Roundhill Investments Breaks New Ground With First Dedicated iGaming, Sports Betting Fund

Posted on: June 4, 2020, 06:05h. 

Last updated on: June 4, 2020, 10:41h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

In the gaming industry, the new frontiers of growth are iGaming and sports wagering. Analysts and investors know this. Among fund issuers, Roundhill Investments is hip to these trends. Today, the issuer is launching the first exchange-traded fund (ETF) focusing on those market segments: the Roundhill Sports Betting & iGaming ETF (NYSE:BETZ).

Roundhill Fund iGaming ETF
Bettors can now invest in sportsbook operators under one umbrella thanks to a new Roundhill fund. (Image: ESPN)

The new ETF follows the Roundhill Sports Betting & iGaming Index, which provides exposure to multiple corners of the sports wagering ecosystem.

This classification includes (i) companies that operate in-person and/or online sports books (ii) companies that operate online/internet gambling platforms and (iii) companies that provide infrastructure or technology to such companies in (i) or (ii),” according to Roundhill.

More than 41 percent of the 30 companies residing in BETZ are classified as sportsbook operators, while more than a quarter are technology companies. Purveyors of iGaming offerings represent 16.3 percent, while traditional casino companies and lead generation combine for almost 17 percent.

First of its Kind, First Fund Home for a Familiar Name

BETZ is a first-of-its-kind ETF, a status that often carries with it some advantages in the fund universe. Likewise, the rookie product is the first ETF to hold shares of high-flying DraftKings (NASDAQ:DKNG) following that company’s April 24 debut. The sportsbook operator is the fund’s largest holding at a weight of 7.02 percent.

Underscoring the leverage offered by BETZ to online sports wagering and daily fantasy sports (DFS) companies, FanDuel parent Flutter Entertainment is the number two component in BETZ at 6.53 percent.

In addition to being the first ETF home to DraftKings and the first US-listed fund with material exposure to Flutter, BETZ is the first product of its kind to sport a position in newly public gaming software maker GAN Ltd. (NASDAQ:GAN). The UK-based company, which recently listed on the Nasdaq Stock Exchange, is the third-largest holding in BETZ.

The traditional casino operators residing in BETZ are, in order of weight, Penn National Gaming (NASDAQ:PENN), Eldorado Resorts (NASDAQ:ERI), Boyd Gaming (NYSE:BYD) and MGM Resorts International (NYSE:MGM), all of which have iGaming and/or sports betting exposure.

Good Timing

BETZ comes to market at a time when analysts are consistently ratcheting up their forecasts for the US sports betting market. Just a few months ago, analysts were projecting a market worth $7 billion to $8 billion by 2025.

These days, analysts aren’t shying away from significantly higher figures, with some saying iGaming and sports betting could each become $20 billion verticals over the next several years. Those projections could prove accurate or, possibly, too conservative, as more cash-strapped states looking for revenue turn to online casinos and sports wagering.

“Goldman Sachs expects the online sports betting market to grow 7.1% per annum from 2018 to 2022,” notes Roundhill.

For BETZ, the fund is tapping into an investment theme where’s there obvious interest and demand, particularly among younger generations. The new fund fills another void: some investors are hearing about scorching hot stocks like DraftKings, GAN, and Penn, but they don’t know which one to pick. BETZ solves that problem.