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Wall Street Comes to Sin City

06/10/2015 03:29 pm ET | Updated Jun 10, 2016

Entity betting has arrived, and its impact on the already $3.9 billion a year sports betting market in Nevada is set to explode. Though admittedly still lagging behind the sports betting giants, the United Kingdom and Australia, Governor Brian Sandoval signed Senate Bill 443 into law on June 2, 2015, allowing Nevada-based companies to place what are called "pool" wagers for members of the business. In essence, this new law creates a viable and robust investment vehicle functionally no different from a Wall Street hedge fund that raises capital from investors who share the risk and reward of their trades proportionally based on their contribution. I introduced this concept in Wild Game about a fictional sports betting hedge fund.

This legislation is not only smart for Nevada, but it is an affirmative statement about a growing trend in the United States to finally -- once and for all -- shake that seedy image of back-alley sports betting and start treating sports as more than just an entertainment outlet, making it a legitimate, bona fide investment opportunity. With technology that rivals that of investment banks, the stage is set for sports betting to undergo the same frenzy and transformation that day trading did in the early '90s. Every day more and more astute investors are seeing the parallels between traditional investment trading and educated sports betting. The execution platforms for sports betting already mirror those of securities trading in London, and it's just a matter of time before the major sportsbook operators and gaming technology companies in the United States will be catering to these new customers. However, I think the excitement, transparency, and seven-day opportunity that sports betting offers is going to introduce a glut of first time sports bettors to the business, and market growth in this sector will be even greater than analysts are predicting.

One of those major benefits will be a level of transparency associated with their investing that they are not accustomed to. For example, the sports bettor will be able to watch an investment perform by watching the game, the players, the coaching, and have a very clear understanding of the strengths and weaknesses of a particular team. This differs greatly from the corporate boardroom, where the stock investor can only speculate as to why their stock rose or fell on a particular hour, day, or week. Sure, there are reports and chat boards, but the average stock investor lacks the time to truly understand the minutia of those market moves or the skills to analyze a quarterly report. While the current buy and hold method of the last few years has provided steady returns, it will end, as a correction in the market will no doubt occur. Alternative investments like sports betting have the potential to provide non-correlated returns with proper diversification while investors can still maintain their traditional holdings.

As more and more investors shed their bias and come to grips with the idea that odds for sporting events are the work of statisticians and math wizards running complex formulas, the liquidity of the market will steadily grow. And just like the stock markets, the difference between a successful stock trader and sports bettor will come down to two things, timing for the best price (odds) and being on the right side.

The economic advantages of nationwide legalized sports betting will not only redirect and stop the untold hundreds of millions of dollars that flow to the Caribbean and elsewhere each year, but there will be a marked increase in the overall interest of watching sports. This will inevitably benefit advertising and marketing companies because of greater audiences, which I refer to as "active viewers" -- those who have a stake in the outcome of the game because now every play has greater meaning and importance, and that incentive to flip channels or run a quick errand quickly disappears.

When the NBA Commissioner Adam Silver thinks it's a good idea, and progressive states like Nevada sign into law dynamic and forward thinking legislation like Senate Bill 443, it's time for people to shed the stigmas and get ready to ride the next greatest wave of alternative investing -- sports.

Blayne Davis is the author of Wild Game, a novel about a sports betting hedge fund. Media agents contact ellipsesmedia@gmail.com.

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