In 1989, MLB, the all-time hits leader Pete Rose, was banned for life from Major League Baseball in the United States due to gambling activities. It wasn't until last year, several months after his death in 2024, that he was reinstated.

Fast-forward to today, and Peter Roth's gambling activities on Wall Street seem like just another ordinary day: financial companies are constantly expanding the ways fans can bet on their favorite teams, no longer limited to just buying a beer and a $15 hot dog.

You might soon be able to buy the stock codes of your favorite ice hockey teams, but that doesn't represent equity in those clubs. Several asset management companies have submitted applications to launch dozens of ETF products—one for each NHL team, and funds for MLB teams have also been filed. These products are based on new futures contracts that track the statistical data of the teams' seasons. Trading has not yet begun, but there are already hundreds of ETF products that track the performance of individual professional teams over a single season, covering various statistical categories, and they have been submitted to the U.S. Securities and Exchange Commission (SEC) for approval.

Some financial experts believe that there are almost no subtle differences in this development.

Robert Johnson, a professor of finance at Creighton University ( Creighton University ), said: "The line between gambling and investing is not just becoming blurred; it has been completely erased."

Funds companies participating in this new trend include VolatilityShares, LeagueShares, Roundhill Investments, and Rex Financial.

None of the four companies mentioned above responded to requests for comments. Under normal circumstances, asset management companies are not allowed to make public comments during the period from submitting a fund application to the U.S. Securities and Exchange Commission (SEC) until the approval takes effect, provided that the application is ultimately approved.

Based in Miami, the issuer Rex announced on September 21st that it is launching Alpha Sports Holdings, a new subsidiary aimed at transforming team performance into exchange-traded funds. REX has filed with SEC for BaseballShares and HockeyShares; these two sets of ETF will track teams from Major League Baseball and the National Hockey League through futures contracts. These futures are listed on the derivatives exchange CME (CME Group), and are based on indices designed by FutureSports. The related CME futures began trading in late September, and contracts for NHL teams require the establishment of a trading history first.

At the beginning of each season, a baseline value is set for each team's index, which then changes as the team accumulates statistical data; baseball statistics include runs scored, stolen bases, and strikeouts, and this index is reset during the off-season.

Alpha Sports CEO Greg Kim ( Greg King ) said in a press release: "The sports industry generates tens of billions of dollars in revenue each year, but there has never been an investment product that is directly linked to what happens during live competitions and that is both liquid and transparent. The existence of Alpha Sports is to create such a product for enthusiastic investors who wish to be involved in the fate of their favorite teams."

However, Johnson stated that sports-related ETF is more akin to gambling rather than investment.

He said, "I once thought that when the ETF industry introduced 2x and 3x leverage as well as reverse ETF, it had already 'jumped over the sharks.' In my view, those were merely tools for short-term speculators. But at least those tools were still based on assets. The new structure—what I call a structure, not an asset—is nothing more than gambling disguised as investment."

In fact, the proposed team ETF also includes a leveraged version that allows for transactions based on the performance of a single team under certain circumstances.

The proliferation of prediction markets has begun to blur the lines between sports betting and market trading. Unlike prediction market contracts, the sports team ETF tracks index-based futures rather than single events (such as winning or losing). However, Johnson believes that although such market contracts may have their utility for investors in a structural sense, this rationale is weak when it comes to the realm of sports performance.

He said, "They are valuable at the societal level because parties can hedge their natural positions and trade with other speculators willing to take on these risks. This can lead to a better risk allocation."

But he added that this is not the case when individual investors bet on the performance of the sports teams they follow.

"There is no need to hedge against natural positions. Overall, they will destroy wealth," Johnson said.

Alex Michalka, the Vice President of Investment Research at the investment platform Wealthfront, stated that it is almost impossible to distinguish investing in sports teams from gambling, as betting on whether a team will win or lose does not serve any economic purpose that can create value for the world.

"That's not to say there aren't legitimate economic uses for them, but most people are likely to use these funds for the same reasons as they do when betting on sports gambling, usually to express loyalty to a team or simply for entertainment," said Michalka. "Just because sports gambling is packaged under the guise of ETF, it doesn't change the risks involved."

Futures have long been used for hedging, and CME contracts, as well as FutureSports, may also become a way for sponsors, broadcasters, insurance companies, and venue suppliers to hedge their asset and liability exposures. Conceptually, this is similar to airlines hedging against fuel prices or insurance companies hedging against extreme weather risks. However, in practice, for the vast majority of investors, this does not apply to these specific sports investments.

Baird Strategas Chief ETF Strategist Todd Thorne ( Todd Sohn ) said: "Sports as an asset class certainly exist, but they are only suitable for a very small and specific group of people. I'm not sure if 'popularization' really makes sense in this context."

He added that there are still many risks associated with these new ETF, as there are hardly any buyers in the market who have reasonable economic reasons to trade them. These risks include liquidity, price discovery, and manipulation. Insider trading related to injuries, transactions, and coaching changes; as well as the lack of liquidity during the off-season, which can last up to four months without any transactions, although transactions and the free-agent market also affect the outlook. In a preliminary analysis, Baird Strategas wrote that such products should also be expected to have larger bid-ask spreads, as well as market imbalances where "prices are driven by fan enthusiasm but there are no commercial hedgers."

