Waterhouse VC: “The crypto-casino sector holds the most promise for outsized returns” | Yogonet International

The sports betting and iGaming sectors experienced notable shifts in 2024, with Brazil emerging as a key growth market and the Middle East showing signs of new opportunities following Wynn’s UAE casino license approval. Meanwhile, regulatory pressures in mature markets, particularly the UK, continue to challenge operators. The rapid growth of crypto casinos and the rise of decentralized betting platforms like Polymarket have further reshaped the landscape.

In an interview with Yogonet, Tom Waterhouse, founder of Waterhouse VC, which focuses on investing in global businesses related to the wagering and gaming sectors, discusses the fund’s performance, key trends in online gaming, and the growth potential of emerging markets. He also highlights the opportunities in the crypto-casino space and shares his outlook for the industry in 2025.

In your opinion, what were some of the major takeaways from the past 12 months, in terms of trends, major developments and technologies?

2024 saw continued growth for both regulated and unregulated markets. Brazil has been a standout growth market, with clear licensing frameworks set for 2025 and online gaming revenue projected to reach $9 billion by 2029. South Africa has also seen 25% year-on-year GGR growth, so these represent real growth markets. Meanwhile, Wynn’s UAE casino license approval may signal new opportunities across the Middle East.

In mature markets, regulatory pressures continue to intensify. In the UK for example affordability checks, while well-intentioned, have pushed players into channels without consumer protection. Higher taxes and increased compliance costs make it very tough for operators in these markets.

One of the most exciting stories this year has been Polymarket which has shown the potential for decentralised platforms to revolutionise betting. It will be interesting to see what kind of momentum they can sustain in 2025.

Then you have the crypto casino space which is experiencing triple-digit growth annually. Operating outside traditional tax and compliance structures which are costly for operators, these operators are able to innovate rapidly and are redefining the wagering experience, making wagering fun and social through streaming and interactive experiences.

Turning to the Waterhouse VC, how did the venture capital fund perform over the last year? What was the fund’s focus during the year, in terms of segments, verticals, etc? 

Since its inception in August 2019, the fund has delivered a gross total return of 3,408% (annualized at 96%), as of November 30, 2024, assuming reinvestment of all distributions.  We have signed seven new option deals so far this year and our 13F stock strategy has continued to outperform the S&P 500 with the fund up roughly 30% this calendar year as of November 30.

On the investment front, we continue to focus on doing option deals with outstanding B2B technology suppliers that can serve a global audience. A standout example of this has been our recent option deal with Racing and Sports (RAS), whose data and content solutions are now being leveraged by operators like Stake.

We focus on businesses that offer something really unique for an operator, whether it’s a solution for reducing acquisition costs, increasing engagement and playtime, or reducing friction to take bets, these are the types of businesses that can excel globally.

What are the main challenges and opportunities you see in the online gaming industry in the upcoming 12-month period? Do you anticipate major changes in regulation, consumer preferences, and technologies for 2025?

In mature, regulated markets, smaller operators will increasingly struggle to compete with scale players like Flutter, Entain, and Bet365 who can leverage their scale to absorb taxation and compliance costs more efficiently. Scale allows businesses to spread fixed costs and tax burdens more effectively allowing them to weather changes in regulations.

On the opportunity side, advancements in AI, and streaming are becoming really noticeable and beginning to redefine the wagering experience. Peer-to-peer casino games are making the experience social, sports betting is becoming more immersive. The convergence of blockchain and gaming is also accelerating, making the overall wagering market increasingly global.

From a regulatory perspective, the pattern of emerging markets embracing new frameworks, while more mature markets tighten their rules is likely to persist. Focusing on the technology suppliers has shielded us from this unpredictable regulatory environment.

As an expert in the investment field, what markets do you see as exhibiting the greatest potential at the moment?

Markets like Brazil which have a large, young population, and a passion for sport are going to experience real growth, especially as the regulatory framework takes shape, so there is real momentum for emerging markets.

However, the crypto-casino sector holds the most promise for outsized returns. Crypto adoption continues to grow, and these platforms have been able to thrive even outside of bull markets. They can innovate faster, create more engaging experiences for users and bypass the constraints that traditional fiat operators face. Our focus is on capturing this trend through the technology suppliers. For instance, platform providers that allow new entrants to set up and compete instantaneously.