In 1989, all-time hits leader Pete Rose was banned from Major League Baseball for life because of his gambling activities. He wasn't reinstated until last year, months after his death in 2024.
Fast-forward to today, and Pete Rose's gambling might seem like just another day on Wall Street as financial firms expand the ways fans can put money behind their teams, beyond a beer and a $15 hot dog.
You may soon be able to buy a ticker for your favorite hockey team, and it isn't a stake in the franchise. Multiple asset managers have filed to launch dozens of ETFs, one for every NHL team, with MLB baseball team funds filed as well, all built on new futures contracts that track a team's season statistics. None has begun trading but in all, hundreds of ETFs that track the single-season performance of one professional team across a mix of statistical categories have been filed at the SEC for approval.
Some finance experts see the development as lacking any nuance whatsoever.
"The line between gambling and investing has not simply been blurred, it has been erased," said Robert Johnson, a professor of finance at Creighton University.
Among fund companies getting in on the novel trend are VolatilityShares, LeagueShares, Roundhill Investments, and Rex Financial.
None of the four companies responded to requests for comment. Asset managers typically cannot publicly comment during the period between when funds are filed with the Securities and Exchange Commission for approval and when they become effective, if approved.
Rex, a Miami-based ETF issuer, announced Sept. 21 that it was launching Alpha Sports Holdings, a new subsidiary built to turn team performance into exchange-traded funds. REX has filed with the SEC for BaseballShares and HockeyShares, suites of ETFs that would track Major League Baseball and National Hockey League teams through futures contracts that CME Group, the derivatives exchange, lists on indexes built by FutureSports, an index company. The underlying CME futures, which began trading for NHL teams in late September, need to first establish a trading history.
Each team's index opens the season at a set number and moves as the team racks up statistics, including runs scored, stolen bases and strikeouts for baseball, then resets in the offseason.
"The sports industry generates hundreds of billions of dollars a year, but there has never been a liquid, transparent investment product tied directly to what happens in live games," said Greg King, CEO of Alpha Sports, in a press release. "Alpha Sports exists to build that product for passionate investors who want to participate in the fortunes of their favorite teams."
Johnson, though, said the sports-themed ETFs are far more gaming than investing.
"I thought that the ETF world had jumped the shark with the introduction of the 2X and 3X leveraged and inverse ETFs. In my mind these were simply vehicles for short term speculators. But, at least these vehicles were based upon assets. The new structures — and I call them structures, not assets — are simply gambling dressed up as investing," Johnson said.
In fact, the proposed team ETFs include in some cases leveraged versions of trades on single-team performance.
The boom in prediction markets is already blurring the lines between sports wagering and market trading, with regulatory battles intensifying over the distinction — CNBC reported on Thursday that the NFL is pushing for prediction markets to be regulated by state gambling authorities. Unlike prediction markets contracts, the sports team ETFs are tracking futures off an index rather than a single event (e.g. win or loss). But while structurally contracts in this market have a role to play for investors, in the case of sports performance, Johnson says the case is weak.
"They have societal value in that parties are able to hedge natural positions and transact with other speculators willing to bear that risk. This allows a more optimal allocation of risk," Johnson said.
But he added that is not the case when individual investors are making bets on the performance of sports teams they follow.
"There are no natural positions being hedged. In the aggregate, they destroy wealth," Johnson said.
Alex Michalka, vice president of investment research at investing platform Wealthfront, said the case for investing in the performance of sports teams is nearly impossible to separate from gambling, since wagering on whether a sports team will win or lose does not facilitate an economic purpose that adds value to the world.
"That is not to say a legitimate economic use case is impossible, but most people will likely use these funds for the same reasons they place a sports bet, which is often to show loyalty to a team or simply for entertainment," Michalka said. "Just because sports betting has an ETF wrapper, it does not change the risk associated with it," Michalka added.
Futures have long been used for hedging, and the CME contracts and FutureSports may be ways for sponsors, broadcasters, insurers and arena vendors to potentially hedge exposure against assets and liabilities. Conceptually, that's similar to an airline hedging fuel prices or an insurer hedging extreme weather risks. But in actuality, that does not apply to the vast majority of investors when it comes to these specific sports investments.
"Sports as an asset class exists, but for a few very select people out there," said Todd Sohn, chief ETF strategist at Baird Strategas. "I'm unsure if 'democratizing' really makes sense here," he said.
He added there are also many risks when it comes to novel ETFs like these with so few buyers in the market with a justifiable economic reason to trade them, risks that range from liquidity to price discovery and manipulation. Insider trading around injuries, trades, and coaching changes; and illiquidity in the investments during the offseason, up to four months of no activity, though trades and free agency can impact outlook, are among them. There should also be the expectations for wide bid/ask spreads and market imbalances with "fan enthusiasm driving prices and no commercial hedgers," Baird Strategas wrote in a preliminary analysis.
