What happened 

Shares of Stars Group (NASDAQ:TSG) jumped as much as 35.4% in trading Wednesday after announcement of a merger with Flutter Entertainment. Shares settled slightly as the day wore on and were up 30.6% at 11:10 a.m. EDT.

So what

Under the terms of the merger, Stars Group shareholders will get 0.2253 shares of the new Flutter company for each share they own. Stars Group shareholders overall will own 45.36% of the new company. Flutter's stock is up 6.8% as I'm writing and is helping some of the gains for Stars Group stock. 

Sports betting shown on a mobile phone.

Image source: Getty Images.

Management expects the combination of companies to deliver 140 million British pounds of cost savings and create cross-sell opportunities. But the real reason a merger is happening is an arms race to acquire assets now that sports betting is legal in the U.S. That's the potential multibillion dollar market that these online betting companies are targeting. 

Now what

This is a big merger in the world of sports betting because it combines two large players with presences in the U.S. and U.K. into one entity. They can leverage software across the globe and improve partnerships with casinos that are taking the bets here in the U.S. As the sports betting business grows, this is a company investors should watch out for, and that's why traders are pushing both Stars Group's and Flutter's stock higher on the merger announcement.  

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.