Cathie Wood’s ARK Investment Management is bullish on the future of US and Canadian sports wagering, forecasting massive growth for the industry over the next five years.
In the asset manager’s 2023 “Big Ideas” report, ARK estimates that mobile/online sports wagering in the US and Canada will grow at a rate of 27% annually, in real terms, over the next five years.
In the first NFL season without COVID-19 protocols, total sports betting in the US and Canada increased an estimated 83% year-over-year to ~$117 billion in 2022. As a percent of total sports betting volume, online has soared from 17% in 2018 to 86% in 2022. Based on ARK’s research, online sports betting in the US and Canada is likely to grow 27% in real terms at an annual rate during the next five years, from ~$100 billion in 2022 to ~$330 billion in 2027,” according to the exchange traded funds (ETFs) issuer.
In states that allow it, mobile betting frequently accounts for close to, or more than nine of every 10, sports wagers placed. Still, ARK forecasts big growth for retail sportsbooks, estimating those venues’ volumes will grow at an 11% annual pace over the next five years, reaching $27 billion in 2027.
ARK Forecast Ambitious to Say the Least
There are some factors that should be noted when evaluating ARK’s sports wagering forecast. First, its inclusion of Canada appears to focus solely on Ontario. That makes sense because it’s the country’s largest province and the one with the most liberalized sports betting market. In the future, if other provinces copy the Ontario model, the outlook could change to the upside.
Second, ARK’s projections pertain to handle, not revenue, though the fund issuer uses the term “volume.” In sports betting, handle is the amount wagered, but revenue is calculated after all bets are settled.
Finally, it must be noted that ARK doesn’t mention any states by name. But it’s not a stretch to assume a more than tripling of current US/Canada handle in just five years factors in some combination of California, Texas, and Florida approving mobile sports wagering, or perhaps all three doing so.
Because of compacts with tribal gaming entities that refuse to compete with out-of-state sportsbook operators, the roads to mobile betting in California and Florida are fraught with disappointment and thorny political issues. There’s budding momentum in Texas, the second-largest state, but the issue faces an uphill battle there, too.
ARK Talking its Book
Naysayers may be apt to say ARK’s enthusiastic sports wagering outlook is born out of the fact the asset manager is talking its book.
Pessimistic as that sounds, it’s not inaccurate. The firm is one of the largest institutional investors in DraftKings (NASDAQ: DKNG), as it holds that stock across three of its ETFs, including the flagship ARK Innovation ETF (NYSEARCA: ARKK). It also holds shares of sports betting data provider Genius Sports (NYSE: GENI) in the ARK Next Generation Internet ETF (NYSEARCA: ARKW).
ARK is bullish on the theme of digital leisure, which includes sports wagering, video games, and more.
“Based on the shift toward digital leisure and digital property rights, real digital revenue should grow 14% at an annual rate during the next eight years, from ~$2 trillion in 2022 to $5 trillion in 2030,” added the fund issuer.
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