Prediction markets have already blurred the line between financial trading and gambling; now a number of fund companies have filed applications to issue hundreds of ETFs that would track individual teams in the National Hockey League (NHL) and Major League Baseball (MLB), relying on futures tied to single-season team performance metrics.

There is already a category of sports ETFs on the market that hold shares in publicly traded companies that own teams, representing a more traditional investment approach where investors can perform balance sheet analysis, such as Gabelli Funds' GOLS and Amplify ETFs' proposed PROS ETF.

But investment experts argue that this batch of not-yet-launched single-team thematic funds is closer in nature to betting than investing; the product issuers say they give fans a transparent way to put money behind the teams they support.

In 1989, baseball hits record holder Pete Rose was banned for life for gambling-related conduct. It was not until last year, months after his death in 2024, that he was reinstated. Fast forward to the present, and financial institutions are continuously expanding the channels through which fans can "pay for their teams," long beyond buying a beer or a $15 hot dog. Pete Rose's gambling behavior back then now seems commonplace on Wall Street.

You will soon be able to buy an ETF ticker corresponding to your favorite hockey team, but that does not mean you own equity in the team's franchise. Multiple asset managers have filed applications to issue dozens of ETFs, each corresponding to one NHL team, and have also filed for MLB baseball team funds. These products are all based on new types of futures contracts that track team season data performance.

Although none can yet officially trade, a combined hundreds of ETFs have submitted listing approval applications to the U.S. Securities and Exchange Commission (SEC), with these products tracking a single professional team's single-season performance across multiple statistical dimensions. Some financial experts believe this product innovation has no value whatsoever. "The line between investing and gambling hasn't just become blurred — it has completely disappeared," said Robert Johnson, a finance professor at Creighton University.

Fund companies joining this new trend include LeagueShares, Rex and two other institutions. None of the four companies responded to interview requests. Asset managers generally are not permitted to make public comments from the time they file fund registration applications with the SEC until approval takes effect.

Miami-based ETF issuer Rex announced on September 21 that it had established a new subsidiary, Alpha Sports Holdings, specifically to package team game performance into exchange-traded funds. Rex has submitted applications to the SEC for the BaseballShares and HockeyShares series of ETFs, products that rely on futures contracts listed on the Chicago Mercantile Exchange (CME) to track the performance of MLB and NHL teams; the futures indexes are compiled by index company FutureSports.

This underlying index futures only began trading on NHL-related underlying assets at the end of September and still needs to accumulate trading history. Each team's corresponding index is set at a baseline value at the start of the season and rises or falls as the team's various data points change. Baseball dimensions include runs scored, stolen bases, strikeouts and more; the index resets during the offseason.

Alpha Sports CEO Greg King said in a press release: "The sports industry generates hundreds of billions of dollars in output every year, but there has never before been an investment product with liquidity, transparency and a direct link to real on-field results. Alpha Sports' goal is to build this product for passionate investors, allowing them to participate in the rise and fall of the teams they love."

But Johnson believes these sports-themed ETFs are far more gambling than investing. "I once thought that the emergence of 2x, 3x leveraged and inverse ETFs had already sent the ETF industry off the rails. In my view, those products were always just short-term speculative tools. But at least they had underlying assets behind them. These new structures — which I call product structures, not assets — are just gambling dressed up as investing."

In fact, some versions of these pending team ETFs also come with leverage, used to bet on a single team's on-field performance. The boom in prediction markets has long blurred the boundary between sports betting and market trading, and the regulatory battle over how to define the two continues to heat up. On Thursday, the National Football League (NFL) stated its position that prediction markets should be governed by state gambling regulators.

Unlike prediction market contracts, team ETFs track index futures, not a single event such as the outcome of one game. Johnson said this type of contract structure has value for investors in certain scenarios, but its rationale is very weak when applied to sports performance. "These products have social value: counterparties can hedge their inherent risk exposure and complete trades with other speculators willing to take on risk, achieving better risk allocation," Johnson said.

But he added that ordinary retail investors betting on the on-field performance of their favorite teams does not fall into that category. "There is no inherent risk that needs hedging. On the whole, this kind of trading only destroys wealth."

Alex Michalka, vice president of investment research at wealth management platform Wealthfront, said investments betting on team performance are nearly indistinguishable from gambling. Betting on whether a team wins or loses does not create any economically value-added purpose. "It's not that there are absolutely no reasonable economic use cases for these products, but the motivation for the vast majority of people buying these funds is the same as betting on sports — to express support for a team, or simply to seek entertainment," Michalka said. "Even if you put sports betting inside an ETF wrapper, it doesn't change the risk itself."

Futures have long been used for risk hedging. In theory, the CME's futures contracts and the FutureSports index could help sponsors, broadcasters, insurers and venue suppliers hedge their balance sheet exposures, similar in principle to airlines hedging fuel prices or insurers hedging extreme weather risk. But in reality, the vast majority of ordinary investors participating in this kind of sports investment do not have such hedging needs.

Todd Sohn, chief ETF strategist at Baird Strategas, said: "Sports as an asset class does exist, but it is only suitable for a very small number of professional participants. I'm not sure this kind of 'democratization of investing' is appropriate here." He also noted that these innovative ETFs carry multiple risks: too few buyers with reasonable trading motives, including insufficient liquidity, distorted pricing and market manipulation; insider trading triggered by player injuries, trades and coaching changes; and an offseason that can last up to four months, during which the product does not trade but player trades and free agent signings still change market expectations.

