Capitalizing on the Casino: Smart Investments in the Gaming Sector

The Surging Landscape of the American Gaming Industry

In the seven years since the U.S. Supreme Court's landmark decision lifted the federal ban on sports betting, the gambling industry has firmly established itself within mainstream finance. With thirty-eight states, Puerto Rico, and Washington, D.C. now permitting legal wagers, the industry's expansion shows no signs of slowing. Last year, commercial gaming operators in the U.S. reported an impressive $71.9 billion in revenue, marking their fourth consecutive year of record-breaking financial performance. This consistent growth underscores a fundamental shift from a niche pastime to a significant economic force.

Investing in the Gaming Ecosystem: A Diversified Approach

For shrewd investors, capitalizing on the gambling boom doesn't involve predicting game outcomes or winning streaks. Instead, it lies in acquiring stakes in the foundational companies that generate revenue from every transaction—be it a slot machine spin, a bet slip, or a parlay. Exchange-Traded Funds (ETFs) and similar "pick-and-shovel" businesses offer a strategic entry point, transforming America's enthusiasm for gambling into a steady flow of returns for shareholders, eliminating the need for personal luck.

The Exponential Rise of Gambling Revenues

Recent data from the American Gaming Association reveals a 7.5% surge in total commercial gaming revenue in 2024, achieving new highs, with sports betting alone contributing over $11 billion. This remarkable ascent is largely propelled by online wagering, as iGaming and mobile sports collectively generated a record $6.39 billion in the first quarter of 2025, marking a 15% year-over-year increase and accounting for approximately one-third of the industry's overall earnings. Experts anticipate that 2025 will continue to set new revenue benchmarks.

Strategic Investments Through Gambling-Focused ETFs

Investors seeking to participate in this dynamic growth without direct exposure to individual company risks can find refuge in ETFs. These professionally managed funds offer diversified exposure within a single, convenient security. Key players in this space include the Roundhill Sports Betting & iGaming ETF (BETZ), launched in 2020, which holds around 30 stocks ranging from DraftKings to back-end technology provider Evolution AB. Despite a higher expense ratio of 0.75%, its year-to-date performance in June 2025 shows a 10.7% increase, and a 24.3% rise over the last year, demonstrating strong liquidity and focused exposure.

Exploring Global and Specialized Gaming ETFs

Another option is the VanEck Gaming ETF (BJK), established in 2008, which aggregates holdings in major gaming hubs like Las Vegas and Macau, alongside global equipment manufacturers. Although it experienced a 4% decline year-to-date due to rising interest costs and a challenging Macau market rebound, its 32 holdings provide a 3% yield and global diversification for a 0.62% fee. For those interested in digital-first operations and technology, the Pacer BlueStar Digital Entertainment ETF (ODDS), a newer entrant, tracks the BlueStar Global Online Gambling, Video Gaming, and eSports Index. With 44 stocks, it boasts an impressive 15% year-to-date gain and 31.5% over the past year, though its small asset base of $1.7 million might pose liquidity challenges.

Diverse Avenues for Industry Exposure

Beyond specialized gambling ETFs, investors can explore broader "sin" baskets like the AdvisorShares Vice ETF (VICE), which includes alcohol, tobacco, and firearms alongside gambling, offering smoother revenue cycles across various vice categories. Direct investment in pure-play stocks such as DraftKings Inc. (DKNG) and Flutter Entertainment (FLUT) also provides concentrated exposure to the industry's leaders, with both companies projecting strong financial performances. Alternatively, investing in real estate investment trusts (REITs) like VICI Properties (VICI) and Gaming and Leisure Properties, Inc. (GLPI) allows investors to collect stable, long-term triple-net rent from iconic casino properties, securing returns regardless of individual gambling outcomes. Finally, "picks-and-shovels" businesses, like payment processor Nuvei (TSX: NVEI) and geolocation technology provider GeoComply, profit from essential services within the ecosystem, with Nuvei reporting a 30% jump in transaction volume and GeoComply noting a 14% rise in active accounts during major sports events.

The Strategic Advantage: Owning the House

While traditional gambling often results in losses for individual bettors, the underlying industry's operational revenue represents a structural, multi-billion-dollar flow. ETFs like BETZ and BJK enable investors to tap into this consistent income stream rather than engaging in risky wagers. It's crucial for investors to assess fees, liquidity, and their individual risk tolerance, as regulatory shifts or tax adjustments can rapidly alter market dynamics. However, for those who prefer to "own the casino" rather than bet on individual outcomes, the strategic choice is clear: smart money is already invested in the infrastructure of this thriving industry.