Market Movers

DraftKings beats expectations: DraftKings’ revenue jumped 57% to $790 million in the third quarter on expansion to new geographies, new customers and retention of existing customers. Net loss was 61 cents per share, down from a net loss of $1 a year ago. Monthly unique payers rose 40% to 2.3 million. DraftKing shares rose 16% on Friday. Last month DraftKings passed FanDuel for largest online sports betting and casino revenue, according to Eilers & Krejcik Gaming. One analysts sees DK as “one of the best (if not the best) growth stories in gaming today.”

BetMGM reports 18% market share: BetMGM’s net gaming revenue rose by 15% to $458 million, per its parent company Entain on NFL strength. BetMGM has a 18% share in sports betting and igaming but a 26% share in igaming alone. The company has added new features such as same game parlays, elevated first-bet offers and team-partner-hometown odds boosts.

Sportradar cuts 10% of workforce: Sportradar has data rights deals with the NBA and ATP. But the high costs of official sports data rights is hard for some companies to handle. Sportradar’s revenue €201 million ($211 million) missed analysts’ expectations, and the company cut its 2023 guidance.

Florida Seminoles announce launch: The tribe announced a Dec. 7 launch of in-person sports betting (as well as craps and roulette) at casinos after a recent Supreme Court decision that declined to block an agreement between Florida and the tribe. The tribe has not (yet) announced anything about the Hard Rock Bet digital service.

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What we’re reading

• ESPN Bet, which plans to launch on Nov. 14, has tons of data on fantasy players from ESPN’s fantasy games. What will it use and how?

• Mobile sports betting launches in Maine with Caesars and DraftKings.

• Bally’s to cut 300 jobs on outsourcing to Kambi and White Hat Gaming.

• Colorado appears poised to ban pick’em DFS games.

• The NHL said Shane Pinto didn’t bet on NHL games but hasn’t said what he did to merit a 41-game suspension.

Overheard

“Decisions driving the future of tribal governments should be made by tribal governments. While the sponsors of these initiatives may believe they know what is best for tribes, we encourage them to engage with Indian Country and ask, rather than dictate.” —California Nations Indian Gaming Association, responding to two ballot California initiatives recently filed.

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Market Movers

DraftKings tops FanDuel: DraftKings has topped its rival to become the US market share leader by GGR. In August, DraftKings had 32.5% market share, including sports betting and igaming, while FanDuel had 29.6%. As part of that, DraftKing’s share of revenue in Massachusetts in August jumped to 56% from 49% while FanDuel’s share dropped to 28% from 33%, according to Eilers & Krejcik Gaming.

As Florida Turns: The Florida Supreme Court has given an extension to Gov. Ron DeSantis to respond in the case that will determine the future of sports betting in the state. It’s the latest twist in the ongoing legal battle over DeSantis and the state legislature’s deal with the Seminole Tribe allowing for retail and digital sports betting. The case seeks to invalidate that deal.

Genius’ Streaming Speed?: Genius’ new purported low-latency NFL video stream, which is being tested by Caesars, can run “a play, and sometimes two” plays ahead of the TV broadcast. That could be interesting to operators, if they can manage to integrate it into their apps.

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What we’re reading

• Pick’em DFS games are under scrutiny, according to a EGR deep dive.

• Earnings+More also checks in with a deep analysis of pick’em DFS.

• Radar, a geolocation company in retail and food, is expanding into sports betting.

• Massachusetts is requiring ESPN Bet to clear hurdles before clearing it to operate.

• Esports betting has had a rough month, but it isn’t dead, says Sharpr.

• NCAA president Charlie Baker said athletes could be deemed employees—as an apparent effort to avoid federal regulation.

• FanDuel is offering users three-month access to NBA League Pass.

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Overheard

ESPN BET will become the top U.S. sportsbook, according to one venture capitalist: “I think they have to get there and I think they will get there.”—Wayne Kimmel, managing partner, SeventySix Capital, citing a potential deal with a tech company such as Amazon, Google or Apple that could give it a boost.

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Market Movers

Supreme Court pauses Seminole deal: The U.S. Supreme Court granted a stay on a previously approved $2.5 billion Florida gambling deal with the Seminole Tribe while the court considers a potential long-term pause requested by Florida casinos. That means the tribe’s launch of Hard Rock Bet likely won’t happen any time soon. It’s the latest twist in the ongoing legal battle in the state. A federal appeals court in June had ruled that the deal was wrongly blocked by a lower court. The deal was originally approved by the state legislature and signed into law in May 2021.

Panda sues Genius, Sportradar: Panda Interactive filed separate lawsuits in the Eastern District of Texas against Genius Sports and Sportradar, claiming patent infringement on its streaming technology. The patent deals with betting and streaming at the same time. Genius recently launched its NFL BetVision product which integrates betting with streaming NFL games—and Sportradar also offers a similar product.

DraftKings CEO wants "clarity” on DFS: DraftKings CEO Jason Robins, speaking at G2E Vegas, says his company and FanDuel are lobbying for scrutiny on pick’em games. But he disputed claims that it’s an anti-competitive move:

“We want to understand what the constraints of what we offer are. There’s always going to be people and companies that are pushing the limits and having clarity helps. It all goes back to competition. We want to be able to compete, we want to be able to offer the same things that anyone else out there offers,” he said.

Michigan bans pick’em daily fantasy: Michigan’s new regulations were filed with the Michigan Department of State after being proposed by the Michigan Gaming Control Board. (This comes a week after New York made a similar move.) The rules were contested by the Coalition of Fantasy Sports, who noted that the Joint Committee on Administrative Rules held no meetings on the implementation of the rules.

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What we’re reading

• How SEQNZR, which has a product used by the Cincinnati Reds and other college baseball teams for optimizing lineups and in-game decisions, decided to launch BetSEQNZR with a trading bot for pricing pregame lines, in-game lines and in-game parlays.

• How Disney made an about-face on sports betting after previous worries about its brand, according to WSJ.

• Attorney Samir Patel wrote for Bloomberg Law about the issues of legality for blockchain-based sports betting. One issue is the Wire Act, which requires operators to ensure that they aren’t taking wagers from individuals in states where they aren’t licensed. Also, the Unlawful Internet Gaming Enforcement Act says a business cannot knowingly accept payments related to unlawful internet gambling. (Summary)

• Online betting has gone off the deep end, says the Atlantic.

• Will this California tribe put another sports betting vote on the ballot in 2024?

• Betting Startups talks to Joe Brennan and Adam Bjorn of Prime Sports.

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Market Movers

New York has shut down pick’em: The state deemed pick’em prop gaming as a form of gambling. The move, which affects companies like PrizePicks, Underdog and Betr, is a setback for the daily fantasy industry. Florida also recently sent “cease and desist” letters to daily fantasy operators.

Michigan, too: Meanwhile, Michigan is also close to banning pick’em prop daily fantasy contests. The state’s Joint Committee on Administrative Rules approved the rules proposed by the Michigan Gaming Control Board. Michigan’s Secretary of State can now make the final approval of the rules. The Coalition for Fantasy Sports, representing PrizePicks, Sleeper, and Underdog, has organized a campaign to try to stop the ban.

Where’s the college sports data? Has the appetite for a big college sports data evaporated? The Big Ten was reportedly closing in on a major data deal with Genius in late 2022, but it hasn’t happened. With unlicensed “data scouting” as well as a recent AGA prohibition of college sports partnerships promoting or marketing gambling, the economics have changed and the data is now more difficult to monetize, according to Sportico.

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What we’re reading

• U.S. Integrity and Odds on Compliance, two large gaming compliance providers, are merging. U.S. Integrity’s clients include William Hill, NBA, Big 12, Pac 12, and SEC.

• An investigation found there were no attempts to fix games in the Iowa betting scandal.

• Playtech is hit with a lawsuit by its partner and Mexican online casino and sports betting firm Caliplay, which is operated by Grupo Caliente.

• A sports gambling bill in Oklahoma isn’t gaining support to pass.

• Tipco was the top rated U.S. casino app, according to Eilers & Krejcik.

