The new law of modern asset management seems to be that anything that can conceivably be put into an ETF will be put into an ETF — including sports gambling.
Since mid-August three existing ETF issuers and a start-up rookie have filed to launch no fewer than 402 funds based on the performance of individual ice hockey, baseball and basketball teams. The initiative is being backed by baseball royalty, with the owners of the Boston Red Sox, Chicago Cubs and Los Angeles Dodgers all investing in the creator of the indices the ETFs would track.
Sports funds are the latest curveball from a US ETF industry that has grown from 2,241 funds at the end of 2020 to 5,488 as of last month, according to data provider ETFGI. Many of them are plainly ridiculous — there’s now even an ETF that purports to benefit from adopting “reverse-engineered alien technology, spurred by government disclosures about UFOs” — but that is no impediment to an ETF industry where no idea is too silly.
These are just proposals at this stage, and the SEC could nix them all. The US financial watchdog this summer requested public comments on a whole host of “novel” ETFs that have been proposed this year.
However, given the current state of the US financial-regulatory regime, it is entirely possible that they are approved eventually, so Alphaville thought a closer look might be warranted.
Why now?
The timing of sports-betting ETF linked to the performance of individual teams may seem odd.
Since the Supreme Court struck down the federal law preventing states from authorising sports betting in 2018, 39 states and the District of Columbia have legalised the practice, giving punters free rein to gamble in the traditional, bookie-approved manner. Moreover, prediction markets are in practice new gambling shops as well, meaning there’s no shortage of venues for people that want to hand their money to intermediaries.
However, given how top-heavy the traditional asset management industry is, ETF upstarts doubtless have their eyes on the huge and growing numbers of punters that think they will be the exception to the rule.
Americans wagered a record $167bn on sport in 2025, according to the American Gaming Association, a rise of 40 per cent in just two years. Last year a record 22 per cent of US adults told the Pew Research Centre they had personally bet money on sport in the previous year (despite 43 per cent of Americans saying they thought legalised sports betting was bad for society, and only 7 per cent seeing it as good).
Offering sports-related ETFs may even be a useful hedge for traditional asset managers: more than half of Gen Zers have directed investment funds to sports betting on at least one occasion, according to a survey by robo-adviser Betterment earlier this year, with 26 per cent of these whippersnappers apparently viewing sports betting as part of their “long-term financial strategy”.
Who are these ETF providers and how do they work?
Roundhill Investments, fresh from the success of its DRAM AI memory chip ETF; Volatility Shares; REX Financial via a new subsidiary Alpha Sports; and debutants LeagueSports are the ETF providers now seeking to introduce sports team ETFs.
They want to cover all the bases by launching entire families of ETFs covering either all 32 National Hockey League teams, all 30 Major League Baseball outfits or all 30 National Basketball Association franchises. This being 2026, the filings also naturally include 2x leveraged versions of the underlying products.
The ETFs would be based on Chicago Mercantile Exchange futures contracts on FutureSports Performance Indices, designed to convert official team statistics into a single, live performance measure.
As for the underlying methodology, well that’s so simple that the guide produced by FutureSports Xchange Inc (“Turning Sports Statistics Into Institutional-Grade Indexes”) for the NHL variants only runs to 23 pages.
Each index would begin life at a base level of 7,500. It would then rise or fall depending on “statistical constituents” — based on play in a single game — and “milestone constituents” — based on reaching thresholds across a series of games.
For NHL teams, some examples include scoring a goal (+12 for an even-strength goal, when both teams have the same number of players on the ice, +10 for a power-play goal, when the scoring team has a man-power advantage, +15 for a short-handed goal, when a team is one or more players down).
There would be corresponding declines for conceding a goal, with this symmetry repeated for metrics such as a shot on goal (±1.5 points), face-off win (±0.5), a save by a goaltender (±0.75), a shutout (±50) and a win (±10).
The multi-game metrics are also mostly symmetrical and include monthly most (least) goals ±125, season most (least) blocks ±250 and first (last) in conference ±250.
