With the online gambling market booming, astute investors are sitting up and taking notice. Here’s how finance is colliding with entertainment in one of the most rapidly expanding online markets.
Investing used to mean keeping blue-chip stocks, maybe some real estate on the side, and if you were feeling particularly adventurous; cryptocurrency. But new to the financial fray is an intriguing new player: Online gambling. More specifically, bookmaking websites and online casinos are winning over retail and institutional investors. What was once a vice is becoming an increasingly legitimate business opportunity thanks to rapid technological progress, shifting regulation and colossal global demand.
So what’s this? And why are finance analysts suddenly talking poker, slots and sports bookmaking as if they’re the next digital finance big thing?
The digital gambling boom: More than just a trend
The global online gambling market is estimated to reach over $153 billion in magnitude by 2030, growing at a compound annual growth rate (CAGR) of about 11.7%. That’s no peanuts. The mobile gaming boom, combined with loosened legal restrictions in the likes of the U.S., U.K. and much of Europe, has unleashed the floodgates.
From weekend recreational gamblers to professional poker players, the online platforms are luring millions of consumers. But there’s a catch, each of those spinny slots games and live bets has behind it an intricate web of infrastructure involving tech companies, payment processors, ad tech and analytics platforms. And that is where the investment magic happens.
Fintech’s fingerprints all over the table
On the face of it, finance and online gambling would appear to be strange bedfellows. But behind the curtain lies the fact that fintech is well grounded in this sector. Payment processing, fraud prevention, customer KYC (Know Your Customer) practices, these are some of the domains where finance and technology businesses are providing solutions specifically suited to gambling sites.
Take payment gateway providers like Nuvei or Paysafe. These firms are experts at rapid, secure payments across regulated markets. They’re crucial enablers in making it possible for online casinos to operate successfully and in compliance, which is why they’re hot tickets for investors looking to get involved without actually risking cash on gambling stocks themselves.
Even crypto and blockchain firms are jumping in on the action. There are now some sites offering betting in crypto, adding yet another layer of speculation for tech-inclined bettors and investors.
M&A action heats up
One of the best signals that this market is one to watch is the record-breaking mergers and acquisitions. Giants are acquiring smaller competitors to establish themselves and get a share of newly regulated markets.
DraftKings’ acquisition of Golden Nugget Online Gaming? All about reaching a broader user base. Caesars’ buy of William Hill? Not all about sports betting, it was a tech and data capability acquisition.
Investment groups, private equity groups and hedge funds are sniffing too. The numbers tell it all. There’s growing demand to invest in platforms that are already generating dollars in new online gaming spaces.
Where investors are putting their money
Going long on casino stocks outright does sound a little riskier. But it is possible to get into the action without putting the farm on the line.
Still more are seeking out affiliate marketing networks. These sites pair users with limited-time promotions and deals from several online sportsbooks and casinos. They earn money each time someone signs up or places a bet, so their profits escalate along with the growth of the industry.
And because they don’t host gambling themselves directly, affiliate networks like that can avoid the heavy licensing fees and regulatory overhang of hosting an actual online casino. For investors, that’s a pretty good bargain.
And then there’s the pick-and-shovel approach: Investing in the companies that power the industry behind the scenes. That includes software providers like Playtech, payment processors, cybersecurity firms and artificial-intelligence-driven data-analysis platforms.
Risk versus reward: What to look out for
Of course, it’s not all rainbows and turning reels. The online gaming world is still strictly regulated, and the law can change overnight. A winning platform this year can find itself being booted out of a key market next year if the law changes.
There’s also ethical scrutiny to consider. Some investors steer clear of the sector altogether because of concerns around addiction, underage gambling or financial exploitation. That’s a personal call, but it’s something to be aware of if you’re thinking of adding gambling exposure to your portfolio.
And finally, there’s the old-fashioned volatility of the market. These stocks and platforms can get hugely volatile on earnings announcements, legal developments or even rumors. This is not an industry where you “set it and forget it.”
Is this the next frontier?
So, is online gambling investing a good money move or just another roll of the dice? Fact is, it can go either way. Like with any emerging market, the world of online sports betting and casino play has its degree of hype and danger. But to investors who bother to research and feel the lay of the land, the reward potential is enticing.
From the fintech backbone in the back to the marketing platforms that bring the users in, there’s a developing web of investment opportunities tied to the online gambling boom. And with every other state and nation opening up their legal systems, the pie just gets larger.