Why Shares of Scientific Games Corp Popped 15% Today

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What happened

Shares of gaming technology and services company Scientific Games Corp (NASDAQ: SGMS) jumped as much as 15.3% in trading Monday after the Supreme Court opened the possibility of states allowing sports betting. Shares pushed higher throughout the day and were up 13.7% at 1:55 p.m. EDT.

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So what

The Supreme Court struck down a federal law known as the Professional and Amateur Sports Protection Act, which outlawed sports betting outside of Nevada. Now, any state could pass its own sports betting laws, which could mean betting at racetracks, casinos, or even online.

Scientific Games could be a winner from sports betting because it creates the infrastructure companies use to bet. Particularly in online formats, the company could become a leading supplier of technology used in sports betting.

Now what

Sports betting opens up a market that could be worth billions for those who can capture a piece of the action. Nevada's Gaming Control Board said $4.8 billion was bet in sportsbooks in Nevada in 2017, with $248.7 million won by casinos. But the illegal sports betting market is likely tenfold that number, or more, based on studies from Congress and gaming analysts.

While we don't know how big a financial impact this could have on Scientific Games, if any, it's incrementally positive for the business in the short term. Now, the company has to prove that the sports betting business will indeed drive revenue, which could take years to become a reality.

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Travis Hoium has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.