‘Positive skew’ 😏
There are some anomalies, though, which mean the indices are not a zero-sum game, and render it tricky to work out whether the ETFs would be likely to rise or fall in aggregate.
For example, a “takeaway” (dispossessing an opponent) is worth +2.5, but a “giveaway” (losing possession) is only -0.8. Conversely, there are metrics that are purely negative, with no corresponding gain for the opposite team, such as “ejection” (a sending-off to non-Americans) -10, “misconduct” -4 and an “extended penalty” -2.
Balancing that, the winners of the season-climaxing Stanley Cup gain 750 points, with no corresponding loss for other teams.
FutureSports was founded by two Australian derivatives traders, Rhett Dinsdale (ex Credit Suisse, Merrill Lynch and Deutsche Bank) and Leigh Taylforth (Commonwealth Bank of Australia, GPS Capital Markets) in 2022.
Dinsdale told Alphaville that in simulations the indices tended “to skew positive” over a season.
The proposed ETFs would not track the spot levels of these indices, however, but futures contracts traded on the CME, whose prices would embed market expectations of a team’s performance over the remainder of the season.
Importantly, the vehicles would be structured differently to the dozens of filings for prediction market ETFs, covering everything from elections to the weather, that have been made this year, but whose launches have been held up by a so-far unconvinced SEC.
These prediction market ETFs are based on binary event contracts — a contract goes to 1 if the Democrats win control of the Senate, 0 if they do not, etc — whereas FutureSports has created a continuous index that moves with teams’ underlying performance.
This continuous nature would also help separate the sports ETFs from regular sports betting, which is by its nature binary and with a finite cut-off point. Dinsdale instead compares his approach to fantasy sports leagues.
That said, the proposed ETFs could still be caught up in a wider SEC review of where the industry is heading. The agency’s chair Paul Atkins noted in May that “novel products raise novel questions” and on June 30 the SEC issued a formal request for public comment on the horde of new-fangled ETFs being proposed.
Everything is gambling
If the concept does take off, FutureSports would seem to be the one guaranteed winner. The Chicago-based outfit has struck exclusive deals with the NHL and MLB to supply it with their official statistics, which will be used to calculate the indices, giving it a handy dose of monopoly power.
It also has heavyweight financial backers, including the power brokers behind three MLB teams: John and Linda Henry of the Fenway Sports Group, the owner of Boston Red Sox and a majority stake in Liverpool FC; Elysian Park Ventures, the investment arm of the group that owns the Los Angeles Dodgers; and Marquee Ventures, tied to the owners of the Chicago Cubs.
The venture capital arm of CME Group, the owner of the Chicago Mercantile Exchange, is also on board as, handily, are two distributors of ETFs and other financial products — Robinhood Markets and Wedbush Securities.
FutureSports also has its eyes on creating similar indices for other sports, with Dinsdale saying:
We are interested in all leagues and sports as well as collegiate sports. We are in talks with a lot of the sponsors, locally and internationally. It has generated a lot of interest. I would expect we would see more announcements coming soon.
Sadly for true sports connoisseurs, though, a cricket-based version is not in the pipeline.
Dinsdale insists that the indices — and any ETFs based on them — have a practical purpose, as they allow the team owners, broadcasters, sponsors, stadium owners, merchandisers and ticketers who have a financial interest in a given team being successful to hedge their exposure.
Colour Alphaville a crimson shade of sceptical. The hedging argument is also offered up as a hand-wavey justification by prediction markets, even when the overwhelming evidence is that they are just gambling venues with better marketing.
Moreover, for it to work as a hedging tool there would need to be derivatives tied to these indices and ETFs, which seems wildly unlikely to take off. The CME launched house price futures two decades ago, but despite being a far more natural product they have flopped hard.
Instead, the main adopters of sports team ETFs — if they ever are approved — will be regular fans who already have a tendency to concentrate their financial exposure on top of their emotional exposure. Because everything is gambling nowadays, as Max Read has argued.