Many people equate the stock market to gambling. If you are bad, it is. If you are investing in sports gambling companies like DraftKings, MGM (which I know is not solely sports gambling, but it makes up a large part of the business), or FanDuel via Flutter Entertainment, then you are gambling. Sports gambling is a poor industry to put your money in; let me tell you why.

First, the industry is too competitive. There is so much money to be made, and so many smaller companies are jumping in, like Penn, Wynn, etc, but there is no real way to differentiate yourself from your competition. What can you do as a gambling company to make yourself appeal to consumers? They are all offering piles of bonus bets, which is money they will give you to add to your bet. They are all throwing hundreds and hundreds of millions of dollars at advertising. They are all attempting to balance the lines perfectly with hyper-complex algorithms. The battle for Americans’ money is a slog in this industry, and we may never get a true winner, so why would you try and pick one now?

Gambling has an awful reputation. Think of a gambler. Seriously, think of someone who gambles consistently. How positive of an image did you just conjure? My point exactly. Eight million Americans have a gambling addiction right now. Sixteen percent of those will attempt suicide because of gambling. It is extremely hard to build a sustainable business model when so many people view your industry as morally rancid.

DraftKings is an excellent example of how hard it is to make this business work well. DraftKings is the largest sports gambling company in the world, and they are projecting to break even in 2025. Maybe that happens. Maybe DraftKings can project two years into the future well enough and not encounter any major bumps or hits, and maybe DraftKings can break even in 2025, but there is no chance they can stay profitable. There is no moat. There is nothing in sports gambling separating this titan from a regular Joe sports gambling company. ESPNBet is a great example of this phenomenon. Penn Entertainment gave Disney $2 billion to use the ESPN name. If I go on the ESPN Bet website, there is no difference from the DraftKings website, except the DraftKings website makes me feel like I just finished using bad cocaine from Atlantic City; I mean seriously, the DraftKings website makes me feel like I just escaped a gambling rehab. As I was saying, the ESPN Bet website is the same as the Draft Kings website, with the same lines, bonus bets, and the same scam. I see no reason why a well-funded company cannot chip market share off of DraftKings, not to mention the other big boys like Fan Duel and Bet MGM, who are equally unprofitable and equally popular.

To summarize, the sports gambling industry is just the worst, both for consumers and investors. Nobody ever wins against the house, including investors.