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Overheard

“Well, the issue is that we’re way bigger than them in fantasy today because they haven’t innovated and they know that we’re coming for sports betting and more. And they know what that looks like because we’re way bigger than they were when they started coming for sports betting five years ago. We have way more active customers and we’ll do way more revenue this year than they did five years ago.” — Underdog Fantasy CEO Jeremy Levine, talking about why FanDuel and DraftKings are against daily fantasy.

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Market Movers

NFL adjusts gambling policy: The NFL made tweaks to its gambling policies—following problems with player betting—now instituting stronger penalties for players betting on their own teams. It also now will let some players get back on the field sooner. Players who make a bet involving his own team will get a two-year suspension. Bets on any other game will get a one-year suspension. Attempted (or actual) game fixing will get a lifetime ban. Betting on non-NFL sports while at a team building or on team travel will get a two-game suspension, six games for a second violation and one year for a third. Three players, including the Detroit Lions’ Jameson Williams, who had been suspended will be reinstated on Monday.

What next in Florida?: a U.S. District Court of Appeals ruling Thursday gives a potential opening for the Seminole Tribe to launch its Hard Rock Bet service in the state. Still, West Flagler and Associates plans to appeal to the U.S. Supreme Court. In June, the Court of Appeals ruled for the Seminole Tribe and the U.S. Department of the Interior, which have a 30-year tribal gaming compact that essentially skirts state and federal law and allows bets on tribal lands.

Sharp exploits DC kiosks: The Washington D.C.-sponsored sportsbook GambetDC lost money in June due to exploits in its kiosk-based system. GambetDC, operated by Greek gaming company Intralot, had handle of $5.2 million in June and negative gaming revenue of $67,702. One sharp, a 27-year old former data scientist in a poke restaurant won $164,000 in the month by exploiting “inaccurate lines,” as well as by betting without signing in after he was limited. GambetDC paid out 140 percent of wagers on golf and NASCAR in June—and no longer offers those sports.

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What we’re reading

888 will launch its first U.S. retail offering, Sports Illustrated Sportsbook, in Michigan through a deal with OpenBet. 888 already has a mobile presence through the SI Sportsbook app.

Meanwhile, 888’s revenue warning this week caused its shares to drop 16%. The news comes after its merger with William Hill in late 2021.

DraftKings was upgraded to overweight by JP Morgan, citing higher holds from parlays and improved trading. JP Morgan also cited its survey which showed DraftKings with the most votes for best user experience, technology and most wager options.

Caesars’ new Fire Bets will use micro markets from Simplebet to offer a service patterned on the NFL’s RedZone channel.

Genius Sports launched its BetVision streaming and betting service, providing live NFL streaming with bet slips and stats rolled into one. Caesars, Fanatics and BetRivers are the first to use it.

North Carolina is preparing for a sports betting launch in June 2024.

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Market Movers

Florida targets Daily Fantasy: The Florida Gaming Control Commission reportedly sent cease-and-desist letters to Underdog Fantasy, PrizePicks and Betr due to their fantasy sports games. Underdog CEO Jeremy Levine posted to Twitter(X) some correspondence that his general counsel had with state officials, which confirmed that Florida considers all of Underdog’s paid fantasy offerings (season-long drafts, daily drafts, pick’em) as illegal. “We strongly disagree with their assessment. We will continue operating our fantasy contests in Florida as we engage with the Commission and elected officials,” Levine wrote on X.

What is DraftKings Cashpicks? DraftKings could be moving into pick em-style daily fantasy, after filing a trademark for “DraftKings Cashpicks.” While it isn’t clear exactly what DraftKings is building, speculation is on a pick’em daily fantasy game, designed to take on PrizePicks, which is topping DraftKings and FanDuel in revenue in Michigan and Arizona. DraftKings and FanDuel have previously lobbied against pick’em games, arguing that it’s a form of gambling. Pick’em games, unlike peer-to-peer fantasy games, are played against the house, picking at least two different players from at least two different teams.

Betr NHA deal: Betr has acquired the users of the daily fantasy operator No House Advantage, which shut down in August 2022 amid reports it was seeking a buyer. The deal transfers existing balances to Betr and the former NHA users will be able to withdraw their funds. Betr launched its fantasy sports service in July in 24 states.

FanDuel’s $20 million: FanDuel had to scramble to pay a $20 million loss after a 200:1 parlay bet hit. The bet was for each NFL team in the 1pm, 4pm and 4:25pm ET Sunday games scoring at least one field goal.

Fanatics NFL streaming: Fanatics is running a promotion that provides streaming of select NFL games inside its betting app—when customers make at least a $1 bet.

Meanwhile, in Florida?: After much discussion, it doesn’t look like Florida will be getting sports gaming this week and probably not anytime soon. The Seminole Tribe is embroiled in a legal battle at the U.S. Court of Appeals.

New Sports Betting/iGaming ETF: Roundhill Financial has switched its ETF and is now offering an ETF (ticker: BETZ) based on the Morningstar Sports Betting & iGaming Index.

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What we’re reading

• PointsBet has been hit with a $25,000 civil penalty by the New Jersey Division of Gaming Enforcement for offering bets on in-state college sports.

• Roundup: This year, Kentucky, North Carolina and Vermont have legalized sports gaming with varying tax rates, but Texas, Missouri and Georgia couldn’t pass laws.

• A North Carolina proposal would give sports betting access control to local pro sports teams, not operators.

• The St. Louis Cardinals and other Missouri pro teams are trying to place a measure on the ballot to legalize sports gaming in the state, after its residents have flocked over the border to Kansas, which launched sports betting in September 2022, to place bets.

• LIV Golf is rolling out Simplebet’s micro-betting golf markets for this week’s Chicago LIV event.

• nVenue is bringing its micro betting to Brazil and Latin American along with partner Vibra Solutions.

• The Tennessee Titans get AR mixed reality with Stadium AR and The Famous Group.

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Market Movers

Record NFL opening week: GeoComply said 242.3 million geolocation transactions occurred during the NFL’s first week, a 56% jump from last year. New player accounts increased 40% to 1.1 million. And downloads of sportsbook apps was up 15% from a year ago. FanDuel (34%) and DraftKings (33%) led, but Fanatics and its PointsBet unit came in third at 12%, topping BetMGM at 11%.

Caesars pays about $15 million to hackers: Caesars paid a ransom to hackers after a cyberattack this summer, according to the WSJ. MGM Resorts also had a cybersecurity problem that caused the shut-down of slot machines, sports betting machines, card keys for hotel rooms and online reservations.

Underdog sued: Underdog Fantasy is facing a lawsuit accusing the company of unlicensed sports betting. But the judge in the Illinois case has ruled that the plaintiff Mark Lavery must make a stronger case by Sept. 29 or the case will be dismissed. Lavery has filed a number of other lawsuits against Underdog, DraftKings and others.

PrizePicks, Underdog, others push back against NY, Michigan: Some daily fantasy sports operators are enlisting their customers to try to keep their pick’em games in New York and Michigan. New potential rules in these states would define their games as sports betting.

What are the prospects for Prohibet? The company, which launched in April, detects gambling activities by athletes for regulators, operators and leagues.

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What we’re reading

• SI profiled Henderson, Nevada-based U.S. Integrity, which sniffs out “irregularities” in sports betting for clients such as NBA, MLB, PGA Tour, SEC and sportsbooks.

• Are NFL long passes going the way of the dinosaur? “There were 3,416 attempts at least 15 yards downfield during the 2022 regular season, the fewest in any season since 2006.”

• Vista Equity is reportedly shopping AI sports data outfit Stats Perform.

• How it’s going with the Washington Commanders’ in-stadium Fanatics sportsbook—the first in the NFL.

• BetMGM, DraftKings, Fanatics, and PENN have bid to offer sports betting in Vermont.

• DraftKings says its 18-month product pipeline of parlay leg tracking, dynamic odds, NBA same game parlay and more MLB offerings will put it “at parity, if not above” FanDuel.

