US Ready to Welcome First Sports Betting Exchange

A new type of sports betting is coming to the US in the form of Sporttrade, a betting exchange platform that announced a licensing partnership Tuesday with Twin River Worldwide Holdings in New Jersey. Officially, Sporttrade will launch America's first betting exchange, although Tradesport tried but failed to gain a foothold in the US market back in December.

Alexander Kane, Founder and CEO of Sporttrade, commented: “We are thrilled to partner with Twin River as we prepare to introduce a truly differentiated product to the New Jersey market. By applying capital markets technology and market structure to the US sports betting ecosystem, we are creating something revolutionary."

There is still some work to be done before Sporttrade goes live however. The Philadelphia-based sports betting startup will have to wait on Twin River Worldwide Holdings Inc. gaining the necessary regulatory approvals to complete its acquisition of Bally’s Atlantic City Hotel & Casino in Atlantic City.

It is said to be a multi-year deal with actual launch date yet to be determined.

What Exactly Is a Betting Exchange?

The best way to describe a betting exchange is to associate it closely with a stock exchange. They link bettors for various games and allow them to buy and sell positions on the games they are betting on. Bettors place bets on odds that are similar to other platforms but your bet is matched up with another trader that wishes to take the other side of the bet.

Betting exchanges offer largely the same betting opportunities as a bookmaker with couple of major differences. Betting exchanges don't actually offer up their own money in case of a bettor winning. In their case, there is no "house".

Customers are tasked with backing and laying bets against each other, not against the sportsbook’s oddsmakers as is traditionally done. A small commission is taken by the exchange on every bet instead of a book simply winning or losing on a wager.

Can Exchanges Work in the Us Market?

There are a couple advantages to what Sporttrade offers that may appeal to bettors in the US. It offers better odds than a traditional sportsbook and allows its customers to set the odds. Exchanges typically have a hold rate of 3-4% while traditional sportsbooks keep between 6-7% of bets placed. It all leads to better value for the average punter.

Betting exchanges have been operating in Europe for the better part of 20 years with varying success. US bettors have certainly heard of Betfair, Smarkets and possibly Matchbook which are all successful examples of this model working.

Sporttrade CEO Alex Kane is on record saying, “We think we are building something revolutionary. This is the first time people from the capital markets space have put time and effort into creating a sports betting product.”

Americans tend to be active in or have some knowledge of the stock exchange so the idea isn't entirely foreign for potential users of the platform.

But...

There are a few hurdles that threaten to stand in the way of widespread success for Sporttrade in the US. Firstly, there is the Wire Act which stipulates that liquidity would have to be generated state by state.

Then there are the numbers out of the UK where betting exchanges were born. Exchanges account for just 7% of all online betting revenues in the country - far short of expectations upon launch. That number may make it a tough sell in the US, a market that has already been hugely successful with the traditional way of placing wagers.

Despite most Americans understanding how a stock exchange works, the platform is still seen as complicated and as flying in the face of traditional sports betting that still dominates the landscape – something that may keep its potential low.

At the End of the Day…

Different doesn’t always translate to success. Attempts at betting exchanges have already been attempted in the US but failed to get off the ground. That said, bringing something new into the bustling New Jersey market seems like the right approach for Sporttrade.

If betting exchanges don’t work in arguably the most bet-friendly state outside of Nevada, it likely won’t work anywhere else in the nation. Stay tuned!