Analysis

Investors like the verdict – on sports betting at least

Betting and gaming stocks rose on the news that all of the ballot measures on sports betting in Maryland, South Dakota and Louisiana were passed on Tuesday.

DraftKings was up more than 6% on Wednesday as was Penn National, the company behind Barstool Sportsbook.

In the UK, Flutter was also up 2.5%, though its share price performance might also have been helped by the historically high betting activity of the outcome of the Presidential vote.

All three votes on sports betting on Tuesday went in favor of the measure. In Maryland, the final tally was a 66% yes vote. In South Dakota a similar percentage of 69% voted for sports betting.

In Louisiana, where the voting took place by parish, 55 parishes voted for the measure put before them.

As was pointed out in a tweet from Jason Robins, CEO at DraftKings, the parishes where sports betting will be allowed were the most populous areas.

New markets

Moves to allow sports betting will move all three states up the Wedge Index of gaming-friendliness in due course. 

Maryland and South Dakota are currently in with a bunch of states at T18th. Louisiana is down at T36th.

Although the regulations are yet to be finalized and punters in each state are likely to have to wait until 2022 for the opportunity to bet, it didn’t stop analysts rushing to size up the potential win for the sector.

Thomas Allen at Morgan Stanley, for instance, forecast that between them Maryland, South Dakota and Louisiana would be worth over half-a-billion dollars in gross revenues.

“While the referenda outcomes were expected, they support the argument that there is positive legislative momentum, which should be enhanced in early 2021 when most legislatures go back into session,” he wrote.

A net win

Also enjoying a post-vote bump was the Roundhill Sports Betting & iGaming ETF, commonly known by its ticker BETZ. It rose 1.8% on Wednesday, its best day in more than a month. 

Will Hershey, CEO at Roundhill, said he agreed that the poll results were a net positive for the stocks within his ETF, even if they were as expected.

“In terms of additional states, I expect that 2020 tax revenue figures will be the most likely driver and motivating factor for additional states to regulate the market,” he added.

“Broadly speaking, budget deficits in the wake of COVID-19 are likely to accelerate the timeline for states which have yet to legalize mobile betting.”

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Scott Longley

Scott Longley has been a journalist since the early noughties covering personal finance, sport and the gambling industry. He has worked for a number of publications including Investor's Week, Bloomberg Money, Football First, EGR and GamblingCompliance.com. He now writes for online and print titles across a wide range of sectors.

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