The gambling boom in American football means that investors …

Shares of DraftKings Inc., Penn National Gaming Inc. and Caesars Entertainment Inc. have risen by more than 20% in the past three weeks, according to forecasts, bets on college and professional football will triple from the all-time high. ‘last year.

Betting platforms saw a flood of new users after going live in six more states this year, bringing the total to 26 states. Online sports betting and traditional casinos are expected to generate up to $ 1.5 billion in revenue, according to projections by PlayUSA, a guide to legal gambling.

“It’s very rare to see the market segment grow so quickly in front of you,” said Yaniv Sherman, US head of betting platform 888 Holdings Plc. “There is no way around it. The United States represents the largest regulated online gambling opportunity in recent history. “

Look no further than Thursday night’s National Football League opener between Tom Brady’s Tampa Bay Buccaneers and Dallas Cowboys. DraftKings has taken over 1.5 million bets on the game, distributing over $ 54 million to the winners.

Dallas Cowboys vs. Tampa Bay Buccaneers
Tom Brady prepares for a game in the first quarter against the Dallas Cowboys at Raymond James Stadium in Tampa, Fla. On September 9, 2021.

A bet on sports betting itself makes sense, given that demand is still in the first quarter. By 2025, the total value of bets placed in the United States could reach $ 180 billion, according to an analyst with Cathie Wood’s ARK Investment Management LLC.

However, payment for investors is not guaranteed. Getting customers to test platforms is expensive, with millions spent on ads and promotions rewarding first-time users. Competition makes it difficult to make a profit. As such, Wall Street analysts don’t expect to see positive earnings at DraftKings – one of the major platforms – until at least 2024.

The way sports betting generates income (not necessarily a profit) is pretty straightforward. While they can’t control what happens in a given game or season, they can make money by shifting the odds, aiming for a balance of players on both sides of a given bet.

For example, if a user places a bet of $ 20 with standard odds and payouts, their payouts will likely be $ 18. If a bookmaker achieves his goal of collecting as many bets as possible from both sides, he can capitalize on the commission he takes on each bet.

Stocks on display in sports gambling have skyrocketed since the pandemic hit

The NFL has always been against sports betting, but recently changed course amid speculation it could increase viewership. The 2021 season is the first time the league has allowed sports betting to buy ads during games, reversing a decades-old stance against sports betting. But an increase in advertising spending could further erode the profits of betting platforms.

The path to profit making has been a key topic for investors looking for top-flight tech companies like DraftKings. Bookmakers and their industry peers are looking for a faster route to profitability. But in the meantime, the industry is likely to move towards more take-out.

“Ultimately, you will have three to four very strong brands in the United States where the rest of the players are fighting for crumbs or regrouping in bigger companies,” said Nicholas Grous, analyst at Wood’s ARK. The company owns more than $ 850 million of DraftKings shares in three of its exchange-traded funds, according to data compiled by Bloomberg.

Read more: The NFL has blurred the line between sport and gambling: Tim O’Brien

The industry has already seen billions of mergers since last month when Penn National acquired Score Media & Gaming Inc. and DraftKings acquired Golden Nugget Online Gaming Inc.

Businesses exposed to online betting have had a meteoric ride since the start of the pandemic, but Wall Street is less convinced of future gains. DraftKings shares are expected to gain just 13% over the next 12 months, according to price target data compiled by Bloomberg.

“There will be massive growth in the industry, but the reason to be skeptical in the medium term is that you can’t spend more money than you earn forever,” said Jason Ader, CEO of SpringOwl Asset Management. “It’s going to be fun for the punters. For the shareholders of the company? We’ll see.”

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