At some point this year — possibly sometime in the next few months — Sporttrade will go live in New Jersey, becoming the first exchange betting site in the nation.
This milestone is being watched by the industry at large, as the promise of exchange betting — which, to put it very (very) simply, would theoretically offer bettors significantly better odds than at traditional sportsbooks — has the potential to upend the still-brand new apple cart of sports betting.
Of course, there is some history here, as it’s been over 20 years since exchange betting became a thing in the United Kingdom. The results there have been … well, “less than awesome” probably is an apt-enough description.
Writing in his substack titled The State of Online Gambling, Alun Bowden of Eilers & Krejcik Gaming noted that nothing really went wrong with exchange betting in the UK — as introduced by Betfair back in the day — and that it does provide better odds for bettors. But he also noted it’s not that fun of an experience and that it was a “good idea that didn’t really work.” (He goes into greater detail, worth the read.)
So with Sporttrade about to set sail, and with exchange betting being a blip on the radar in the UK, the following question is certainly worth asking: Is this going to work here in the good ol’ U.S. of A?
Not just about odds
“I read Alun’s piece, and I don’t think Alun has one sentence that’s wrong. I think it’s brilliant, and I spoke with him about it and told him, ‘You’re totally right,’” said Alex Kane, the CEO and founder of Sporttrade. “And yes, Sporttrade is very similar to Betfair in terms of high level, how it works. But the way Betfair was marketed from the very beginning was ‘This was the death of the bookmaker,’ and for one simple reason — they had better odds. They literally put a mannequin in a coffin and paraded it around the streets of London as their first advertising campaign, that this was the death of the bookmaker.
“But what people found out very quickly was it was very hard to use, very unapproachable, and all for the one value proposition — that the odds were better,” Kane continued. “But for every 10 bettors, probably three of them care about getting the best odds. So 70 percent of your potential user base doesn’t care about your value proposition. And even if they do, they have to learn about backing, and laying, and understanding all of these new terms that Befair introduced to the market.”
But Kane notes “better odds” is not all Sporttrade will be offering. In fact, that’s not even the company’s main value proposition.
Basically, Sporttrade will be “stock marketifying” – our words – the experience of sports betting.
“Americans are voracious about day trading and stock trading, and it’s far more approachable and understandable now to the average person. It’s to the point now you have a persona like Davey Day Trader (Barstool Sports founder Dave Portnoy), who completely rebrands himself in the absence of sports to become a stock-picking expert,” Kane said.
“It can’t be overstated how that just doesn’t exist in any other society. The concept of investing and trading stocks is very unique to the U.S. It would be unthinkable for the London Stock Exchange to invest in Smarkets or Betfair. But NASDAQ invested in Sporttrade. America is a day trading audience, and Sporttrade is a day trading platform. Hopefully, this is how Sporttrade will be perceived by the customer relative to sportsbooks.”
— Sporttrade (@sporttrade_app) February 24, 2022
Of course, for Sporttrade to work like a stock market, the execution of trades has to be instantaneous.
“Think about the last time you made a stock trade. You probably went on Fidelity or Ameritrade or Robinhood or whatever, and you typed in a ticker, looked at the chart, and you bought some share and you instantaneously got your fill. That’s essentially pregame betting right now for the recreational customer,” Kane said.
“But in-play sports betting is the antithesis of how stock trading works right now. There’s no transparency, very finicky coverage. And when you do place a bet, it’s a very bad price, and the delay — you submit the bet, and five or 10 seconds later it’s either ‘yes, you’re in’ or ‘no, the odds changed,’ or ‘no, we’re no longer taking bets.’ Our single focus is to bring everything from stock trading into sports betting to solve that one problem.”
And for that to work, there has to be liquidity. Enter the market maker.
Time to make the markets
In the stock market, a market maker is someone — generally a firm — who quotes both the buy and sell price for an asset and they make their money on the spread. In short: They take all the action and grab the pennies in-between.
And for Sporttrade to work, market makers have to exist and do their job. They have to basically accept any bet they’re offering a price on. No spinny wheel, in other words. And Kane says this is exactly what will happen. No lockouts on live betting. If the market is being offered, there is a someone — or a “somefirm” — that is going to take the bet.
(A brief and overly simplistic description of a Sporttrade bet: Say the Eagles are playing the Browns and it’s a pick’em contest. The odds would be set – generally speaking – at -110 at sportsbooks. The implied odds of -110 are 52.38 – or, looked at another way, $52.38 would have to be wagered to win $47.62. In the Sporttrade model, someone — or a market maker — could offer either team at $52.38 to win that $47.62, as all Sporttrade markets close out at zero or 100. But someone else could — and almost certainly will — come in lower, say at $52.25. Theoretically, the pricing can continue to get tighter and tighter. Hence, better odds for the consumer. And in the live markets, the bid and ask will obviously go up and down depending on the state of the action. Sporttrade allows bettors to get in and out of their bets as they please, exactly like day trading.) (The explanation is more confusing than the actual action.)
