Legal Sports Betting: Why I’m Bullish on the Sector

Many investors do not realize just how big of an opportunity this is

When John Carney walked into the Dover Downs casino on Tuesday, June 5, 2018, he was about to make history.

DraftKings (DKNG) logo, magnified, on its app.
Source: Shutterstock

The governor of Delaware bet $10 on the Philadelphia Phillies beating the Chicago Cubs that day.

It was just a regular game in a long season, but the wager was the first legal bet outside the state of Nevada in U.S. history. And he even won it, as the Phillies did indeed beat the Cubs.

The moment was made possible three weeks earlier by a landmark U.S. Supreme Court decision that left it up to the states whether to legalize sports betting.

I said at the time that I had trouble thinking of any other court decision of that magnitude and that it was a rare gift to investors.

And I still feel the same today.

Admittedly, I was early to the trend. Sports betting stocks didn’t move right away.

But the great thing about long-term hypergrowth investing is that unlike justice, profits delayed are not profits denied …

When Governor Carney placed his bet, Delaware was the only state outside of Nevada that allowed sports betting.

Things have really changed in the last two years:

  • 18 states and Washington, D.C. now allow sports wagers
  • 4 more states have legalized it but not yet begun the actual betting
  • 6 states have sports betting on the ballot

So depending on the voting in those states, more than half the country may soon allow sports betting.

Growth is soaring, even with sports shut down earlier in the year because of the pandemic. New Jersey set a U.S. record in August when it recorded $668 million in bets, breaking the previous record it also held by more than $100 million.

Pennsylvania hit its own all-time high in August with $365 million. Illinois collected $139.6 million, more than double the combined amount bet in March, June, and July.

DraftKings (NASDAQ:DKNG) saw the amount of money wagered surge 460% in the third quarter. The company said the first weekend of the NFL season was the best ever, with total wagers resembling the Super Bowl.

You may know that I’m a huge sports fan, and I also enjoy a good wager. But I was floored when I heard that someone placed not one but two $500,000 bets on the New York Giants in week three of the season — and then lost.

The first half-million-dollar bet was that the Giants would cover the four-point spread. As long as they lost by three points or less, he or she would have won big. They lost 36-9. Ouch.

The second bet was that Giants’ quarterback Daniel Jones would throw for more than 244.5 yards. He ended up with 179. Double ouch.

But there are plenty of happy bettors out there as well. In the third week of the season, this guy bet $1,000 that Patrick Mahomes would score the first touchdown when the Kansas City Chiefs played the Baltimore Ravens. He was right, turning his $1,000 wager into $36,000.

When Nevada was the only state where you could bet legally, nearly $5 billion was wagered there each year. But here’s the kicker: That was just 3% of the estimated $150 billion bet illegally through bookies around the country.

As more states legalize sports gambling, money previously bet under the table is making its way into legal channels. That means more tax revenue for states — and more states wanting in on the action. It means increased sales for companies. And it means higher stock prices.

Like DraftKings. It went public via a SPAC in April and has popped more than 200% since.

The Technology Boost

Spreading legalization is a huge catalyst in its own right, but it gets magnified as more states go that route when technology is allowing more people to wager on more bets.

In the coming years, the majority of wagers will be placed via apps and mobile devices as the 5G revolution provides speed and reliability. We’re already seeing this, as 85% of the $169 million bet in Indiana in August came online.

Plus, fast and immediate connectivity also expands the number of bets that are possible. These are in-game bets, sometimes called proposition — or “prop” — bets. They are the real game changer, so to speak.

In-game gambling — also referred to as in-play betting — will enhance the experience of attending sporting events and lead to a ridiculous boom for gambling platforms. You can bet on what the next batter will do in a baseball game. Whether your favorite football team will run or pass on the next play. If Lebron James will make or miss his next free throw.

The possibilities are practically limitless, thanks to the 5G technology breakthrough that allows for nearly instant connectivity from a mobile device. Beyond more wagers, it will also lead to increased interaction from fans and be welcomed by teams and leagues as an additional revenue generator.

I expect we’ll see this hit the big time in the next few years, making the opportunity even more enticing.

With everything else going on in the world, you may have forgotten about the Supreme Court’s decision that opened the doors to legal sports betting. And with the industry not catching fire right away, you may not have realized at the time just how big of an opportunity this is for investors.

I hope you do now. One of my recommended stocks is up more than 200% from its March lows. And there’s still time to make money in this growing trend. Sports should be back to normal — or at least close to normal — next year, and that will be a huge boost to the amount of money wagered on games.

On the date of publication, Matthew McCall did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. Click here to see what Matt has up his sleeve now


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