The Coming Wave of Sports Gaming Isn’t a Win for Casino Stocks

While many Americans have been celebrating the Supreme Court’s ruling that allows states to decide for themselves whether or not to allow sports gaming, others are a little nervous about the prospect of legalized gambling. This is especially true as some states immediately set about passing laws to initiate the sports gaming process and started sportsbooks nearly before the ink was dry on the ruling.

Many people believe that gambling and playing the stock market are similar, as both of these require people to expend capital that they may or may not get a return on. While gambling allows people to risk money in the short term and they may score a big payout or lose all their money in one night; investing is for the long term (usually) and most people see a gradual increase or decrease in their money. With regard to casino stocks, however, investors have noted that there may not be a return on their investment because of the looming specter of sportsbooks.

History of Casino Stock Performance

Casino Stock PerformanceWhile some casino stocks have been available for over 40 years, many casinos began to offer stocks in the 1990s. In the last 10 years, several different fund companies have begun to add stocks to their index funds and stock portfolios because the casinos offer a boost to an aggressive fund program. Historically, stocks have performed well within a portfolio, especially with the exponential growth of casinos in the last 20 years. This has been especially true of MGM, Caesars and Wynn Casinos, who have each experienced significant growth in the last decade.

The Dilution of Gaming

One of the largest reasons why casino stocks have been declining is due to the fragmentation of the market. In addition to casinos, the gambling industry in the United States is continuing to fragment. First, casinos are competing with racetracks, offshore casinos and fantasy sports operators online. In the last 20 years in many states, casinos are being outpaced by racetracks and racinos –which are a combination of casinos and racetracks. In addition, the largest casino companies in the United States have casinos overseas as well that are increasingly facing competition from online gaming, mobile gaming, and sportsbooks. While the economy is doing well in the United States, it is not doing well in other countries, and this only adds to the angst of the casino stockholders.

Sports Gaming and Casino Stocks

Sports Gaming and Casino Stocks

However, it has been the legalization of sports betting that can spell success or failure for casino companies. Those casinos who have incorporated—or are on the verge of incorporating—sportsbooks into a casino should see their stocks rise, as it is projected that sports gaming will be a $150 billion a year business. The sheer amount of profit alone should be enough to keep casino stocks with sportsbooks on the upswing. As sportsbooks are legalized, it is estimated that they will increase the amount of money wagered by gamblers – some experts predict the increase could be as much as 50%, which could spell success for casino stocks.

The problem for casino stocks comes because experts believe that many people will choose to make their sports wagers online or via mobile applications. If that happens, people will not visit casinos, which means the casino’s profitability will drop. Sportsbooks will further splinter an already fragmented gaming scene. However, there could be a silver lining for brick-and-mortar casinos if they incorporate online and mobile applications into their own gaming activities. Some casinos in New Jersey have already begun to incorporate online gaming with their casino gaming and have found success.

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Richard Holmes was born in Tampa, Florida and studied computer science at Pensacola Christian College in Pensacola Florida. A devout Baptist, volunteer Sunday School teacher and online gaming fan, Richard works as a part-time systems administrator at Baptist Hospital and part-time professional blogger specializing in statistics, probability and computer science issues. He is an ardent believer in the future of artificial intelligence as a tool for transforming human society for the better, particularly in the area of health care and modern medicine. A chess player, and competitive online gamer Richard actively participates on online gaming tournaments in his free time.