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An Historic Vote in Colorado

Jeff Remsburg

In three years more than half the population will live in states with legal sports betting … the opportunity for investors

An historic vote in Colorado last night was too close to call and is carrying over into today. At the time of this writing, we don’t know the outcome.

But if it passes, it will open the door to billions of dollars of wealth creation over the coming decades … and no, it has nothing to do with marijuana.

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Yesterday, Colorado residents voted on Referendum Proposition DD, which seeks to legalize sports gambling in Colorado’s casinos.

If it passes, the win for Colorado will be tax revenues — estimated to come in around $20 million next year. Of course, the win for investors will likely to be far greater.

Before we answer “why?” let me briefly digress …

Matt McCall and Eric Fry are two of our most respected analysts. They also happen to be two of the most successful.

For example, as I’m writing this, I’m scanning Matt’s portfolios, seeing open gains of 57%, 59%, 90%, 95%, and 139%. Meanwhile, Eric’s subscribers have been able to close out winners at 75%, 101%, 134%, 162%, 210%, and 287%.

Now, Matt and Eric have racked up these gains with different market approaches. Matt is principally a thematic investor, whereas Eric is a global macro investor. So, it’s not often you’ll see them fishing around the same part of the markets for opportunities.

Yet, that’s exactly what’s happening right with legalized sports betting.

It takes a unique, special investment opportunity to get the attention of both of these guys … we’d be foolish not to take note.

So, in today’s Digest, on the heels of the Colorado referendum, let’s dig into the details of the rise of legalized sports gambling and see why Matt and Eric are so bullish.

***How we got here, and where sports gambling is going

In 1992, the Professional and Amateur Sports Protection Act became law, banning sports betting except in Nevada. Proponents of the law said it protected the integrity of the sporting events. On May 14, 2018, the U.S. Supreme Court overturned the law by a 6-to-3 vote.

Now, to be clear, this didn’t legalize sports gambling — rather, the decision made it not illegal.

What that means is it’s up to each state to decide if, how, and when sports betting operates within its borders. But states are already deciding … and they’re saying “yes” to legalization.

From Eric:

Last year, New Jersey became the very first state to legalize sports betting. Since then, 12 more states have gone live with sports betting platforms. And within the next three years, more than half the states in the union will approve sports betting in some form, according to Eilers & Krejcik Gaming.

The adoption rate could easily exceed this estimate. In fact, American Gaming Association President Bill Miller predicts a total of 40 states will legalize sports betting within the next five years.

***So, what sort of numbers are attached with these adoption rates?

Here’s where things start getting exciting.

For revenue projections, Matt points toward a research report predicting annual gaming revenue of $6 billion in the U.S. by 2023. That’s based on 32 states legalizing sports gambling.

From Matt:

The firm’s research report goes on to say that if all 50 states legalize sports gambling, annual revenue could reach $15.8 billion on a total of $245 billion wagered in just five years …

Let’s look at the most exciting number of all. If revenue climbs from $248.8 million in 2017 to $15.8 billion in 2022, we’re talking about a 63-bagger! That kind of growth opportunity is rare, especially outside of world-changing technology.

***The challenges of investing in sports gambling

Before we get into potential ways to play this growth, let’s be clear about some of the complexity of investing in sports gambling.

As mentioned earlier, the landmark Supreme Court decision in 2018 didn’t legalize sports gambling, it simply made it not illegal. This means it’s up to the individual states to enact their own laws and rules.

This means some states will limit gambling to casinos. Others will permit both casino-based betting and online platforms, such as New Jersey and Pennsylvania have already done. Others will choose to run things through their lottery systems, similar to Rhode Island.

The complexity doesn’t end there. Here’s Eric for more:

Many tribal casinos are eager to introduce sports betting … and these operators will impose their own sets of rules and processes. Gaming companies that hope to gain a piece of the sports betting pie must forge deals state-by-state, tribe-by-tribe, casino-by-casino.

That’s a lot of heavy lifting, and very few companies are up to the task. But those that are up to it can capitalize on an enormous — if somewhat tedious — opportunity.

***So how might an investor play this?

Let’s turn to Matt first:

There are a number of players that can take a big piece of the growing sports gambling pie. The most obvious are the casinos that can easily add a sportsbook and attract gamblers who are already on their properties …

There are the bookmakers that have been around for years, many of these overseas. Several are making big moves into the United States as they struggle on their home turf, including one I recommend in Investment Opportunities.

Then, technology is needed to power the gambling experience on land and on mobile. In the coming years, the majority of wagers will be placed via apps, so there are opportunities in companies at the forefront of this technology.

This “tech” angle is what’s behind one of Eric’s preferred ways to play it.

His pick operates the “guts” of sports betting processes for casino companies and online betting sites. On behalf of its clients, this company sets, or resets, odds on sports bets 480 million times every month, or 100 times per second. For more on this from Eric, click here.

As we wrap up, both Matt and Eric see huge investment potential as sports betting legalization spreads. We’ll be watching closely to see how the story in Colorado unfolds today. But whether it passes today or not, we believe this trend is only beginning to gather steam.

If it hasn’t been on your investment radar, it’s time to give it a look.

Here’s Matt for the final word:

… since we’re talking about bets, who do you like to win the Super Bowl? My heart is always with the Philadelphia Eagles, and this year I also think they’ll win it all.

I may place a wager just for fun, but a lot can happen and I’m marginally confident I would make money on that bet. But I’m very confident I will make money in sports betting stocks in the coming years.

Have a good evening,

Jeff Remsburg

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