UPDATE 2-Sports Illustrated enters online betting in deal with UK's 888

* 888 gains exclusive rights to Sports Illustrated brand

* Authentic Brands Group to receive licensing fee, stake

* 888 plans launch in Colorado in second half of 2021 (Adds rollout plans, online gaming transition, CEO quote)

By Vishwadha Chander

June 24 (Reuters) - British online gambling firm 888 Holdings Plc will offer sports betting under the Sports Illustrated brand to U.S. customers later this year, it said on Thursday, in an effort to expand in a thriving market.

The deal will give London-listed 888 exclusive rights to the Sports Illustrated (SI) brand, known for its eponymous sports magazine. In return, SI parent Authentic Brands Group will receive an undisclosed licensing fee and a minority passive interest in 888.

The British company is hoping to entice millions of Sports Illustrated fans who it says potentially have a "really high affinity" for sports wagering, according to internal research.

"We think this is kind of the missing piece in our American puzzle," 888 Chief Executive Itai Pazner said in an interview. "It will give us the local brand we were missing, access to a huge audience, and opportunity to communicate with this audience on an ongoing basis."

Betting companies have been circling the U.S. market, which has grown rapidly since a ban on sports betting was lifted three years ago. 888, which already operates online betting brands like Bingo and Casino in the United States, extended a poker partnership with U.S. casino group Caesars earlier this year.

The new sports betting service, branded SI Sportsbook, should launch in Colorado in the second half of 2021, with a planned expansion to 10 other markets by 2022-23, 888 said.

For 888, the deal comes at a time when many people stuck indoors because of the pandemic have turned to online gambling.

"On the face of it, this agreement provides 888 with a platform to take its (business-to-consumer) strategy in the U.S. to the next level, by giving access to a sports brand with a long history, nationwide awareness," Stifel analysts said in a note. (Reporting by Vishwadha Chander in Bengaluru Editing by Rashmi Aich and Mark Potter)