Despite these risks – which are all listed in the risk disclosure section of the ETF prospectus – NovaDius Wealth Management President and ETF expert Nate Jerrasi ( Nate Geraci ) expects these products to be approved by SEC. He said that assuming these futures contracts “operate normally and sufficient liquidity is established,” he doesn’t see why SEC would not approve them. “It’s not new to package futures traded on CME into a ETF shell, but it’s certainly possible to try to classify these sports-focused ETF as novel products,” he said.

SEC is currently formulating proposals and seeking public opinions regarding the "novel" ETF; after ETF company declared its forecast for the market ETF, regulatory authorities initiated this process.

Gerasi was not surprised that ETF fund issuers would pursue this concept. “It’s somewhat ironic that ETF was initially designed to provide a low-cost, broad market access, but in recent years it has gradually evolved into an expensive, narrowly focused speculative tool. Nevertheless, this is a common phenomenon in the asset management industry: fund issuers compete to package and sell anything that attracts investors’ attention,” he said.

Sadness can also affect your pension.

Ivan Mills ( Evan Mills ), the financial advisor for Scholar Advising, said that it is very important to understand the difference between owning a productive asset and placing a bet on a certain outcome.

“If you are buying the stock of a company, that stock is linked to income, profits, and cash flow. Therefore, its appreciation is based on these factors, as well as the market demand for the stock,” Mills said. Bonds, on the other hand, involve a predetermined payment stream stipulated in the contract, and that is how you make money from bonds.

When you put these sports teams into a single stock code, it may give the appearance of credibility, but he argues that this is still just speculation. “And the real harm of speculation lies in the fact that when these two things are tied together financially and emotionally, it usually happens within pension funds or investment portfolios,” he added.

If you cry over beer because your favorite team loses, then betting on that team will only make things worse.

"For avid sports bettors and fans, it's already heartbreaking enough when their team loses. Now there's a way to not only have your heart broken when your team loses, but also to have your retirement savings suffer as well," said Mills.

Although these funds are not suitable for long-term investment due to their single-season nature, LeagueShares's marketing slogan does create some confusion among retail investors regarding how to understand these funds: 'Your team, your portfolio.'

Not all sports ETF are based on futures. The Chicago-based ETF issuer Amplify ETFs filed for Amplify Pro Sports Private & Public Ownership ETF on September 22, with the code PROS. This is an actively managed fund, with at least 80% of the assets to be invested in listed and unlisted companies that own or operate professional teams, leagues, and venues, and up to 15% can be allocated to private equity.

Amplify ETFs CEO Christian Maguenn ( Christian Magoon ) stated when announcing the fund: “ PROS aims to expand the channels for the public to participate in professional sports ownership through private investments and a portfolio of publicly traded companies related to sports business.” The fund has not yet been launched.

Gabelli Funds's Opportunities, in, Live, and, Sports ETF (including GOLS) have been trading since January of this year, holding stocks in the ownership companies of teams such as MSG Sports, Atlanta Braves Holdings, and Manchester United. However, it is not a product that purely bets on teams. GOLS also holds shares in media and entertainment companies such as Liberty Media and Disney. Gabelli describes its investment portfolio as covering a broader range of sports and live entertainment economies, so some of its investments extend beyond just the premium seating areas in stadiums.

Even in the world of sports ownership and stocks, the segmentation is becoming increasingly detailed. MSG recently announced that it will split the New York Rangers and the New York Knicks into two separate publicly traded companies.

"How many people can write a check for one billion dollars?"

Mauricio Rios, the Strategic Director of Miami Sports Consulting Company Global Field Sports Consulting, stated that putting contract exposures linked to what happens on the field into ETF does not change their underlying economic properties. It also does not possess the same economic logic as purchasing shares of a company that owns a team, as the value of the latter “reflects expectations regarding the company's assets, profitability, and long-term prospects.”

Equity in team ownership still comes with financial, valuation, and governance risks; sporting success does not guarantee returns for shareholders.

“A valuable franchise does not necessarily mean it is a good investment at any price. Revenue, operating costs, debt, and management decisions are all important,” said Rios, adding that investors must also examine governance issues because “holding shares does not necessarily give them meaningful influence over the decisions of the controlling shareholders.”

For funds that are linked to performance, Rios says that even if a team has a strong season, investors may still be disappointed if the purchase price already reflects higher expectations. "In these products, fees, liquidity, and concentration levels are all factors that deserve attention. Supporting a team and evaluating an investment related to it are two different things," he said.

However, former MLB player Matt Lapota ( Matt LaPorta ) believes that investment in professional sports is worthwhile. Lapota played as a first baseman and left fielder for the Cleveland Indians (now Guardians) for four seasons; today, he serves as a senior executive at the independent investment advisory platform Dynasty Financial Partners, participating in sports transaction investments.

“I’m optimistic about sports ETF. As the value of franchise rights soars, the pool of buyers who can afford to acquire controlling stakes is shrinking,” said Lapota, referring to the deal in which the Kosala family acquired the Seattle Seahawks for $9.6 billion, a record for a NFL team. “How many people can write a check for $10 billion? To keep the valuation rising and provide liquidity for the owners, the solution is to introduce a broader market,” Lapota said.

However, Lapota stated that the funds holding the ownership of the team company represent a real stock exposure, whereas the futures funds linked to the team's seasonal statistical data “feel more like a bet.”

He also said that even though these funds provide ordinary investors with the opportunity to truly access sports assets, “they should be clear about what they are actually investing in. In the long run, I expect the tokenization of teams to bring more liquidity to their owners,” he said.