Roundhill Investments is looking to be the first exchange-traded funds (ETFs) issuer to capitalize on the fast-growing sports betting segment by bringing a fund dedicated to that theme to market.
In a recent filing with the Securities and Exchange Commission (SEC), the issuer revealed plans for the Roundhill Sports Betting & iGaming ETF, which would trade on the New York Stock Exchange under the ticker “BETZ.”
Assuming the fund comes to market (not all ETFs that issuers file for do), it will track the Roundhill Sports Betting Index. BETZ will follow a methodology similar that of the issuer’s first fund, the Roundhill BITKRAFT Esports & Digital Entertainment ETF (NYSE:NERD).
This means that pure-play online sportsbooks will have higher weightings than companies whose primary business is physical casinos, all else equal,” said Roundhill CEO and co-founder Will Hershey in remarks emailed to Casino.org.
Index components can include operators of brick-and-mortar and online sportsbooks, purveyors of internet-based gambling platforms, and infrastructure providers to those companies.
Inside The Index
Information on the Roundhill Sports Betting Index hasn’t yet been made available to the public. But the SEC filing contains relevant details, including how Roundhill defines “pure play” and “core” companies.
Pure play entities are those “whose primary business model and/or growth prospects are directly linked to the Sports Betting and/or iGaming Industry. For these companies, continued growth in the Sports Betting and/or iGaming Industry is expected to be critical to their economic success going forward,” according to the filing.
Core firms would be those with “substantial operations and/or growth prospects linked to the Sports Betting and/or iGaming Industry.”
The benchmark will consist of at least 20 components, and while all those names haven’t been revealed, it appears FanDuel and Paddy Power parent Flutter Entertainment and PointsBet will be in the fold. Hershey noted that Diamond Eagle Acquisition Corp. (NASDAQ:DEAC), the special purpose acquisition corporation (SPAC) DraftKings is using to become a public company later this year, could also be included in the Roundhill Sports Betting Index.
Tapping Into Growth
Roundhill is pitching BETZ as growth estimates for the US and online sports betting industries are reaching the exponential stage for the nascent market.
Last month, Jefferies said sports wagering the US could be generating $5 billion in earnings before interest, taxes, depreciation and amortization (EBITDA) for operators by 2023. Adding to the growth case for BETZ, sports wagering just went live in Illinois, with Michigan and Montana joining the fray in the coming days and Colorado coming online in May.
“In terms of the theme, we view sports betting and online gaming more broadly, as a secular trend in the worldwide entertainment industry,” said Hershey. “We wanted to be first to market in offering pure-play exposure, as we move towards legalization catalysts on the state level in the US and country level in places like Brazil.”
The BETZ filing did not contain an expense ratio, indicating it could still be some time before the ETF comes to market.
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