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Overheard

“In the early days, there was a view that maybe you shouldn’t be able to bet at a sports book inside the stadium. But I think as sports betting has matured, and you realize, well, people are doing it on their phones anyway.” Ari Borod, chief business officer for Fanatics’ betting arm, on the sportsbook at FedEx Field.

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Market Movers

Promos galore: As the NFL season kicks off, FanDuel and DraftKings are battling for the top spot with new promotions and bonuses, while Fanatics and ESPN Bet are also jumping into a competitive battle, per WSJ’s overview story. Vox also weighed in with its take on (the problems with) sports gaming.

Meanwhile BetMGM is trying to keep pace, with a new unified login, hometown odds boosts, first bet offers, same game parlays, a Barry Sanders free-to-play game, and other new features.

Predictions: 73.5 million Americans plan to bet on the NFL this season, up 60% from last year, according to a Morning Consult survey done for the American Gaming Association.

35th State: Kentucky launched retail sports betting, becoming the 35th state to legalize. Online sports betting in the state will launch with eight operators on September 28.

Betr Securities?: Betr is adding WagerWire’s technology to its sportsbook which is scheduled to launch in 2024. WagerWire can turn active sports bets into tradable assets akin to stocks. The secondary marketplace enables consumers to buy and sell bets.

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What we’re reading

• DraftKings becomes presenting sponsor of RedZone NFL show.

• The story behind the biggest match-fixing scandal in tennis history—180 players in 30 countries.

• Are Iowa and Iowa State the only college sports programs with illegal gambling?

• North Carolina legislators consider more gambling options, after they passed a law last year legalizing sports gambling starting in 2024.

• SuperContest’s free-to-play NFL game with cash prizes now available online in multiple states.

• Missouri voters could decide on sports betting in 2024.

• Boom Entertainment acquired NBC Sports Predictor, taking it in-house.

• Megan Lanham from Rithmm on the Betting Startups podcast.

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Overheard

“[W]e’re launching this to win.”– Penn Entertainment CEO Jay Snowden, talking ESPN Bet’s ambitions to be the top of the sports betting market, while acknowledging ESPN Bet will be 18 months behind the pack.

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Market Movers

A new exchange: Sports betting exchange startup Novig raised $6.4 million pre-seed funding from Lux Capital, Y Combinator and others. Novig says its sports betting exchange will offer peer-to-peer betting without a vig, or commission—and will instead make money through fees to institutional traders and other methods. Two other exchanges, Sporttrade and Prophet Exchange, operate in New Jersey—and Sporttrade, which offers a stock market approach to sports wagers, also just received its license in Colorado. Novig plans to launch in Colorado in October.

Micro bets for Nascar: Nascar gets a micro betting deal with data provider nVenue. nVenue will use live track data and historical data to create predictions and odds. including for races and drivers.

Meanwhile, Nascar looks to be seeking a bigger piece of the sports gaming market: FanDuel has become the third authorized operator for Nascar, in addition to Barstool Sportsbook (soon to be ESPN Bet) and BetMGM.

DraftKings inches closer to FanDuel: DraftKings’ share of U.S. handle increased to 34% in the second quarter of 2023, from 29% in Q1 2023. FanDuel also increased its share to 37% from 34%. BetMGM and Caesars both lost share.

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What we’re reading

• Kentucky approved nine operators for sports betting licenses: bet365, BetMGM, Caesars, Circa, DraftKings, Fanatics, FanDuel, Kambi and Penn Sports.

• Billy Walters, “the greatest” sports bettor ever, dropped his book. He sat down for an interview with SportsHandle.

• Simplebet, a provider for DraftKings, Caesars and bet365, adds in-play offerings for college football.

• Yahoo Sports opens a sportsbook powered by William Hill technology at Venetian in Las Vegas.

• Fanatics was approved to launch in Pennsylvania—using PointsBet’s former operations that it acquired in June.

• Suspect arrested in $22 million illegal offshore sports betting operation for US customers.

• Iowa proposes changes after college sports betting scandal.

• Rivalry launches esports same game parlays in Ontario.

• The PGA says there’s been no increase in fans disrupting golfers due to betting.

Overheard

“We’re serious about the bill. It’s just about how quickly we can get the sponsors.” —U.S. Rep. Paul Tonko, on his proposal for a federal ban on sports betting commercials.

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Market Movers

Fanatics is live: The long-awaited Fanatics Sportsbook app launched in four states this week—Maryland, Massachusetts, Ohio and Tennessee—and then the company launched a retail desk at Cleveland Guardian’s Progressive Field on Friday. Fanatics had been beta testing the app for several months. The company has a loyalty program, FanCash, which enables consumers to make more wagers or buy merchandise.

Fanatics also recently acquired PointsBet’s US operation for $225 million, which will allow it to launch in more states. The company also offers a retail sportsbook at the Washington Commanders’ FedExField in Maryland. The launch will give Fanatics a three-month jump on ESPN Bet, which is expected to launch in November.

Not so fast: The Seminole Tribe’s new Florida sports betting venture with Hard Rock Bet may not be able to relaunch in time for the NFL season after a DC District Court of Appeals request for a response in the case that could enable the launch.

New markets?: Expanded Sportradar in-game betting markets could be coming this season - as a result of Sportradar’s recent extensions with Caesars and FanDuel, which include access to NBA optical tracking data from Sony’s Hawk-Eye. This could result in new in-game markets, for example, such as Stephen Curry 30-foot-three-pointers.

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What we’re reading

• US overall gross gaming revenue in Q2 2023 rose 8.3% year-over-year to $16.2 billion, with sports betting GGR up 58.5% YOY to $2.3 billion, according to the American Gaming Association.

• How new season transfers affect traders who are setting Premier League odds.

• The market between publishers and sports gaming companies in in a “correction” after “endless” customer acquisition budget has dried up, according to Digiday.

• MGM Resorts launched its first BetMGM branded operation in the U.K. with its LeoVegas technology, which MGM acquired last year for $604 million. Kambi is powering the sportbook. Entain, which is a 50-50 partner in the US with BetMGM, is not involved in the BetMGM UK venture.

• How Live Solutions plans to use AI presenters in live casinos.

Overheard

“There’s something that feels shabby about this. There is the association that PENN had with Barstool, and what’s literally going to happen, it’s called reskinning — it’s basically like getting a new case for your phone. They’re just, like, changing the Barstool label to ESPN.” —Josh Levin, host of Hang Up and Listen, on the ESPN Bet-Penn Entertainment deal.

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Data Point

29.2%

The all-time high monthly hold number for parlays in New Jersey set in July.

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Market Movers

BetMGM reached profitability. BetMGM reported positive EBITDA in the second quarter and also expects to be profitable in the second half of 2023. FanDuel is the only other operator to reach that mark. BetMGM saw same state player acquisition costs drop 8%—a good sign. However, its market share for online sports betting in North America dropped to 11% in Q2 from 13%.

Fox Bet, which is operated by Flutter, is shutting down. Fox Corp’s Fox Sports originally launched Fox Bet with The Stars Group in 2019. Flutter later acquired The Stars Group in 2020.

Kambi looks to Bally’s in transition to AI. Kambi saw revenue increase 24% in the second quarter, though earnings dropped 23%. Kambi is also now breaking out its AI trading services into its own division. Read more on Kambi’s AI ambitions from our recent interview with COO Erik Lögdberg. Meanwhile, Kambi is betting on its Bally’s deal, which it signed in May.

Betr is rolling out daily fantasy sports in 24 states with its BETR Picks. The DFS product will be accessible to existing Betr sportsbook app users and both will be available through a single API. Betr plans to launch the DFS service in 30 states this year.

PointsBet sees profit coming. After selling US operations to Fanatics, CEO Sam Swanell says PointsBet is on the way to profitability, citing a net win rise of 10% to A$61 million.

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What we’re reading

• Fanatics is launching a sportsbook in Columbus, Ohio, part of a broader nationwide rollout. It is also operating invite-only digital sportsbooks in Maryland, Massachusetts and Tennessee.