"You're able to live trade based on the changing probability of those bets to win, so it's a very exhilarating, dynamic experience," said our Founder/CEO Alex Kane.
— Sporttrade (@sporttrade_app) February 23, 2022
Ed Miller, the chief architect at Deck Prism Sports, told US Bets his firm is in the process of getting approved by the New Jersey Division of Gaming Enforcement to be a market maker for Sporttrade.
“From Deck Prism’s perspective, we are an odds-making company, we offer our main service to licensed sportsbooks. Plan A is not exchange betting,” Miller said. “But what piqued my interest about Sporttrade is the competitive aspect. We built our company around the idea that we have sharpest lines and prices anywhere, and this is a platform where that strength can probably shine against possible competitors. And the promise of an operation like Sporttrade is we can go ahead and use our tools and make money.”
Seems easy enough. Except Miller notes it might not be that easy.
“The hardest part of gambling is finding people willing to lose,” Miller noted. “You could have the best odds-making in the world, but the trick is finding someone willing to lose their money. That’s TBD.”
In short: Are recreational bettors going to flock to Sporttrade for the ability to buy and sell games like stocks? Or are they simply … not?
A bettor perspective
Bill Krackomberger, a noted professional bettor, isn’t convinced.
For starters, the still-huffing and puffing Wire Act prevents would-be Sporttrade users in one state from being able to bet with would-be Sporttrade users in another state.
Beyond that, though?
“I just don’t see it being a success,” Krackomberger said. “Why? When you break it down there are only a small percentage of people like myself that worry and live off the small mathematical edge of sports betting. Most people love to play with the big marketing machine powerhouses that will charge you up to 10x more vigorish to play with them. However, in the end, let’s face it: The majority of people that bet sports don’t even know what the word ‘vigorish’ means.”
I would bet on sports but I can't get past what a weird word vigorish is.
— J. Elvis Weinstein (@JElvisWeinstein) February 14, 2022
As for the stock market-like atmosphere Sporttrade promises?
“I just think that the recreational bettor would rather post up their money with a big sportsbook that is giving them bonuses and booster bets,” he said.
Another pro bettor, Capt. Jack Andrews, is on the other side of this and thinks exchange betting can indeed work in America. He also believes it would behoove the existing sportsbooks to root for Sporttrade to succeed.
“Sportsbooks should be encouraging betting exchanges into their market, not setting up barriers to entry,” Andrews said. “A liquid and bustling betting exchange does one thing better than any other sportsbook: price discovery. A good betting exchange will make the market more efficient, and other sportsbooks don’t have to work as hard. The consumer gets potentially reduced vigorish at the long-term expense of shrinking market inefficiency.”
Andrews does offer a word of caution, however, to non-pros who think they can “be the bookie” and throw out their own lines.
“You will need to be trading 24/7 without ever taking your eyes off the market,” he said. “Otherwise, you’ll be eaten alive by market movement you didn’t see coming. Far safer to just take the best price than try to squeeze out a couple more pennies of value by offering a line to be bet into.”
Back to Bowden
Can Sporttrade thread the needle and breathe life into an old idea? Can the day-trading culture of America be transferred to sports betting? Is this whole thing going to work?
“It’s absolutely possible Sporttrade can pull off something spectacular and effectively create a new online gambling vertical, where recreational players buy into the trading model wholesale,” Bowden told US Bets. “I can buy that being a reality in the U.S. It’s not that far removed from what currently exists, and people have an inherent feel for sports they don’t do for Brazilian mining stocks.”
If you sense a “but” coming …
“Is it probable? I don’t really think so,” Bowden continued. “Sports markets are different to financial markets. They always settle to 100 and 0, to use Sporttrade terminology, so there are big winners and big losers. There is no underlying value in the asset, and while there are lookalike aspects in the sense you can cash out, it’s not the same.
“Also, most markets will settle really quickly for those used to day trading. We’re talking hours for in-play and at most maybe a week for most pre-game trading events. Could you build a business on futures? I guess, but there aren’t that many markets, and they are traditionally really low handle volume and also frequently some of the least efficient. It comes back to [the basics]: Is this really fun? Is it engaging? Or is it just me setting fire to money?”
As for Kane, he certainly hopes Bowden’s “possible” outweighs Bowden’s “probable.”
“We built this to make sports betting more fun, more approachable, with no delays, no suspensions, and I think every customer is going to care about that,” Kane said. “When Alun says what he’s saying, he’s totally right, but we set out to solve a different problem. If you use Robinhood, if you know how to buy a stock, you can use Sporttrade immediately. And you’ll love it.”