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The economic outlook in the United States is setting the direction the iGaming industry will take by 2025. Changes in monetary policy, interest rates and regulatory inclinations are creating a dynamic environment, full of opportunities and risks.
Here we will explore how these conditions will impact company valuations, private equity activity, and overall market dynamics in the sector.
Dovish interest rates and monetary policy
The Federal Reserve has recently reduced interest rates by 0.25%, leaving the range at 4.5%-4.75%. Although this measure aims to promote economic growth, it also implies risks for leveraged sectors such as iGaming if an adverse economic scenario cannot be avoided.
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Impact on the stock market
A long-standing lower interest rate environment tends to inflate the stock market by lowering the cost of capital. For iGaming companies, especially publicly traded ones, this means a potential rise in their valuations as investors look for high-growth options.
In addition, there is an incentive for mergers and acquisitions (M&A), since more accessible capital creates the right conditions for leveraged buyouts.
Private equity activity
The new liquidity will also favor private equity firms seeking to acquire assets in the sector. These companies could benefit from selling stakes in mature businesses that have already accumulated value. This domino effect could lead to a wave of strategic transactions in the iGaming space.
M2 money supply and liquidity
The M2 money supply has fallen by $500 billion following post-pandemic highs, a contraction caused by quantitative tightening. However, if rates continue to be reduced, a rebound in M2 is expected which could revitalize liquidity in the market.
Bonds, inflation and loans
A decline in bond yields could divert capital toward riskier investments, such as iGaming stocks. Emerging and expanding companies within the sector will likely find a more favorable financing outlook. However, this liquidity also comes with potential increases in inflation, which could trigger more restrictive measures again from the Fed, stifling growth in the process.
National debt and inflation concerns
The U.S. national debt, which reaches $35.9 trillion, remains a critical issue. The possible increase in public spending under expansionary fiscal policies could raise this figure even further.
For iGaming, these macroeconomic dynamics can act as both opportunities (thanks to the injection of liquidity) and threats, since an eventual inflationary correction could hit leveraged sectors.
Among emerging risks, the growing adoption of cryptoassets is also a point to watch. Issuers of stablecoins, such as USDT and USDC, are now among the largest holders of US debt, underscoring broader acceptance of these types of digital assets, which are also gaining popularity on unregulated betting platforms.
Regulations and new markets
The regulatory landscape in iGaming continues to constantly evolve, with countries like Brazil implementing new laws to liberalize the market. In the United States, post-PASPA, growth remains significant.
However, challenges in unregulated and over-regulated markets are allowing the rise of alternative operators, such as sweepstakes and crypto casinos. These platforms are opening doors for both consumers and investors seeking new opportunities beyond conventional markets.
Risks and opportunities for investors
Opportunities
- Low rate environment which benefits high-growth investments.
- M&A and accessible financingattracting monetary flows to the sector.
- Expansion of unregulated marketsespecially in sports betting and crypto casinos.
Risks
- Possible inflationary adjustments that force more restrictive monetary policies, affecting liquidity.
- National economic and political volatility that could influence investment conditions.
Look to the future
Despite the risks, the coming years look promising for the iGaming industry. With a more favorable macroeconomic environment and growing interest from buyers and investors, 2025 could be a “harvest year” for those who have bet on this industry. Balanced regulations, technological innovation and adoption of alternative models such as cryptoassets will be key pieces in the success of this dynamic space.
The iGaming industry not only appears resilient to macroeconomic changes, but could emerge stronger, capturing new opportunities in a changing global market.
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