With consistent growth in online gambling over the past few years, sports betting companies have had sustained periods of growth. Huge changes in legislation, such as the complete legalisation of sports betting in the United States in 2018. They have also been a huge catalyst for growth within the sports betting market in recent years. As of 2022, the total value of the global sports betting market was $83 billion. Moreover, this market is expected to keep on growing in the future with a CAGR of over 10%. However, there are some past examples of why sports betting stocks could prove a risky investment.
This article will consider the pros and cons of sports betting stocks as an investment. And whether this could prove a sustainable investment in the long term.
One of the major advantages of investing in sports betting stocks is the huge levels of growth that sports betting companies have experienced over the past few years. In 2018, the United States Federal Court passed a bill stating that states can legalise sports betting if they so wish. This has paved the way for huge growth in sports betting stocks in recent years. Immediately following the decision, stocks in companies such as Scientific Games, Churchill Downs, and Penn National Gaming skyrocketed. Moreover, as more states have since legalised sports betting. Stocks in sports betting companies have experienced consistent growth in value over the past few years. According to Goldman Sachs, the annual of the American sports betting market could reach $39 billion in annual revenue by 2033.
Beyond the United States, similar growth in sports betting has also taken place within Ireland. Within the country, sports betting was totalled in at a value of £40 million in 2022. This figure is especially impressive when considering that this is double the value of the previous year. Sports betting in Ireland is also a huge proportion of online gambling making up 415 of the market. Ireland is home to some of the biggest sports betting sites in Europe such as Paddy Power, Boylesports, and Bet365 and newer betting names too. Therefore, the significant levels of growth within Irish sports betting markets make this a promising market for potential Irish investors.
However, while sports betting has experienced significant growth over the past few years, there have been questions about how sustainable this growth in the market could be. Within the United States, since the legalisation of sports betting firms have been racing to enter into the market. While this has led to increases in the valuation of sports betting over the past years, competition within the market has also massively increased. Many firms within the market are currently taking huge losses to establish themselves within the market in the hopes of long-term profitability. While this strategy could work in the long term, there is an equal chance that some companies could not sustain this growth. This could bottom out. Therefore, while the market overall is experiencing huge levels of growth, there are fears that some companies may not be able to stay in the market long enough to become profitable.
Another potential disadvantage to investing in sports betting stocks in the near future is uncertainty overregulation in the coming years. Within the United States, after the initial sports betting boom lawmakers are now looking to regulate this with increased legislation. While no official legislation has been introduced in the United States, the unsustainability of sports betting hints that it’s only a matter of time. The situation is the same in countries such as the United Kingdom, Australia, and Canada. This is a catch twenty-two for sports betting companies in this market. If the companies are too successful, then this could lead to increased regulation within the market.
Within Ireland particularly, lawmakers are cracking down on sports betting with the Gambling Regulatory Act passed in 2022. Under the act, the advertising of sports betting is completely banned on social media and is banned on TV and radio between 5:30 am and 9:00 pm. The Act is also introducing an independent regulator into the market in charge of enforcing legislation on firms not adhering. With increased concerns regarding gambling addiction among young Irish adults, it is likely that within the near future. This increased regulation could follow in the market. Therefore, potential increases in the regulation of sports betting should be something that investors should keep a firm eye on.
Overall, the sports betting market has experienced huge levels of valuation increases with growth in online gambling and relaxations in legislation. However, investors also need to consider how sustainable the growth of firms within the US is and the potential of tightening restrictions in the future.