Sports betting is becoming part of popular culture, explains Jon Markman, a leading technology sector specialist and editor of Strategic Advantage.

It’s impossible to turn on a college football or National Football League game and not hear commentators rattling on about point spreads and the betting odds.

Executives at DraftKings (DKNG) announced a $20 billion offer for Entain, a British sports betting giant. The oddity is Entain currently has a joint venture with MGM Resorts International (MGM). It’s a gold rush. Investors should buy the companies making shovels.

More from Jon Markman: Place a Bet on iGaming with Rush Street

Rush Street Interactive (RSI) is making software tools for the next generation of sports betting. Demand for iGaming is surging as technological advancements and political expediency collide.

For the first time it is possible to run a sports book completely in the cloud. Pushing real-time gambling data to smartphones changes the gaming landscape. And revenue hungry politicians see online sports betting as the answer to their Covid-ravaged budgets.

Sports betting is currently legal in 24 states, and New York could come online later this year. Betting legislation is pending in five more states, with more likely to be folded in during 2022 and 2023.

In Georgia, team officials from the Atlanta Braves from MLB, the NFL’s Falcons and the Hawks of the NBA have petitioned state lawmakers to legalize sports betting. Pro sport executives expect to collect billions from licensing fees. A study from the American Gaming Association in 2018 pegged those fees at $4.9 billion, and that was before the popularity of smartphone apps.

DraftKings is vying for a piece of the growing smartphone business. It might seem like the Boston, Mass.-based company faces an uphill battle trying to beat established gambling organizations online. That’s not entirely true. The upstart has better onboarding for new users. DraftKings also has better technology.

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The company acquired SB Tech in 2019 for $3.3 billion. The British software developer was known for its cutting-edge risk management and odds-making tools. DraftKings developers specialized in the types of algorithms that enabled new non-standard, in-game bets. It was a marriage made in heaven.

Entain and MGM Resorts International currently have a joint venture called BetMGM. The project is growing quickly, with 23% iGaming market share in the United States, according to David Katz, an analyst at Jefferies.

MGM made an offer in January to buyout Entain’s interest in BetMGM. That transaction is being held up United Kingdom regulatory restrictions yet Katz argues MGM could make another bid for BetMGM in the future. Unfortunately, that transaction may leave the venture undercapitalized in terms of technology. MGM needs a few good shovels.

Rush Street Interactive operates an online casino and sports betting business. Its strength is the software that underpins iGaming. The nine-year old company came public in January through a special purpose acquisition company.

Shares have been on the move in September following DraftKing’s $1.6 billion acquisition of Golden Nugget Online, a similar business. Investors are speculating Rush Street will get gobbled up in the rush by bigger players to gather digital tools.

Rush Street has reported sequential quarterly from for the past seven quarters. First quarter revenue grew to $112 million, up 218% year-over-year. And the business is only getting started.

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The company currently operates in 11 states. It launched a sportsbook during 2021 in Michigan, Virginia and Iowa. Monthly active users grew to 115,000, up 166% from a year ago. And average revenues per user grew 21%, to $302.

Big players are furiously trying to stake their digital claims for the future of gaming. DraftKings going after Entain is part of this process.

Rush Street is a logical target for a bigger player yet the core business is strong enough to stand on its own. Investors should consider buying Rush Street into any material weakness.

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