• MGM, Penn and Wynn were fined by Massachusetts regulators for taking illegal bets on Massachusetts-based college sports.

• The restarting of student loan repayments this year may impact operators’ handle, according to TransUnion.

• Hard Rock gets a mobile and retail sports betting licenses in Illinois.

• PlayUp’s Colorado sportsbook was taken down — after the New Jersey site previously lost is sports betting license.

• PrizePicks is growing but critics say its DFS offerings are a form of gambling, according to the Wall Street Journal.

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Overheard

“This counterfeit version of sports gaming masquerading as a fantasy concept is going to become a problem.” — Matt Schuler, executive director, Ohio Casino Control Commission, talking about DFS operators.

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Market Movers

PlayUp stopped accepting deposits and has reportedly stopped withdrawals. The company’s New Jersey site has shut down after its licenses were revoked and Colorado is reportedly investigating the company related to problems with payroll taxes.

What’s next in sports gaming: Per Adam Krejcik and Chris Krafcik, Eilers & Krejcik: 1) Look for operators to partner with restaurants or other sports, tourism or hotel venues (e.g. BetMGM-Buffalo Wild Wings). 2) Disruptive products, similar to what has emerged in casual or daily fantasy sports and 3) More sports, such as Formula 1.

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Phoenix Rising FC aims to become the first U.S. “non-major sports entity” to offer sports betting. It’s one of the entities shooting for the three licenses available in Arizona.

Are shorter baseball games affecting betting? Not on volume, according to SBJ. But how people are making wagers is changing—more player props and same game parlays from casual and DFS players are popular now. It’ll be interesting to see full-year data at the end of the season.

Disney is considering selling a stake in ESPN to sports leagues including the NFL, NBA and MLB as it tries to manage the rocky move away from the cable subscriber model to streaming, according to CNBC. The moves could raise conflict of interest questions.

What we’re reading

• Ontario’s sports betting handle reached $2 billion in the quarter ending in June.

• Black market gambling sites are targeting under-18 Roblox users, who gamble their Roblox items or Roblox’s in-game currency.

• U.S. senators introduced an NIL bill that would require disclosure by athletes to universities, and give the NCAA power to enforce NIL regulations—and create a medical fund to cover athletes’ injuries.

• The power shift amidst the reshuffling at ESPN.

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Overheard

“In the US online gambling space, retail casino brands are getting demolished by two digitally native, sports betting-first brands: FanDuel and DraftKings… Are retail casino companies taking the OSB opportunity seriously enough? And could their early efforts in US OSB — in which they’ve increasingly ceded product and market share supremacy to their aggressive, digitally native rivals — come back to haunt them?” — Adam Krejcik and Chris Krafcik on the current U.S. sportsbook landscape.

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The company recently announced a new “Third Generation” AI approach. We sat down with Kambi COO Erik Lögdberg to talk about what this is and what his views are on the industry.

The new technology is the product of an ambitious plan to rethink the technology behind sports gaming. The idea is to make machine learning models that can not only run sportsbooks autonomously but also learn on their own, allowing the company to build new products extremely fast.

Kambi has set some ambitious long-term financial revenue targets, and this new AI technology is key to its growth plan and cost savings. Despite losing DraftKings and its expected loss of Barstool, Kambi has customers such as Bally’s, BetRivers and Parx. Other sportsbook operators are watching what Kambi is doing—as they are intensely competing and seeking to build, partner to access, or buy their own automation technology. Kambi is betting it can move faster than other operators, especially consumer-facing ones, by focusing on the underlying technology behind sportsbooks.

New approach 

Kambi actually created its first algorithms to generate probabilities—then known as Unibet—in around 2005, says Lögdberg, who also joined Unibet in 2005. (Kambi was officially formed in 2010 as the B2B unit of Unibet and spun off in 2014.) That technology later became critical to Kambi offering in-play markets, he said. But the technology has advanced tremendously since then. It has gone from “machine assisted human trading to human assisted machine trading.”

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The idea behind Kambi’s third generation system is to build underlying technology that can quickly adapt to new products and sports. Instead of building specific machine learning models for each sport, Kambi has built a model that can switch to different sports, Lögdberg says. Kambi announced the new third generation product for pre-game soccer earlier this year and now aims to roll out it out for in-play soccer this fall, he said. Then it will roll out to other sports.

“What if we could automate that and let that, over the years, more so evolve with the data (rather) than actually rebuilding bespoke stuff?” he said.

Previously, Kambi built separate models for different sports to understand specific aspects of a sport such as corner kicks or yellow cards or red cards. But that was time consuming and costly. So the new version can essentially learn new aspects of a sport or learn new sports on its own. It requires new data and some adaptations, but with the new system, “We can make these adaptions far fewer, faster and less costly than in previous systems and this drastically speeds up product development of the sportsbook.”

Here’s how he explains it:

“In the second generation, how we did it—this was very costly—you start from your core soccer product. Now we're going to understand how corners work. We need to study the statistics and build a corner model. Okay, we've done that. Now we're going to understand how cards work. And in the long run now we're going to understand how basketball works. What we believe we're on to here is that we invest a lot of years in one core model, and that model is not so much about whether it’s goals in football or points in basketball. It's more how we crunch this data. Of course, there will be some specific things—there's different rules. But the big investment is rather into one core—then scaling to others. So what our AI/ML now is doing is: we don't really tell it anything about what to expect from how corners in the football match works. We don't tell it anything about that. We more or less use the same model that we then use for cards—we just feed it with data.”

This also saves resources from investing in trading, Lögdberg notes. “And if it does a good job setting the probabilities of course then you need to invest less in the trading systems as well. Because you don't need so much of that because it is automated to a much higher degree.”

Kambi already had automated trading before this new launch, but he says some human traders are still needed now—though perhaps less than before.

“We, for many years, have had a quite automated setup. A live betting match will have 50 different markets. And odds need to change on just a possession in an NBA game. So it needs to be automated to a high degree. (But) a really skilled trader can change input parameters to these models. Now as external and internal data gets richer and machine learning algorithms more powerful, of course, they can do more of that job that the trader does. But I think for many years (going forward) even with the best machine learning models now on a big game for live betting: it will be possible for traders to add value as well.”

In the long run, Lögdberg believes this new product will make it much faster to roll out new products and new sports. “This will generate over many years, we believe, a much faster throughput of product development.”

In addition, the new models will give a boost to products which were aging, he said. “We felt we were reaching a limit for how much more exciting a product we can do for the end user with this whole setup.”

Lögdberg notes that there are still aspects that need to be proven as it grows. “I mean, I wouldn't say it's totally proven and to what degree it scales. but I think the signs we're seeing are certainly very positive.”

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In-house incubator

Kambi has been interested in developing this type of AI product for a number of years but faced a challenge many companies do: it was busy building and maintaining its existing products. 

“We talked about it for many years. We knew what had to be done, but it didn't really happen. Why? Because we have an existing big business. We have the deadline of NFL starting in nine months. We have to get the product up to par. We’ve then got to set aside the five best mathematicians to explore something new. And we're okay not evolving the NFL product now.”

The reason to finally do it: there’s intense competition in the industry so Kambi was trying to figure out: “How do we future-proof our business—in five years from now, and onwards?”

Eventually the company started discussing the new AI system in 2019 and formed a group of just three people to build it in summer 2020, Lögdberg said. The team didn’t have to worry about day-to-day current product development. In other words, it set up a kind of in-house incubator to try to build something fast, like a startup. The group eventually expanded to a much larger team.

“We said: we have to think differently. We have to think much more long-term. We set up a team. We asked them what they need. And we didn’t come with deadlines or short term product requests. We at the same time continued to invest in the medium-term to keep our NBA and NFL products leading. So then (we could) break out a proof of concept when it starts to prove itself.”

By focusing on the AI/ML models, it was able to push the technology further, he said.  

“What we did—a key point—was asking them, more so the mathematicians than the traders, or product people: starting from an algorithm-first approach, what do you need? And we gave them everything they needed. We didn't put boundaries of how our platform works, how a trader works. We asked them to start and then let us know, how can the traders contribute?”

