The economic landscape in the US continues to evolve, with signals of easing in monetary policy. Trump’s presidential win, combined with a Republican majority in the senate and house, means the GOP (Republicans) will have complete legislative and executive power, which will significantly impact economic policy. This control will influence critical areas such as interest rates, debt management and inflation, with far-reaching economic consequences.
This analysis explores how these macro-moves could impact the online gambling industry. Key indicators such as the Federal Reserve’s trajectory on interest rates, US debt levels, inflation risks and money supply adjustments shape market liquidity and investment flows.
Next, we connect these variables to assess their potential impacts on both public and private sectors within the igaming ecosystem.
Notably, when monitoring macro-trends, we mainly focus on the US, as that’s where the money is, and other regions tend to align their policies to maintain currency strength in response to US moves.
Fed’s dovish shift
The US Federal Reserve has recently lowered the federal funds rate by 0.25%, bringing the range to 4.5%-4.75%. While this cumulative 0.75% reduction is notable, the yield curve offers a clearer read on market expectations for growth and inflation.
Igaming investors may interpret current rates as a signal for further cuts, but with much of this optimism likely priced in, markets remain vulnerable if the anticipated ‘soft landing’ doesn’t materialise. The potential for rate reversals, coupled with new tariffs or fiscal shifts, could drive volatility in risk assets, especially in leveraged sectors like igaming.
- Impact on equity markets: Historically, dovish monetary policies have stimulated equity markets, boosting asset prices as capital becomes more accessible. Lower rates also reduce the cost of borrowing, encouraging leveraged buyouts and acquisitions within capital-intensive industries like the regulated igaming segment. Publicly traded gaming companies could see valuations increase as speculative investors look to park their cash in high-growth stocks.
- Private equity and trade M&A: As market sentiment shifts and private equity moves away from risk-off to risk-on assets, we expect an increase in M&A activity. Cash-generative sectors, such as online gaming, will become attractive targets. PE firms operating in the igaming segment may capitalise on this liquidity environment to divest portfolio assets that have reached peak value or achieved key strategic milestones.
M2 money supply
The M2 money supply, a measure of cash and readily accessible funds, has fallen by $500 billion to $21.2 trillion from its all-time post-pandemic high. This decline is partly due to quantitative tightening (QT) which refers to monetary policies that contract or reduce the Fed balance sheet. The Fed then steadily reducing its bond holdings. With projected rate cuts, we’ll likely see a revival in M2 levels as liquidity re-enters the system.
- Treasury bonds and M2 correlation: If the Fed continues to cut rates, Treasury bond yields will decrease, making bonds less attractive relative to riskier assets. This dynamic will likely push capital into equities, potentially stimulating higher valuations in the gaming sector. A fall in treasury yields could spell a favourable lending environment for startups and scaleups in the igaming sector.
- Potential for inflationary spillover: September’s inflation rate of 2.44% aligns closely with the Fed’s target, suggesting a stable outlook. However, increased liquidity could trigger higher inflation, prompting swift Fed action that might reverse gains in high-growth sectors like igaming. These yo-yo policy swings could stymie investment and slow growth.
US debt and inflationary concerns
The US faces a staggering national debt of $35.9 trillion, with debt servicing costs representing 17% of government spending. President-elect Trump’s proposed fiscal budget is projected to increase the national debt by an additional $15 trillion over the next decade. However, it does include a nod to the debt problem with proposed spending cuts of $2 trillion.
- Who holds this debt? The single largest holder is the US government, accounting for over 21%, effectively representing an internal obligation. Notably, the percentage of foreign-held debt has declined by approximately 10% since 2014, indicating a shift in foreign investor sentiment and raising potential concerns about the sustainability of this financial structure.
- Stablecoin issuers: An interesting development is that issuers of the cryptocurrency stablecoin, in aggregate (such as USDT, USDC, etc.), rank as the 19th largest holders of US debt, even surpassing Germany. This indicates a broader trend in the mainstream adoption of Bitcoin and crypto assets.
- How the Fed plans to address this: The most likely option for servicing this debt is further QE alongside the ultimate stealth tax, inflation. However, this “we can print our way out of this” approach has severe implications on dollar strength.
- What’s this got to do with igaming? Well, everything and nothing. While you can’t build a business solely on macroeconomic signals, they can offer valuable indicators for when to batten down the hatches. Key metrics to watch include the Consumer Confidence Index (CCI), jobless claims and interest rate hikes. These indicators provide valuable insights into shifts in consumer spending, economic stability and overall market sentiment.
Zooming into the igaming sector
Regulatory waves continue to play a significant role in market accessibility and investor sentiment. Many countries planning igaming regulation are motivated by the prospect of tax revenue to bolster their financially strained economies.
- Regulatory dynamics: Major markets like Brazil and the US continue to see evolving regulatory landscapes. Brazil’s recent moves to liberalise igaming and the post-PASPA US rollout have spurred both public and private company investment. However, unregulated markets, or in some European countries, over-regulated ones, are fuelling the popularity of sweepstakes and crypto gaming operators. This trend represents a growth opportunity for private and dark-pool funds (a private exchange where investors can buy and sell large quantities of securities), while creating new challenges for regulators.
- PE and VC backing trends (2010-2024): Private equity’s role in the igaming sector has steadily grown, with transactions like Bridgepoint’s investment in Cherry Group in 2018 and Apollo’s acquisition of IGT & Everi this year. By mapping PE/VC-backed acquisitions year over year, we see an increasing appetite for gaming assets, reflecting the sector’s maturity, resilience and growth potential.
Conclusion and hypotheses
As the economic environment becomes more favourable for capital deployment, the case for continued growth in the igaming industry strengthens. We’re witnessing this first-hand, with growing interest from buyers and investors seeking opportunities in scale-ups and M&A assets that promise attractive synergies.
- Bullish market conditions: Lower rates and increased liquidity suggest a “wall of money” may flow into high-growth stocks, including gaming assets, driving up valuations. Public markets might benefit, while startups may find it easier to secure funding.
- Inflation risks and potential Fed response: If dovish policies lead to inflationary concerns, the Fed may return to hawkish measures sooner than expected. This would likely dampen market exuberance, particularly in leveraged sectors like igaming.
- Expansion in unregulated or over-regulated markets: The unregulated market is booming, especially in sweepstakes, crypto casinos and sportsbooks. These businesses appeal to audiences in unregulated markets and, increasingly, in over-regulated jurisdictions where heavy tax burdens and restrictive policies have rendered regulated offerings uncompetitive.
Despite the macroeconomic risks, the current trajectory suggests a promising short- to medium-term for the igaming sector. Investors who have allocated capital into this space may find 2025 a vintage year for returns.
Bio
Ben Robinson is the managing partner and founder of Corfai Capital (est. 2023) and RB Capital (est. 2014), with over 20 years of commercial experience in technology and media. Specialising in igaming, sports betting, fintech and media, his firms have facilitated numerous M&A transactions and funding rounds, supporting business owners in reaching their growth, investment and exit goals.
Original article: https://igamingbusiness.com/finance/us-macroeconomy-igaming-2025/
