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Stock Strategist Industry Reports

U.S. Sports Betting Worth a Wager for Investors

We don't think the market appreciates Caesars' and MGM's leading presence in domestic athletic gambling.

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With U.S. professional sports resuming action and our view that more states will legalize athletic betting in the next few years, it’s a good time for investors to understand the large and growing opportunity that domestic sports wagering presents. The desire to bet on sports has a long history in the United States, dating back to 1665 when the first horse racetrack was built. This has historically been captured through the illegal sports betting market, with placed bets measuring around $150 billion last year (based on government-commissioned reports). The dynamic changed when the Supreme Court overturned the Professional and Amateur Sports Protection Act in May 2018, allowing states to legally offer sports betting. Since then, 22 states and the District of Columbia have legalized athletic wagering, and we expect another 17 states will do so by 2023.

We see a $6.2 billion industry revenue opportunity for U.S. sports betting in 2024 ($35 per adult in legalized states), derived from our forecasts for individual states using data on both illegal and legal sports wagering. Although this doesn’t alter our no-moat ratings on the U.S. gaming markets, investors seeking exposure to this growth area should review Caesars Entertainment (CZR) (trading near our $56 fair value estimate) and MGM Resorts (MGM) (trading nearly 30% below our $30 fair value estimate).

Dan Wasiolek does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.