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Live vs Pre-game

In-play or live betting has become popular in the U.S. in recent years, and that should only increase in the future, Lögdberg said. But there are nuances if you look overseas.

He noted that unlike the U.S, the dynamics are different in Europe, where live betting has been available since around 2015 and is popular with tennis as well as soccer. However in Europe there are many more live games going on around the clock—since soccer is a global sport. So it’s easier to find live betting any time you want it in Europe, as opposed to targeting a specific team in the U.S. 

On a random “Wednesday, at least in Europe, it's natural to go to the live betting product. You can say: ‘I don't necessarily know of any game going on right now but I'm more in it to get some action.’ Sort of like using it like a casino,” he said. 

Kambi offers about 300,000 live events per year globally, while the “Big Six” U.S. sports have 50,000 if you go deep into college sports, he said. For live betting to really take off in the U.S. there needs to be a growth in interest in other sports or international leagues of the major sports, he said.

“Will (US consumers) be interested in European basketball or South American basketball? Maybe to some degree, but so far I think we see a much more of a limit to what is going on in the US,” he said.

But globally pre-game has come back in the last three years, he said. This has been driven by new markets, player props, the ability to create bets across sports, and new ways to cash out.

“Where live betting for many years kept growing…and in some markets would have gone up to maybe 70% of total bets—not revenues because margins are lower in live betting. But since these newer markets—bet builders, play props, cash out, as well—they have made the pre-match product more interesting again. So we're seeing globally a bit of a shift back to pre-match.”

Meanwhile, as the U.S. market has developed, more U.S. operators are focusing on retention instead of just customer acquisition fueled by bonuses. That opens up more opportunities for third party providers, Logdberg said. 

“It's a positive development, but it is really positive for any company that is involved in creating the product. Because if it becomes less about big volume and marketing and bonus spend, and when it focuses on retention, it has to be more about a sticky product. So I think that's positive for us as a sportsbook supplier.” 

The new technologies also make it harder for operators to keep up and give opportunities for Kambi, he said.

“The big change here was when the same game parlays and the bet builders—when they came around, it was very tricky for any sportsbook to adapt to be able to do that,” he said. “It was a big technical and algorithmic change when the bet builders came and certainly smaller suppliers were way faster.”

Market Movers

Data wars: Esports data firm Bayes won a lawsuit against PandaScore in Germany, dealing a blow to data scraping. Bayes, which offers live data for some 16,000 matches, argued that PandaScore couldn’t advertise data that it had scraped from a public video stream as “live” or “real-time”. The court ruled in Bayes’ favor. Bayes has data partnerships with Riot Games and others. This type of data is key for many operators in order to offer and settle wagers.

NFL player betting: Two Indianapolis Colts players Isaiah Rodgers and Rashod Berry and free agent Demetrius Taylor were suspended indefinitely for betting on NFL games last season. A Tennessee Titans player was also suspended for six games for betting on other sports in the workplace. The investigation did not find game manipulation, ESPN reports. However, at least one Rodgers bet was placed on the Colts. It’s the latest in NFL players being suspended for gambling allegations.

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PointsBet deal: PointsBet’s shareholders approved Fanatics’ $225 million offer to purchase its U.S. assets on Thursday. The move clears the way for Fanatics to build out its sportsbook using PointsBet’s licenses in a number of states—it will have access to more than 15 states now. Rival DraftKings previously made a $195 million bid, topping Fanatics’ original $150 million offer.

VCs bet on Betr: Jake Paul’s Betr raised a $35 million Series A extension at a $300 million pre-money valuation. Betr plans to expand its media operation and expand beyond micro-bets into traditional pre-game moneyline and same game parlays. It is licensed in Ohio and Massachusetts and plans to launch in Virginia.

What we’re reading

• Should EA pay college students more than a reported $500 one-time payment per player for the 2024 EA Sports College Football video game?

• Relatedly, EA just won an initial ruling against Brandr Group, which had argued that EA’s game would cause “irreparable” harm against students’ NIL earnings.

• The Seminole tribe can offer mobile and in-person sports betting across Florida, according to a D.C. Circuit Court ruling.

• FTN Network’s Stefano Vaccarino interviewed by Betting Startups. (Apple or Spotify)

• Ohio’s legislature plans to increase the state’s sports betting tax rate from 10% to 20%.

• An academic paper on the science of sports betting.

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Overheard

“We are looking forward to delivering this national program to provide crucial education and advice regarding the ever-growing relationship between wagering and professional sports in the US.”—Epic’s director of sports partnerships Ben McGregor, on a deal for Epic Risk Management and Entain Foundation to educate MLS players about gambling harm.

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InPlay Innovation is the leader in AI-powered sports betting. Fully automated micro-markets, odds origination, and risk management.

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Market Movers

More on DraftKing’s bid for PointsBet. DraftKings and Fanatics were working on a $48 billion merger deal back in 2021, but the deal fell apart—and the inevitable bad blood ensued, the NY Post reports. So DraftKings recently made a last-second offer for PointsBet’s US business, topping Fanatics’ bid and potentially throwing a wrench in Fanatics’ upcoming sports betting launch plans. Does DraftKings want:

A) To get PointsBet’s state licenses, e.g. NY since the state doesn’t plan to issue any more,

B) To get PointsBet’s well-regarded Banach Technology, which it acquired in 2021,

C) To slow down Fanatics’ entry into multiple markets,

D) To just force a higher Fanatics’ purchase price,

E) All of the above.

PointsBet shareholders are scheduled to vote on the Fanatics offer on June 30.

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PrizePicks sued: Vetnos LCC has sued PrizePicks in Georgia, alleging that PrizePicks stole its technology.

Soccer data deal: Genius Sports extended is deal with Football DataCo, becoming the exclusive low latency data provider for EPL, EFL and SPFL. Genius had already installed AI-powered tracking in certain stadiums as part of its deal with EPL. SecondSpectrum provides teams with real-time data on the pitch.

NFL takes on gambling: The NFL is now requiring rookies to attend sessions on gambling to help them understand what is allowed and what is not. An investigation recently found that a Colts cornerback Isaiah Rodgers bet on Colts games.

Bally’s shuts down app in switch to Kambi: Bally’s is closing its Bally Bet app and stopped taking bets as it switches to the Kambi platform. Bally’s, which hasn’t gained much traction in the market, has said it expects to relaunch by the end of 2023.

What we’re reading

• Qatar Investment Authority became the first sovereign wealth fund to invest directly in a major U.S. sports team.

• 1xBet founder has reportedly died but reports are apparently based on a Facebook post.

• The NCAA betting investigation was triggered by unusual logins in Iowa.

• How Rapsodo’s data platform helps Oklahoma softball—winner of three straight College World Series—thrive.

• Nebraska’s first sportsbook opens this week.

• Rhode Island became the seventh state to approve iGaming.

• Betting Startups podcast talked to Geoff Doyle of Bettor Vision, a sports betting and fantasy sports aggregator.

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Overheard

"It comes back to, in large part, a couple of rules that have existed as long as anybody can remember. Don't bet on the NFL. That's not new because sports gambling is more available. That's always been the case. And don't bet when you're at work, wherever work happens to be in that moment. That's existed for a long time." —Sabrina Perel, NFL VP and chief compliance officer, on the NFL’s efforts to address gambling by players.

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InPlay Innovation is the leader in AI-powered sports betting. Fully automated micro-markets, odds origination, and risk management.

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Learmonth is the host of the Betting Startups podcast where he talks to up-and-coming startups in the industry and writes the Betting Startups newsletter. A former executive at Pinnacle, he’s now an advisor to startups so he knows the ins and outs of what’s moving the market.

In this discussion Learmonth talks about what he's seeing in terms of innovation in sports gaming, from AI to free-to-play gaming to live streaming to infrastructure plays.

Operators have a loyalty problem and a commoditization problem and they are trying new approaches to technology, fan engagement and marketing to address it, Learmonth says. That’s also leading to interesting dynamics and deals between big operators and new startups.

