Nick’s Note: At the Daily, we’re always trying to stay in front of big, money-making trends… And one that we’re excited about comes courtesy of PBRG friend and Strategic Investor editor, E.B. Tucker.

E.B. has been following the legalized sports betting trend for months—and shows why it’ll be even more lucrative than selling alcohol or cigarettes…

By E.B. Tucker, editor, Strategic Investor

He stared down his opponents, with his eyes barely visible under the broad brim of a Stetson cowboy hat.

He had a rattlesnake with its jaw open and fangs exposed glued to the front of it. With a Texas drawl, he’d tell the other players how he’d killed it himself.

At 6-foot-4 and 170 pounds, Amarillo Slim was the greatest gambler to ever live. He made his first million in 1947 when he was only 19. His unforgettable look helped make poker a mainstream game around 20 years ago.

Slim was so good at poker that he said he was one of only four men who deserved to call themselves players. He won millions of dollars back when a million was considered serious money. He took pots from presidents Lyndon Johnson and Richard Nixon, Hustler magazine founder Larry Flint, and even drug lord Pablo Escobar.

The most interesting fact about the man who popularized mainstream competitive poker was that it wasn’t his first love. Before he played professional cards, Amarillo Slim was a bookie. If the federal government hadn’t banned the transfer of sports information across state lines in 1961, we might remember him for bringing sports betting mainstream.

That’s right. Before Slim became a poker legend… he was a successful sports bookie.

To him, taking sports bets was a more sophisticated way of putting his odds-making ability to work. If he set the lines properly, his profit was almost guaranteed.

Slim realized that sports gamblers make a lot of mistakes. For example, they always bet on the home team, regardless of the odds. And they rarely bet on the underdog. Traits like these made bookmaking easy in his eyes.

But in 1961, the U.S. government stepped in, making the bookmaking business too difficult for Slim. As is the case with most government laws, sports betting legislation protected some licensed bookies in places like Las Vegas. But it made transmitting sports information across state lines illegal. Slim didn’t want to tangle with the government. So he traded bookmaking for poker hustling.

In today’s essay, I’ll show why the ban on sports was unconstitutional… what the Supreme Court’s new ruling means going forward… and why this trend needs to be on every investor’s radar today…

The Federal Ban on Sports Betting Was Unconstitutional

The feds stepped up their attack with the Professional and Amateur Sports Protection Act of 1992 (PASPA). The justification was for keeping integrity in sports.

I always say if you want to know the true effect of a law, just look at the opposite of its name. The Food Safety Act made the small farmer a criminal and agribusiness a hero. The Patriot Act made the average American prove he’s not a terrorist if he wants to open a checking account.

And of course, PASPA did nothing to safeguard sports. It did, however, make thuggish bookies across America rich.

Last May, the U.S. Supreme Court finally heard a case challenging this preposterous law. The suit spent years winding its way through New Jersey courts before making it to Washington.

The argument against the law rested on the Tenth Amendment to the U.S. Constitution. That amendment says that any power not delegated to the federal government by the Constitution—or outlawed specifically by it—belongs to the states.

There’s no mention of gambling in the Constitution. That’s why states can license casinos and lotteries. The Supreme Court said federal laws limiting a state’s right to license, regulate, control, and tax betting within its borders violate the Tenth Amendment.

Within days of the Supreme Court’s decision, New Jersey announced plans to open up sports betting. By the end of June, Delaware, New Jersey, Pennsylvania, New York, West Virginia, Connecticut, and Mississippi had enacted sports betting legislation.

And about a dozen other states are currently working to pass new laws.

As regular readers know, this is a massive trend my team and I are covering closely. [See E.B.’s previous Daily essays on the subject here and here.]

We think it will be one of the best money-making opportunities in the years ahead. Here’s why…

What the Numbers Look Like

It’s impossible to know how much revenue legal sports betting will bring in. Most people who bet illegally don’t want to talk about it much.

All we have to work from are estimates. We pored over studies like the one Ernst & Young carried out that says $107 billion in sports wagers changes hands illegally every year in the U.S. And research from the University of Nevada, Las Vegas that suggests the illegal sports betting industry is turning over $150 billion a year. That’s more than the GDP of Nebraska.

My own research shows that the market should turn out to be even larger than that. Markets the government has outlawed always get bigger when they become legal again.

Based on all the available data, we think up to $400 billion in wagers could flow through licensed channels when sports betting is fully legal.

That sounds like a huge number, considering Americans only consumed $121 billion worth of tobacco in 2017. And they only drank $223 billion worth of booze in 2016.

Both of those vices are legal, licensed, and heavily taxed. Betting, on the other hand, while still illegal, brought in an estimated $4.76 billion in bets on the Super Bowl alone in 2017. The American Gaming Association (AGA) figured 97% of those bets happened underground.

The AGA also estimated that bets on the NCAA men’s basketball tournament totaled $10 billion in 2017. Most importantly, people either had to fly to Nevada or break the law to make their bets.

Our estimate of up to $400 billion in sports wagers starts to look reasonable as we consider the first states that legalized betting. Tiny Delaware took in $322,135 in sports bets on the first day after legalization—June 5, 2018. Outside of regular season baseball games, there weren’t any major sporting events taking place in the U.S. that day.

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The Floodgates Are Open… Now’s the Time to Take Advantage

Legal sports betting is the type of investment theme I’ve made a career out of spotting.

Strategic Investor subscribers know this is a good example of why my investing newsletter is very different from others you might read…

We know the trick to making money in the stock market is spotting what’s on the horizon—before you read about it in the mainstream news.

The government deciding to lay down arms and allow licensed, legal operating of anything means a chance to profit.

By striking down a federal law prohibiting sports betting, the Supreme Court has opened the floodgates to a multibillion-dollar industry.

And when you see a business that’s about to get a lot better, you buy a handful of stocks likely to benefit. That’s what we’re doing at Strategic Investor.

So if you’re interested in learning more, I invite you to join me tonight at 8 p.m. ET for a free investment summit. I’ll teach you more about this trend… what will cause over $4 billion to move into this industry… and the three specific stocks that will capture the lion’s share of profits. Reserve your seat here.

Regards,

E.B. Tucker
Editor, Strategic Investor

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