Philly Tech Startup Sporttrade Has A New Model Of Sports Betting, And It Looks A Lot Like A Stock Exchange

Alex Kane traces the origin of his big idea to revolutionize sports betting to his junior year at Drexel University, when he and his father bet on an obscure Thai golfer to win the 2016 Masters Tournament.

Kane’s golfer, Kiradech Aphibarnrat, performed surprisingly well throughout the first half of the four-day tournament and was only a few strokes behind the leader after two rounds. The odds in his favor had increased about 100 times since the start of the tournament.

Kane would have liked to trade his bet at that point, just as he could sell a stock or cryptocurrency on a smartphone app such as Robin Hood or Coinbase, popular tools for a new generation of traders. But there was no similar market platform for sports betting trading.

“That’s when I realized, ‘Oh my gosh this structure stinks,’” said Kane, who grew up in Birmingham Township, County Chester. “It should be a lot more like trading in the capital markets, where I’m able to take Robinhood or Coinbase and trade as the market changes.”

Sadly, Kane lost his bet on Aphibarnrat, who finished tied for 15th in the Masters. But the seed of a new business has been planted.

Fast forward five years. Sports betting is now legal in Pennsylvania, New Jersey, and a dozen other states. Kane, now 27, has turned his idea into a real business, Sporttrade Inc., which he says will function more like a stock exchange than a traditional sportsbook. He launched his website last month, www.sporttrade.com, and is undergoing a licensing exam in New Jersey. Pending approval, he could start taking bets by the end of the summer.

“We basically think what we’re building is so much closer to options trading or futures trading than traditional sports betting and casinos,” said Kane, who studied business administration at Drexel, where he studied business administration at Drexel. was also an interuniversity golfer.

Kane hopes Sporttrade will radically change the way in-game sports betting is conducted by increasing the speed and reducing the cost for bettors to bet while an event, such as a golf tournament, is underway.

Bettors using sports betting apps can now place bets during an event and even withdraw a position. But experts say there is often a delay as bookmakers wonder whether to accept or reject an in-game bet while they are weighing their risk, and the margins bookmakers earn on such bets make them unattractive.

“You will find that if you don’t bet during the timeouts or between shifts you are going to end up with a situation where you submit the bet and then there is a delay,” said Jack Andrews, a professional sports bettor from New Jersey. “It looks like they’re getting a free kick against you.”

“You don’t feel like the customer is in control,” Kane said. He believes that electronic platforms adapted to handle split-second trading in the stock markets can handle sports betting stocks, connecting buyers and sellers without delay, as the stock exchange acts as a neutral party and does not take not the risk of a bad bet.

Sporttrade is not a small business. Last year, Kane’s company partnered with Twin River Worldwide Holdings Inc., which was then in the process of acquiring Bally’s Atlantic City Hotel & Casino, to obtain one of three sportsbook brands or ‘skins From Bally in New Jersey. Kane has also recruited investors, software designers and experts, including influencers from the sports betting world and veterans of investment banking and Wall Street exchanges.

Kane’s journey up to this point – “we’re at the bottom of the mountain,” he said – received a huge boost when he pitched and sold his idea in 2019 to the Comcast Accelerator. NBCUniversal LIFT Labs powered by Techstars, a three-month program designed to introduce promising entrepreneurs to a network of partner companies, investors and mentors.

One lesson Kane learned from his Techstars experience was to think big. He realized that the Sporttrade platform he was considering would depend on sophisticated financial software that had to pass regulatory scrutiny, and that the company would require more resources than the $ 3 million budget than it did. he had set himself as an initial objective.

“Three million dollars was not going to give us any skin in the game,” he said, without specifying the capital he actually raised. He said a public announcement is forthcoming that will disclose Sporttrade investors, who generally need to be identified with regulators.

Kane, whose father is a doctor and whose mother is a teacher, is relentlessly polite and patient as he maintains that sports betting will inevitably evolve to resemble the most efficient and transparent exchanges.

Traditional sports bookmakers set odds, take risk, and essentially take an opposite stance from their customers. Sporttrade would act more like a neutral exchange, connecting buyers and sellers of contracts on the outcome of a sporting event.