Tech Differentiators

Operators have an increasing interest in new technology and innovation. But this wasn’t always the case. In the early years after PASPA was overturned five years ago, operators were in land-grab mode and just trying to acquire customers, Learmonth said. (Big bonuses always help.) “They were just literally trying to get to market with whatever they could. So in the early days, the operators weren't focusing too much on innovation,” he said.

Now operators realize that their products are too similar. There are dozens of operators in many states, many of them with similar lines and odds. So operators are looking to technology to differentiate.

“We are starting to see more of an increasing emphasis on operators really trying to look at ways to differentiate their brands and their products, recognizing that it is quite a homogenous commoditized landscape now. And a lot of these operators are looking to early stage companies to really be the drivers of that innovation,” he said. “Innovation is more of an increased focus now than it may have been over the last few years.”

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But many operators don’t have the resources for new technology. “As much as they might want to be innovating internally, the reality is for most of these outfits that resources are scarce. Compliance and regulatory is a massive priority and it often pulls resources away from projects that may be focused on innovation. So they need to lean on innovators to drive forward those objectives.”

For some operators that are now established, they can focus on technology. “A lot of these operators are now ready to start to focus on this—now that they have their footprint in certain states. So innovation is the theme now of these next innings of the regulated US betting market.” he said. 

Commercial partnerships and B2B deals between larger operators and tech startups are picking up—and could later lead to M&A. Areas that are buzzing for these types of partnerships include companies creating unique betting markets or betting products and then providing them to operators, he said.

One company creating new markets is Alt Sports Data, which is securing rights to alternative sports such as skateboarding, snowboarding, surfing, motocross or even bull riding. The California-based company then creates betting markets and offers them to larger operators. Alt Sports Data recently announced a deal with a large operator to offer markets for professional skateboarding, Learmonth said. 

Large operators are looking to expand beyond the big four pro sports into new demographics and new audiences. 

“Whereas a year or two ago, [operators] were focused on the major pro leagues, now they’re saying, ‘You know what? We do have good market share with these leagues. We now need to extend into some of the longer tail sports,” he said. 

Fan Engagement

The other major area of innovation is fan engagement, which is key to keeping consumers around, Learmonth notes. 

“We've all seen these headlines on the crazy sums of money that the operators have been spending to acquire customers without as much corresponding attention being put on the retention side of these customers once they paid the $1,000 to acquire one.” 

Now operators are looking at player engagement through things like free-to-play games, live streaming or live betting markets, he said.

“There's a lot of focus now on: What can we do as an operator to move beyond simply facilitating a transaction and move into actually creating a viewing or fan experience around the transaction as well. So a lot of startups are trying to serve that need now. And focusing on increasing the retention once the operators have paid all this money to acquire their customers.”

Anything to improve the live experience, through live streaming, visualizations, new forms of real time stats or data are also a big focus, Learmonth said. 

The Loyalty Problem

Many customers are willing and able to switch between apps, especially if there are bonuses or +EV opportunities—because there are so many apps that have become commoditized, as well as affiliates and aggregators to compare the best lines and odds. That’s a major concern for operators, so they see technology as a way to keep customers by generating more loyalty.

“There's not a lot of loyalty right now amongst customers between operators, and operators are trying to use this fan engagement piece to build some brand loyalty amongst their customers that really prevents the situation where users are jumping from app to app, and not having much loyalty towards any one brand or operator,” he said. 

The heavy marketing budgets of operators are not going to last, so operators need to take different approaches, Learmonth said. 

“A lot of the above the line marketing we've seen is around brand awareness—TV ads, billboards, and that's not sustainable forever for a lot of these operators. So there is a shift towards more sustainable marketing which means rather than trying to get all customers in, instead getting the right customer for each operator. Then once you have them what are the things you can provide that will keep them content and not jump to the next one that's offering the next sign up bonus?”

New Consumer Markets 

In direct-to-consumer startups, some are making big best by trying to create completely new forms of betting markets. One approach is Mojo, a startup that lets customers essentially buy a “stock” in a player—which are like contracts in an athlete’s performance.  

“They’re allowing people to really represent their fandom through betting on players that they think will have long successful careers,” he said. 

Another startup with a novel concept is Sporttrade, which offers markets in the form of $100 contracts. Customers can buy or sell contracts that will settle for either $100 or $0. Prices fluctuate between $0 and $100.

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“That lowers the barrier to adoption for people to get their heads around live betting, which for most sportsbooks is a grid of numbers that looks like a spreadsheet,” Learmonth said. “And what Sporttrade has done nicely is obfuscated a lot of that complexity and made it easy to understand by offering what are just simple contracts that settle in either $0 or $100.”

Artificial intelligence and data

In terms of AI, more companies are using AI to set lines and odds and handle risk management or lifecycle management. At companies such as Pinnacle where Learmonth worked, AI was used to do things like defend certain positions from high-volume, sophisticated entities, Learmonth said. 

Another use of AI is for personalization, with companies such as Future Anthem, which provide personalized experiences and personalized bonuses.  Finally, AI can be used to do things such as predict problem gambling and make interventions for certain players that exhibit those tendencies, Learmonth noted. 

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InPlay Innovation is the leader in AI-powered sports betting. Fully automated micro-markets, odds origination, and risk management.

Relatedly, one other area of development is new forms or uses of data as well as new ways of automation for data capture. Companies like ShotQuality are using computer vision to generate basketball data, Learmonth said. But there are more technologies that should come to market soon. 

Finally at a macro level, the industry is watching how sports betting relates to iCasinos—which are still emerging and don’t have regulatory clearance in many states, Learmonth said. “A popular thought is that with sports betting, it’s not just how you acquire a customer but how you cross-sell them over to an iCasino, how you actually turn them into a profitable customer,” he said. “The one to watch is going to be the emergence of iCasino over the coming years, as it rolls out in new states and seeing how these operators really try to capitalize on that.”

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Market Movers

Changes to come? A group of gambling industry veterans bought a stake in 888 Holdings, seeking to shake up the company. 888, which owns William Hill, sold a 6.6% stake to Lee Feldman, formerly of GVC Holdings (now known as Entain, which owns BetMGM), former GVC CEO Kenny Alexander, Stephen Morana, formerly of Betfair, and others. Share prices jumped on the news. The new investors see 888, which doesn’t currently have a permanent CEO, as undervalued and are seeking leadership and strategy changes.

Fliff lawsuit: A class action lawsuit in California has been filed against Fliff, which operates a sports gaming app. The lawsuit argues Fliff is violating California’s ban on sports betting. The free-to-play app enables people to make predictions on sports using Fliff Cash. The Fliff Cash can be redeemed for dollars. Fliff describes itself as a free-to-play social sportsbook. The company says on its website that Fliff Cash is used for promotional sweepstakes and that “no purchase is necessary” to obtain Fliff Cash.

“Bet-now-pay-later”: That’s what California-based EDGE Markets calls its soon-to-launch virtual debit card that provides interest-free loans to use for making wagers on mobile apps.

More on “Can’t Lose”: Penn Sports Interactive tried to explain Barstool’s “Can’t Lose Parlay”—which the company suspended in March—at a Massachusetts Gaming Commission hearing. The commission has yet to issue a ruling and or any punishment in the case.

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What we’re reading

BetMGM launched the first mobile sports betting app in Puerto Rico, after the company received a retail wagering license last year.

An Indianapolis Colts player, Isaiah Rodgers, is under investigation for placing wagers, including some on the Colts.

How did David Beckham convince Lionel Messi to join MLS’s Inter Miami?

Vermont Governor Phil Scott is expected to sign a sports betting bill this coming week.

North Carolina’s sports betting bill has been passed and sent to Gov. Roy Cooper, who is expected to sign it.

Can a hitter with a 30% strikeout rate still make a positive impact?  

Overheard

"I don’t think any player knows about that. That's so specific." — A free agent with seven years of NFL experience speaking to The Athletic, which found that four of five players it talked to didn't know they couldn’t place mobile bets on other sports while at work.