Baird Strategas' preliminary analysis points out that the products will also experience wide bid-ask spreads and market imbalances — "prices are driven by fan enthusiasm, with no commercial hedging participants." All of these risks are written into the risk disclosure sections of the ETF prospectuses. Even so, ETF industry expert and NovaDius Wealth Management president Nate Geraci expects the SEC to approve these products. "Assuming the futures contracts can function properly and accumulate sufficient liquidity, from a regulatory standpoint the SEC has no reason not to let them through. ETFs holding CME futures as underlying assets is not new, though the SEC could very well try to classify these sports ETFs as a new type of special product."

The SEC is currently soliciting public comment on "novel ETFs." The regulator launched this comment period after multiple fund companies filed for prediction market ETFs. Geraci is not surprised that issuers are chasing this concept: "Ironically, when ETFs were born, they were meant to give investors low-cost, broad-market investment tools, yet in recent years they have evolved into expensive, highly segmented speculative vehicles. But this is an old story in the asset management industry: fund issuers rush to package and sell any concept that can capture investor attention."

Break your heart and drain your retirement savings. Evan Mills, a financial advisor at fee-only advisory firm Scholar Advising, said it is crucial to distinguish between holding productive assets and betting on an outcome. "If you buy stock in a company, the share price is tied to revenue, profits and cash flow, and the share price rises based on these fundamentals plus market demand. Bonds have contractually agreed cash flows, and you earn returns from that."

Packaging team game performance into an ETF ticker may appear to add credibility, but in essence it is still just speculation. "When speculation is tied to both finances and emotions, the damage is doubled, and this often happens in retirement accounts and investment portfolios," he added.

If your home team losing already makes you drown your sorrows in drink, once you put money on it, the blow will be even heavier. "For passionate sports gamblers and fans, a team losing is already enough to break their hearts. Now, a product can simultaneously break your heart and drain your retirement savings," Mills said.

Because the contracts cover only a single season, these funds are not suitable for long-term holding. LeagueShares' website slogan "Your team, your portfolio" can easily mislead retail investors about the nature of the product.

Not all sports ETFs are based on futures. Chicago-based ETF issuer Amplify ETFs filed on September 22 to launch the Amplify Professional Sports Public-Private Ownership ETF, ticker PROS, an actively managed fund. At least 80% of the fund's assets are invested in public and private companies that own and operate professional teams, leagues and venues, with up to 15% allocated to non-listed equity.

Amplify ETFs CEO Christian Magoon said in the product launch announcement: "PROS aims to give more investors the opportunity to participate in professional team ownership investing through private investments plus publicly traded sports industry companies." The fund has not yet listed.

Gabelli Funds' Live and Sports Opportunities ETF (ticker GOLS) began trading in January of this year, holding shares in team-owning companies such as MSG Sports, BATRK and Manchester United. But it is not a pure team play; GOLS also holds media and entertainment companies such as Liberty Media and Disney. Gabelli positions it as covering the broader sports and live entertainment economy, with an investment scope far beyond the field itself.

Even within team equity investing, asset separation is becoming increasingly granular. MSG Group recently announced plans to split its Rangers business and Knicks business into two separate publicly listed companies. "How many people can write a $10 billion check?" said Mauricio Rios, strategic director at Miami sports consulting firm Global Field Sports Consulting, who believes packaging on-field performance contracts into ETFs does not change the underlying asset's economic characteristics. It does not carry the investment logic of buying shares in a team's parent company — the latter's value "reflects the market's expectations for the company's assets, earnings and long-term prospects."

Team-owning stocks themselves carry financial, valuation and governance risks, and a team's strong on-field performance does not necessarily mean shareholders will profit. "A great team franchise is not necessarily a good investment at any price. Revenue, operating costs, debt and management decisions all affect returns," Rios added, noting that investors also need to examine corporate governance because "holding shares does not mean you can exert substantive influence over the controlling party's decisions."

Regarding funds tied to team performance, Rios said that even if a team has a standout season, investors can still lose money if the purchase price has already fully priced in market optimism. "For these products, the key focus should be fees, liquidity and concentration. Supporting a team and evaluating a related investment target are two different things."

However, former MLB player Matt Laporta holds a different view. He played four seasons for the Cleveland Indians (now the Guardians) as a first baseman and left fielder; he now serves as an executive-in-residence at independent advisory platform Dynasty Financial Partners, participating in sports investment projects. He believes professional sports investing has value. "I'm bullish on sports ETFs. Team franchise valuations are soaring, but fewer and fewer buyers can afford to acquire controlling stakes." He cited the Koshla family's acquisition of the Seattle Seahawks, a deal that set an NFL team acquisition record. "Very few people can write a $10 billion check. To sustain upward valuations and provide liquidity to team owners, investment channels must be opened to a broader market."

But Laporta also said that funds holding shares in team parent companies are genuine equity investments, while products based on futures and tied to team season data are "closer to betting." Even if these products give ordinary investors a chance to gain exposure to the sports sector, "they must fully understand what they are investing in. Over the long term, I expect tokenized team shares to further enhance team owners' asset liquidity."