What a difference a year makes.
One year ago, I was celebrating after my Philadelphia Eagles won the Super Bowl. I grew up in Philadelphia and football has always been my favorite sport. To see my hometown win its first Super Bowl was beyond amazing.
Also one year ago, the only place you could bet legally on the Super Bowl was Nevada. This year, you could bet legally in eight states. Industry experts think that number could double to 16 by the end of this year.
Just wait until next year’s Super Bowl. It and the NCAA’s “March Madness” basketball tournament are the two biggest betting events of the year.
If you look at the early numbers coming in from this year’s Super Bowl, they are less than expected. But don’t let the early numbers fool you. Sports gambling remains every bit the unique opportunity it has been since last May when the Supreme Court ruled that it was up to each individual state whether to allow betting or not.
And trust me, they will.
The reason is simple: money. Past numbers show that roughly 30 times more money has been bet illegally than legally – $5 billion versus $150 billion. That’s because Nevada was the only place where it was legal. There is no doubt that a big chunk of that money will move over to legal channels as they become available.
The potential tax revenue for states is too big and too important to ignore. If a state doesn’t offer sports gambling but its neighbors do, you can bet (pun intended) that state will lose millions in tax dollars.
A Moneymaking “Proposition” for You
In New Jersey’s first year of legal sports betting, folks wagered nearly $35 million on the Super Bowl. The sportsbooks themselves lost money because most of that was on the New England Patriots. Still, I’d say going from $0 wagered last year to $35 million this year is a sign of what’s to come.
In Nevada, the total amount bet fell to $145.9 million. That was still the second-highest total ever after last year’s $158.5 million.
There are a few reasons for the decline in Nevada. Overall interest in the game appears to have been somewhat low with the Patriots playing in it yet again. TV viewership was also down.
In addition, there was little scoring in the game, so the amount of in-game betting was likely lower than it would have been otherwise.
These “prop” bets (short for proposition bets) have huge potential. Prior to this year’s Super Bowl, one sportsbook listed 442 prop bets. 442!
Here are just a few from Sunday’s game:
- Coin toss result (tails)
- Coin toss winner (Rams)
- First turnover (Patriots)
- First timeout (Patriots)
- Number of punts, over or under 6.5 (Over)
- MVP (Julian Edelman)
Heck, you could even bet on which songs would be sung first and last during the halftime show. Or how long the national anthem would last.
Turns out the last one was more controversial than you might have thought. One sportsbook offered a bet on whether Gladys Knight would sing the anthem in more or less time than 1:50. Turns out the “official” time was 1:49.5 as measured to where the note ended the first time she said the final word of the song, “brave.” That’s what the fine print said, so even though she sang for more than two minutes, those who bet it would be under 1:50 won the bet.
Stay Tuned
There’s no question that sports betting stocks have been a bit disappointing recently. Such ups and downs are unavoidable in early-stage trends. They are also where most investors tend to give up and sell first, missing out on the big gains to come.
Take marijuana stocks for example. They had a similarly big catalyst last year as Canada legalized recreational use. Still, cannabis stocks had a rough end to 2018.
This year they have been spectacular. The marijuana stocks we have in Investment Opportunities have surged an average of 45% in just the first five weeks of 2019.
I am as bullish as ever on the long-term outlook for sports betting stocks as well. I believe the way sports are viewed will change dramatically in the years ahead, and it will all be related to the potential to place wagers during the game.
One league source from the NFL had this to say about gambling on football: “The owners see this as the next horizon… They see this as the next biggest revenue stream after television contracts. They believe it will be worth billions to the league.”
Did you know that every Friday this season the NFL’s Sports Betting Committee met to discuss the future?
The next big move by the league will be through an upgrade in technology related to those in-game bets. You will be able to wager whether the next play will be a pass or a run. Or if your favorite player will sack the quarterback on the next play. For this to happen, the NFL and other professional sports leagues will need to make sure they are aligned with the best in the business. This runs the gamut from technology to betting software to sportsbooks to casinos.
That makes the recent weakness in sports gambling stocks an opportunity that cannot be overlooked. One of the most difficult things for any investor – me included – is to be patient. Fortunately, I have witnessed time and time again how patience pays off in transformative and breakthrough investment themes. Sports gambling fits this bill.
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