“We have our PGA Tour, which is offered in all states and a significant market for us. On the other side, we have LIV, which is allowed in some states, but not others, and then we have majors where we can or can’t do certain things with LIV players depending on the jurisdiction. We’ve had to adapt quickly.” — Kevin Lawler, Head of Trading at PointsBet, on the challenges of golf betting rules after LIV Golf merged with the PGA Tour.

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InPlay Innovation is the leader in AI-powered sports betting. Fully automated micro-markets, odds origination, and risk management.

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In-Play Uptime

Suspensions: In-play markets or micro-markets are one of the fast growing areas in sports gaming today. But having constant, real-time markets is not easy. Problems can result in markets being pulled down. That’s worse than when it happens with pre-game markets, because customers are following during the game and expect markets to be live throughout.

Different operators have widely different strategies on how to manage this. That resulted in very different outcomes during the Super Bowl this year, according to a deep analysis by Earnings+More of USAbility data.

This year’s game was a good test case for in-play markets since it was a quickly moving, action-filled game. Some operators tried to keep risk low by suspending markets often, while others were more aggressive and tried not to suspend markets at all. Others appeared to suspend markets only when risk or liability grew too high.

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Overall this market is still emerging and operators are trying to figure out what works best, while assessing how their systems perform in high-pressure, big stakes games. It’s clear that there’s a wide range of technology and business strategy involved. Here’s some of the operator break-down from Earnings+More:

• FanDuel had the most suspensions—seeming to try to lower its risk—but also had the lowest average suspension time.

• Barstool, Unibet and Kambi had a similar lower-risk in-play strategy, with suspensions often for certain types of plays, and also had the the longest duration of suspension of 45 minutes.

• Caesars had fewer suspensions but the average time was longer. Caesars had some long suspensions that may have been due to technical issues or topping liability limits in the second half.

• BetMGM had the lowest total availability and took the longest to unsuspend markets after big plays or complex game situations.

• DraftKings meanwhile had the most aggressive strategy, and only suspended key markets for close to 2 minutes during the game.

Market Movers

What next for Fanatics? Fanatics had a big plan for its sport betting app—cross promotion on its popular ecommerce site. But Fanatics now says it has dropped a promotion for bonus bets for customers who purchase hats, jerseys and the like, after a request from the Ohio Casino Control Commission. Meanwhile, Fanatics is waiting for its agreement to acquire PointsBet to be finalized, which will eventually result in it adding 14 more states.

Handle tax: Tennessee hsa passed a law to tax sports betting based on a 1.85% tax on handle instead of the previous 20% tax on gross gaming revenue.

Overheard

How did FanDuel reach its dominant position in the market? It "benefited from a competitive field that was hampered by various challenges, including fumbled M&A integrations, inefficient partnerships, [and] diluted focus." — Chris Grove, Acies Investments.

What we’re Reading

• Kindred is looking to speed up its plan to sell its business after several C-level executives resigned.

• One current MLS player and another former MLS player are caught up in a match-fixing investigation in Brazil. Prosecution in the U.S. is possible, the AP reports.

• About 58% of college students had made at least one bet in the last year, according to an NCAA study.

• Two University of Cincinnati baseball coaches were fired for failing to report a player’s parent betting on games.

• Minnesota’s sports betting bill will wait another year.

• 1,600 DraftKings accounts were hacked and drained of $600,000 last year, according to the FBI.

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InPlay Innovation is the leader in AI-powered sports betting. Fully automated micro-markets, odds origination, and risk management.

Data Point

$21 billion: The total all-time handle from Pennsylvania sports betting, making it fifth among U.S. states. Sportsbook revenue was up 5% in April from the year-ago period.

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Market Movers

Fanatics in talks with PointsBet: Fanatics is in talks to acquire a piece of PointsBet, according to SporsHandle. PointsBet has been seeking a sale of its U.S. assets, according to several reports. Fanatics is preparing to launch its sportsbook in a number of states this year so this would obviously change that.

Meanwhile, PointsBet ended its partnership with the University of Maryland. Its marketing deal was technically between PointsBet and third party Playfly Sports’ Maryland Sports Properties. Previously PointsBet ended a deal with the University of Colorado that was under scrutiny.

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Bally’s outsources sports betting app. Bally’s basically admitted its technology wasn’t working on its recent earnings call. Bally’s, which is live in 6 states, has now partnered wtih Kambi for sports betting technology and White Hat for player account management.

Tax on handle? Tennessee could become the first state to tax sports betting on handle, with a proposed 1.85% tax on operators, compared to its current 20% of adjusted gross revenue.

Overheard

“Recommended bets or wagers are a great way to broaden the pool of sports bettors… Making the first wager can be a little intimidating.” — Casey Brett, MLB’s SVP of business development, on how suggested bets can help new bettors.

BetCrunch is sponsored by InPlay Innovation:

InPlay Innovation is the leader in AI-powered sports betting. Fully automated micro-markets, odds origination, and risk management.

What we’re Reading

• Prove Identity signed a deal to handle FanDuel’s mobile identity verification and authentication.

• After NFL players suspended, exclusion lists for pro athletes are in focus.

• Vermont legislature sent its sports betting bill to the governor.

• Texas sports betting bill has passed the House, but faces challenge in the Senate.

• Five years since overturning PASPA, an oral history.

• Iowa and Iowa state are investigating athlete gambling.

• Colorado Rapids suspended a player for unlawful sports gambling.

Data Point

$220 billion: The total that has been bet with U.S. sportsbooks since the May 2018 Supreme Court overturned PASPA, per the American Gaming Association.

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In this conversation he talks about what he’s seeing in sports betting and fantasy sports, both in the U.S. and internationally, and the differences between the two. He also talks about micro-markets or in-play gaming, and the impact of technology such as AI and automation. But despite some big moves toward technology, many sportsbooks are still fairly traditional and rely on human traders, he notes.

More recently, Eccles helped start BetDEX, an decentralized exchange providing liquidity for sports betting. That company is taking on others such as Betfair by using Web3 as a way for people to bet on sports with a much lower cost for consumers. Since bets are decentralized and held on a smart contract, neither BetDex or brokers/operators are able to hold customers' money—it’s held by the Web3 protocol. Eccles is also working on a new music startup, Vault. Here’s our conversation which was edited for length and clarity.

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BetCrunch: What are you seeing in terms of innovation in sports betting and fantasy sports?

Nigel Eccles: We are seeing quite a lot of innovation or more than we've ever seen in 20 years. The U.S. opening up is a big part of that. Not only opening up the U.S. market but opening up to a lot of U.S. entrepreneurs that—might be doing something else otherwise. 

We've also seen some ideas that maybe started in the U.S. and have gone to other countries like India or Brazil and then developing further than they have in the US. One example would be Dream11 in India that as a fantasy sports business is actually much bigger than FanDuel or DraftKings’ fantasy business. So we’re definitely seeing a lot of innovation.

So some of that innovation is happening overseas as opposed to moving to the U.S.?

Yes, the U.S. is a massive laggard in gaming. If you add FanDuel and BetMGM (and PointsBet), around 65 to 70% of the U.S. sports betting market is controlled by European operators or those that have at least a 50% stake owned overseas. That's quite incredible. There's not that many markets in the U.S. like that—maybe music with Spotify. That's pretty rare for consumer businesses. The only U.S. ones are DraftKings, which had to acquire an international operator, SBTech, and Caesars, which had to acquire William Hill to get the expertise. BarStool acquired a Canadian operator and relied on Kambi or still relies on Kambi.

Is that because the U.S. has been closed off?

It's been closed off whereas the rest of the market has developed and matured.

Does that leave more opening for startups in the U.S.?

The challenge is the U.S. has moved from being a market opening up to actually being quite restrictive now. So I don't see much of an opportunity for new entrants in regulated sports gambling in the U.S. It's quickly becoming an oligopoly of three players. We've seen even PointsBet which was early and well capitalized—even then, they have a 5% market share and now trying to find a buyer. It’s a great market to be number one. It's a harder market to be number two or three. It's a terrible market to be any lower than that.

