Sports and gambling investors expect 'substantial' M&A ahead. These 5 hot areas could fuel dealmaking.

• Sports and gambling investors shared key areas they think will drive M&A deals looking ahead.
• Crypto, sweepstakes, and fantasy sports were a few topics of discussion at a recent conference.
• Overall, these investors expected "significant" M&A in the space in the next two years.

Crypto, sports sweepstakes, and gambling's expansion in Latin America are a few areas that could fuel the future of dealmaking in the sports and betting spaces.

Investors speaking last week at Next.io's Next Summit, a gambling conference in New York, predicted M&A will increase in the sector over the next two years.

"I think there is going to be substantial M&A over the course of the next 24 months," said Edward King, cofounding partner and co-chief investment officer of Acies Investments, which invests in sports wagering, technology, and online gambling.

King said he expects M&A in the next 12 months to be more of the same, with major companies continuing to fill product and distribution gaps by buying smaller players. But he thinks dealmaking beyond that will shift as gambling operators like DraftKings and FanDuel grow profits.

"Suddenly these companies are going to have enormous financing capacity and firepower," said King. "I would love to see the branching out of that industry and I think we are coming at some point in time towards that."

DraftKings has been a big acquirer in recent years, for example. Last year, it bought Jackpocket, an app where people can order lottery tickets online.

Sports and gambling investors shared their M&A predictions during a panel at the conference. They said crypto, sweepstakes, pick 'em fantasy, collectibles, and the growing industry in Latin America are hot areas that could drive M&A in the coming months.

1. More sportsbooks expand into pick 'em fantasy sports

Emerging formats that are gaining popularity and resemble sports betting could be ripe for takeover.

"Pick 'em" fantasy sports is one area that could be targeted for M&A. In pick 'em fantasy, there is no point spread, just a decision to make, like if LeBron James will score more or less 20 points in tonight's game. Joey Levy, CEO of sports betting and media company Betr, which has a pick'em product, predicts these games will continue to become more popular across the world.

Several challenger brands like PrizePicks, Underdog, Sleeper, and Betr exist in this space. But DraftKings is the only top-tier provider to launch a pick 'em format so far. Levy thinks at least one more major operator could launch its own version of the service in the coming months and turn to M&A to do so.

2. Sweepstakes and prediction markets converge with gambling

Levy expects sportsbooks to expand into sports sweepstakes, which are free-to-play games that have become increasingly popular in which people can wager in-game currency.

He also pointed to prediction markets that have expanded into sports contracts, which are similar to betting, and could see growth.

"This convergence between the existing incumbents and emerging operators is going to be something that is worth watching," Levy said.

3. A crypto company buys a betting company

Roger Ehrenberg at Eberg Capital thinks a crypto exchange or or a large retail trading app is going to buy a sports betting company.

Fintech companies like Robinhood are already pushing into sports betting via prediction markets, for example.

"Crypto is a huge unlock for the space," he said. "That access to gaming users and the cross-fertilization between those who are effectively betting — they are just betting with different vehicles."

Crypto has been on a rollercoaster since the Trump administration embraced it.

4. Collectibles see a resurgence

Collectibles are another area that could be attractive for a gambling company looking to branch out. Sandford Loudon, a partner at Oakville Capital, said collectibles are a largely untapped market.

Fanatics, for one, has expanded to the space, acquiring the trading card company Topps in 2022 and collectibles company PWCC Marketplace in 2023.

5. Latin America could be the next big area for gambling expansion

The US has been the epicenter of the gambling boom in recent years, but Latin America could be next as countries like Brazil legalize sports betting.

Loudon predicts that North American operators will move to South America to dominate the space and help it grow while it continues to develop.

Loudon said places like Peru, which has a stable economy, or Mexico, have a lot of room to set up good gambling structures that allow for a lot of M&A to flow. Because Brazil is legalizing sports betting, new markets in that region of the world could continue to pop up.