The ETF sector is blazing hot right now, and it is a great opportunity for investors to monitor whole sectors of the economy at once. One of the areas where ETFs are thriving is in the gambling sector, and more and more gambling centered ETFs are now being introduced. The Supreme Court recently decided to repeal an act that made it illegal to offer sports betting outside of the state of Nevada, and gambling ETF investors have been taking note. But what does the decision mean for ETFs and the industry as a whole?
Details of the Decision
On May 14th 2018, the Supreme Court officially struck down the PASPA act, which forbade any state from sanctioning sports gambling on their territory. Other big major gambling states like New Jersey have been working to repeal the act for many years, and have finally been vindicated. The decision was voted for 6 to 3 in the Supreme Court and many major leagues, such as the NBA, NCAA and NHL have all been lobbying for the new legislation to come in effect.
The court deemed that the piece of legislation was unconstitutional and infringed on the state’s rights by applying federal restrictions. This has been a great victory with the state of New Jersey and other states as well who wanted to get into the sector.
How the Markets Reacted to the News
As we can expect, the financial sector reacted immediately to the news and many casino related stocks and ETFs saw a direct hike following the news. The Vaneck Vectors ETF, one of the biggest casino ETFs out there, saw an instant 2.2% increase after the announcement. And the markets also reacted when playsugarhouse.com became the first online casino in the US to offer an integrated online sportsbook and casino. But some players in the industry saw things differently and were affected negatively by the new legislation.
Not Everybody is Happy About the New Rules
While legalized sports betting might be a great thing for the state of New Jersey, legalization also means more competition for major casinos, and some traditional casino stocks have been feeling the heat since the decision. Online betting in particular is something many traditional casinos have been trying to fight against, and with the advent of new online betting options available to Americans, things aren’t looking very great for them.
For instance, the Sands and Wynn casinos saw significant drops after the decision. This ultimately means that ETFs that have a lot of brick and mortar casino assets might not be as good a bet after all. However, these casinos also have wide exposure to foreign markets, such as Macau for instance, and might be able to pick up steam and eventually recover.
While more legislation may seem like a boon for the gambling industry, we still have to see how the new market shapes up and how old and new players are adapting to this new reality.
Disclaimer: This content does not necessarily represent the views of IWB.