We’re seeing more innovation in fantasy sports than we are in sports betting. In fantasy sports it is more open to startups. And we're seeing more innovative products like say, Underdog, that are doing really well.

Can the big operators with scale just rely on heavy marketing and advertising?

They still need to innovate and develop the product. But you wouldn't bet on someone with an innovative product but doesn't have scale in that market. Because to get there—it's just too hard. An interesting product is Mojo or Betr, but the challenge is how do they get to national scale? It costs hundreds of millions of dollars. So it's very hard for somebody who's got a cool product to really prove it in one market and then roll it out. No one's managed to do that. I'm skeptical that anyone will in regulated sports betting.

The Fantasy Sports Market

What about fantasy sports? Is that more open in terms of competition?

It’s much more wide open because it doesn't have the restrictive regulatory requirements. You can launch in some 40 states out of the gate—including in big states like Florida, Texas, California.

There’s a lot of interest in micro markets and in-play betting. What are you seeing there? 

That’s a long term trend. And it sort of depends by sport. Something like tennis where over 80% of the bets are in-game, or cricket has a really fantastic in-game betting market. So we're definitely seeing a rapid movement and share moving towards in-game.

Are you seeing more interest from a younger audience in micro markets?

Hard to say. I think so. But I haven't ever seen any kind of hard data. Both demographics (older and younger) have migrated towards in-play, so it's hard to say that's one or the other.

Technology in Sports Betting

What do you see in terms of sports gaming companies moving into artificial intelligence, automation, and machine learning?

So for pregame markets it maybe wasn't quite as important. But for in-play, you can’t operate without it. As a technology, it moved from something that was kind of uninteresting—a cost saving, you can automate, therefore you don't need as many traders—to actually being something that's more interesting. Which is: whenever you automate, you can offer products you couldn’t even have done before. You can offer many, multiple markets for in-play. You can't really do that with human traders. So that's when the technology gets really interesting. When it's not just a cost saving, it's more enabling something totally new.

Are the larger operators moving that way in terms of automation and AI technology?

Yes. Interestingly Amelco just did a deal with Simplebet. So that is an indication of demand. There's definitely indication that that is the case.

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They talk about it but are they actually doing it?

The trading side (of many companies) is surprisingly less sophisticated than people think. Everyone that looks at the gaming sector thinks that they've got supercomputers and they've got Harvard and MIT PhDs running artificial intelligence. When in reality it looks more like: you've got 40-something-year-old blokes with a stubby pencil, with Pinnacle lines up, and and they see risk and they move it around. And it’s more like the latter. I'm not saying it's totally like that, but it looks a lot more like that than you would think.

Given that, how do they handle risk?

One other thing about regulated sports betting is because those sportsbooks have Know Your Customer procedures, they can limit users. If they didn't have that ability, they would have to have sophisticated risk management. But because they can quickly identify who the winners are, and what a pattern is of a winning customer—they just restrict those users. 

Therefore they don't have to have super sophisticated risk management. All you need to do is identify who the winners are and eliminate them. It’s a job of just trying to price the losing users you have on the higher and higher margin products. That’s not the case in gray markets—take India for example. You don't have KYC, you can’t limit users. If you don't know who they are, you can’t limit them. Therefore they surprisingly have to be more sophisticated. And they manage their liability. They also operate to much lower margins.

Web3 and crypto in sports betting

You’re working on a startup, BetDEX. How does that play in the sports betting world?

BetDEX is focused on international sports betting markets. About $2 trillion is bet every year on sports. The weird thing is that it's split, that liquidity is split among 10,000 different sportsbooks. And so, we have all these different pockets of liquidity.

For example, if you wanted to buy Apple stock, imagine there were 10,000 different places where you could buy it—and all quoting different prices.  That’s insane. That's the sports betting market today. Our view is: why isn't there a central clearing house for all of those markets? So if there is a sportsbook that takes a lot of money bet on one side of a game, it can blow it off onto this exchange, or it could even offer that exchange pricing to their customers.

What’s the existing landscape look like there?

There is an existing betting exchange called Betfair, which is very popular. It was founded about 20 years ago in London. And the problem with Betfair is that it is a centralized exchange. It's owned by Flutter. And, early on, they said, “Winners are welcome.” But later what they decided was well, winners are welcome, but we're taxing them really heavily. 

So if you invest a lot of time and money building your business on there, suddenly you might be unprofitable. Additionally, there's a risk if you build infrastructure on top of Betfair that Betfair could just decide they don't want that business anymore. 

How is BetDEX different from the traditional exchanges? 

So what we decided with BetDEX was we were going to separate the exchange part from the broker part. There's two parts to this product. The exchange part is like digital plumbing—sports betting plumbing. That means that two different brokers can use the protocol, called Monaco. And so I could make a bet through BetDEX and that bet appears on Monaco. So if I want to bet $100 on Manchester United to win, someone using a different broker could see that bet and could take the other side of that bet. 

So what the protocol does is it allows this liquidity to be broadcast out to all of these brokers. And our aspiration is that one day we have 10,000 brokers using this infrastructure to pool bets. And what that means is that Monaco becomes basically the greatest source of truth and of liquidity for any of these markets.

The other thing to note is it's noncustodial, so neither BetDEX or brokers ever holds users' money. If I bet with BetDEX, I have a wallet and when I place a bet that money goes from my wallet into a smart contract, which is controlled by the Monaco protocol. And when the bet is settled, the money goes straight from Monaco back into that user's wallet. So at no point am I ever at risk from the bookie deciding that they're not going to pay me back, or they're going to make it difficult to get my money out, because the bookie never touches my money.

BetCrunch is sponsored by InPlay Innovation Inc.:

InPlay Innovation is the leader in AI-powered sports betting. Fully automated micro-markets, odds origination, and risk management.

Which basically is not possible in the traditional world?

100%. There’s been a lot of discussion over the last year on use cases for crypto. A lot of people have come up with stuff and you're thinking: why does it need to have crypto? A lot of projects didn't really pass a test of: does it really need crypto? With Monaco you can't build it without it. Unless there's a decentralized protocol that does this. There is a single controller. There's some entity that we have to trust. With Monoco we no longer have to trust anyone with our money because the money is not controlled by some third party. It's either in my wallet or it's in the smart contract. And then when it settles, the money goes straight back to my wallet. And that's pretty revolutionary.

And then oracles determine the outcomes?

We've used a price oracle. It's, “Did Man City win or not?” Once that happens, then there's a price oracle that triggers it, the smart contract looks to that oracle to tell us what the truth is and then settles it. In cricket we seem to have a lot of traction, but also soccer and basketball.

So the vig or hold would be much lower than in the traditional world?

It looks like 1% to 2%. Compared to the 10% to 15% that a lot of people are more familiar with.

Do you see other use cases for crypto or web3 and sports betting?

This is one that really makes sense. I was at Betfair 20 years ago which is quite alarming. I remember even when I was leaving and some years afterwards, it felt like there must be a better way of doing it. And this is a better way of doing it. 

Today where crypto is the most successful is payment rails. Gambling is a huge problem with payments. A lot of times the credit card company just doesn’t play nice with it. So we've seen products like Stake.com say “We’ve got a solution for that. We're just going to use crypto.”

His Music Startup

And so you’re also doing the music startup Vault as your day job?

Yes, Vault is a new digital music format that uses crypto, but that's hidden from the user. And the idea behind Vault is if you think of the mp3 format, from an artist's perspective, the thing that was really bad about it was it was infinitely copyable. You could create perfect copies of it. And from a fan perspective, the thing that was bad about it was you didn't own it. You just had a file. The ownership: you couldn't gift it to a friend, you couldn't resell it. You couldn't really collect it in the same way. You didn't actually have ownership. 

We've created a new format that is copy-protected. If there’s only 100 of them, there’ll only ever be 100 of them. (Many artists create only 100 using Vault.) But also it is collectible because you can actually own it. And ultimately you could gift to your friend or you can resell it. It uses NFT's and crypto rails but from a user perspective they don't actually see any of that.

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