Despite the risks, all of which are covered in risk disclosures within these ETFs' prospectuses, Nate Geraci, an ETF expert and president of NovaDius Wealth Management, expects them to be approved by the SEC. Assuming the futures contracts "function properly, and establish sufficient liquidity, I don't see a regulatory reason why the SEC wouldn't approve the ETFs. CME-traded futures held in an ETF wrapper certainly aren't novel, though it's entirely possible the SEC could attempt to classify these sports-focused ETFs as such," he said.
The SEC is currently in the midst of a rulemaking proposal and public comment period covering "novel" ETFs, a move the regulator made after ETF companies filed for prediction markets ETFs.
Geraci is not surprised that ETF issuers are chasing the concept. "It's somewhat ironic that ETFs began as a way to offer low-cost, broad-based exposure to the market and have morphed in recent years into expensive, narrowly focused speculation vehicles. That said, it's a tale as old as time in asset management, where fund issuers rush to package and sell whatever is capturing investors' attention," he said.
Break your heart, break your retirement
Evan Mills, a financial advisor at Scholar Advising, an independent fee-only advisory firm, said it is important to understand the difference between owning a productive asset and making a bet on an outcome.
"If you're buying stock in a business, that stock is tied to revenue, earnings, and cash flow, so it appreciates based on that, as well as demand for the stock," Mills said. Bonds, meanwhile, include a contractual stream of payments, and that's how you make money off them.
When you put these sports teams under a ticker symbol, it can add a veneer of credibility, but he said it is still just speculation. "And where speculation really hurts is when those two things get tied together both financially and emotionally, which usually happens in retirement funds or portfolios," he added.
If you cry in your beer when your favorite sports team loses having a financial stake in it makes it worse.
"For avid sports gamblers and sports fanatics, their team can already break their heart with a loss. Now there's a way it can break your heart and break your retirement fund at the same time," Mills said.
While these funds are not long-term investment holdings given the single-season nature of the contracts, the marketing tag line for LeagueShares does leave some room for confusion among retail investors about how to think about these funds: "Your Team, Your Portfolio," it states.
Not every sports ETF is built on futures. Amplify ETFs, a Chicago-based ETF issuer, filed Sept. 22 for the Amplify Pro Sports Private & Public Ownership ETF, ticker PROS, an actively managed fund that would put at least 80% of its assets into public and private companies that own or operate pro teams, leagues and venues, with up to 15% in private stakes.
"PROS is designed to expand access to professional sports ownership through a combination of private investments and publicly traded companies tied to the business of sports," said Christian Magoon, CEO of Amplify ETFs, in announcing the fund. The fund has not launched.
Gabelli Funds' Opportunities in Live and Sports ETF (GOLS ), has been trading since January, and it holds shares of team owners such as MSG Sports , Atlanta Braves Holdings and Manchester United. But it isn't a pure play on teams. GOLS also owns media and entertainment companies such as Liberty Media and Disney, and Gabelli describes it as covering the broader sports and live-entertainment economy, so part of its portfolio occupies space far from the nosebleed seats.
Even within the world of sports ownership and equities, things are being sliced and diced more finely. MSG recently announced it will be splitting the New York Rangers and News York Knicks into two separate publicly traded companies.
'How many people can write a $10 billion check?'
Mauricio Rios, director of strategy at Global Field Sports Consulting, a Miami-based sports consulting firm, said putting the exposure to contracts tied to what happens on the field into an ETF, does not, by itself, change its underlying economic character. And it lacks the economic case of buying shares in a company that owns a team and where value "reflects expectations about the company's assets, earnings and long-term prospects."
Team-ownership stocks still carry financial, valuation and governance risks, and sporting success does not guarantee shareholder returns.
"A valuable franchise is not automatically a good investment at any price. Revenues, operating costs, debt and management decisions all matter," Rios said, adding that investors must also examine governance, because "owning shares does not necessarily give them meaningful influence over the controlling owner's decisions."
For performance-linked funds, Rios said, even a strong season may disappoint investors if the purchase price already reflected higher expectations. "Across these products, fees, liquidity and concentration deserve attention. Supporting a team and evaluating an investment connected to it are different decisions," Rios said.
Still, Matt LaPorta, a former MLB player who played four seasons at first base and in left field for the Cleveland Indians (now the Guardians) and now invests in sports deals as executive-in-residence at Dynasty Financial Partners, a platform for independent investment advisors, said there is value in investing in professional sports.
"I'm bullish on sports ETFs. As franchise values soar, the pool of buyers who can afford a controlling stake keeps shrinking," LaPorta said, pointing to the Khosla family's $9.6 billion deal to buy the Seattle Seahawks, a record for an NFL franchise. "How many people can write a $10 billion check? The way to keep valuations climbing and give owners liquidity is to bring in the broader market," LaPorta said.
But LaPorta said while funds holding shares of team-owning companies are real equity exposure, futures-based funds tied to a team's season stats "feel closer to a wager."
And even with funds providing real opportunities for everyday investors to gain exposure to sports, "they should understand exactly what they are investing in. Longer term, I expect tokenized sleeves of teams to add even more liquidity for owners," he said.