Similar to those of a stock Exchange, the prices on the Sporttrade exchange will be set by the market makers, who quote the “ask” prices for the sellers and the “ask” prices for the buyers. Sporttrade would take a small commission on each trade, which would be reflected in the difference between the buy and sell price. Kane predicts that such a system will produce narrower margins than the “vig” (or fees) that sports betting now charge to cover their risk. Lower margins mean lower transaction cost for customers.

The Sporttrade system also seeks to redefine the traditional American way that betting odds are displayed, which is now based on a minus and plus system (a favorite is cited as a minus, such as -110, which shows that a bettor must put $ 110 at risk to win $ 100).

Sporttrade will express the cost of the bet as a percentage. If the Sixers have an 11% chance of winning the NBA Championship, a bettor would bet $ 11 to win $ 100. If the team’s fortunes increase, the contract price will increase and a bettor could cash out the position. After an event closes, a contract is worth $ 100 or zero.

Sporttrade’s model resonates with people who have spent their lives working in the financial markets.

Kane hired Thomas A. Wittman, the former chairman of the Philadelphia Stock Exchange who retired last year as executive vice chairman of Nasdaq, to ​​sit on Sporttrade’s board and invest in the business. Wittman believes Sporttrade will follow the same path that online stock trading has taken over the past decades, reducing transaction costs and opening up trading to a wider audience.

“It’s similar to what we’ve seen in the capital markets and it will play out the same, I guarantee,” Wittman said. “I know it well.”

Some sports betting operators have launched overseas betting exchanges, but none in the United States, and none modeled so closely on capital markets, according to Sporttrade executives. Wittman does not think the big sports betting operators will adopt the model because it is not as profitable as a traditional bookmaker.

“They’re going to have to cut a few fingers off to change models and I don’t think they’re going to be ready to do it until it’s too late,” he said.

But Andrews, the professional New Jersey player, believes there will be enough interest among New Jersey punters to generate the kind of liquidity Sporttrade will need to grow its market. “I think there are enough guys working in the Jersey City financial district who would love to get into this business and think it’s easy money,” he said.

Creating a sports betting platform that functions like a stock exchange will inevitably lead to the gambling spirit among sophisticated bettors, such as traders who invented high-speed stock trading to get a millisecond of money. ahead of market trends. A spectator with a fast internet connection at a sporting event will have an advantage over a bettor who watches the game at home five seconds behind on the cable.

“I’m a little worried about the security controls you’re going to have to put in place for people who get fired and the latency [the speed of online response]”said Jeff Ma, co-host of the popular Bet the Process podcast, during a recent interview by Kane. But Ma, vice president of start-ups at Microsoft, said he believes such challenges can be solved and that it wouldn’t be particularly difficult for Sporttrade to improve the current in-game betting experience.

Kane says Sporttrade is designed to appeal to a younger audience and won’t steal existing casino customers. Because the product is aimed at a different market, Kane does not plan to join the costly promotional battle currently underway on television among legal bookmakers to acquire customers.

“I think there are some really interesting avenues that we are going to take for customer acquisition and traditional television is not one to begin with,” he said. “The advantage we have is a differentiated product. We don’t have to spend a ton of money trying to get someone to use our sports betting app.

Sporttrade now employs around 50 people, and most of them live and work remotely in the Philadelphia area – executives meet monthly at a shared WeWork office in Center City. Kane said he plans to open an office in Camden soon, to house the company in New Jersey to meet regulatory requirements.

If the system is successful in New Jersey, which overtook Nevada in less than three years to become the nation’s largest sports betting state, then the model can be replicated in other states. Pennsylvania, despite having the third highest volume of sports betting in the country, has a high barrier to entry due to its $ 10 million license fee and high tax rates compared to other states.

Kane thinks it’s inevitable that someone models a sports betting business on a stock market, and the first player will have a significant advantage.

“Someone’s going to do this, right?” “, he said. “Someone is going to make this look like the capital markets, that’s for sure. This market is full of all these inefficiencies that have already been addressed in every other industry.”

“I think that’s why I’m so fundamentally passionate about this,” he said. “You have a time in your life when you say to yourself, ‘This is why I was put on Earth.’ And I got that with that.

the Pennsylvania Problem Gambling Council offers advice to problem gamblers at 1-800-GAMBLER.

About William G.

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