This tweet could pretty much apply to any of the US based exchanges. However, we will talk about Sporttrade as it seems to be the frontrunner in certain jurisdictions at the moment. Important to remember that exchanges are in their formative stages in the US. I should put out a proviso here.
Alex Kane who is the CEO and founder reached out to me a couple of months ago saying he enjoyed my threads and that we should catch up. I replied saying sure. Sounds good. Anytime. Not much happened until I put up a poll asking what tweet I should write next. One of the options had been Sporttrade. Alex got back in touch saying we should have a chat. I did something I havent done before to a DM on Twitter. I havent responded. I apologise for being rude. I just don’t know what to say. It felt very much like a damage limitation exercise.
What I need to point out is that anything I say about Sporttrade isn’t personal. It’s the same with all the tweets I write. I literally say what I see. No affiliations. Just as I see it. Alex has done an unbelievable job to get Sporttrade to the position it is in. A monumental achievement and something I will never come close to achieving. Something to be very proud of. Now the niceties/provisos are out of the way lets get down to Sporttrade.
I love betting exchanges. I have worked at and punted professionally on exchanges for almost 20 years now. Betfair desperately needs competition. We have seen outside of the US numerous competitors spend large sums of money to try and compete and come up short. Time and time again.
What will make Sporttrade different? What will make them successfully break into this space that has seen so many fail before? How’s it been going so far? So I would say two things stand out with Sporttrade from what I have seen and heard. I really like the 0-100 price ladder. It was something I spoke to a close friend about 3/4 years ago as an interesting way to reach the mass market. The second thing is they clearly have large market makers on board, which helps to ensure customers can place bets. You think hmm that’s interesting until you start to dig a little bit deeper. Once you start digging a little deeper you realise that it isnt an exchange in the purest sense at all. It is literally a glorified bookmaker using a betting exchange interface.
Captain Jack tweeted recently that the players had beaten the house in four of the first five months on the NJ exchanges. What that means is that the market makers have lost in four of those first five months. There is a belief this will turn round. No idea why. I would say I am shocked by the naivety that is being displayed by Sportstrade but I am not. You find it with young energetic companies in industries which are seeing huge growth. Like the US Betting market. Sportstrade will have sold all sorts of dreams to its investors. Raising small fortunes. We will disrupt this space with technology. We are going to apply principles from the Stock Exchange to Sports Betting. We have the liquidity issue resolved. Blah blah blah. The lack of understanding as to how and why a true exchange works is unreal.
How can you honestly expect to disrupt this market if you have only in recent days got aggregated profit and loss for positions taken. One of the most basic requirements from an exchange. The basics are so lacking it is untrue. Trading in American odds. Lol. Surely, customers must be able to use API software to place large numbers of bets to help provide liquidity? They must have software vendors lined up to help facilitate that process? After all you are trying to build an exchange where customers are both providing liquidity and taking prices. Hmm. The single biggest red flag I have seen though related to answers around a question relating to bet delays and courtsiders. It was something along the lines of we don’t need bet delays. If we do we will address the situation then. Genuinely like wtf. These are some of the most basic things you have to get right as an exchange and to not resolve these issues already shows how little desire there is to be a proper exchange. Or lack of awareness. I don’t know. It just blows my mind.
The market makers will get their pants absolutely pulled down in due course if they continue to do these sorts of things. The problem is that I think there is an arrogance that suggests they think they will be fine. Good luck with that because you will need it. One of the fundamental problems for exchanges in the US has always been the fact that each state constitutes a separate liquidity pool. So you will do incredibly well to get enough people to provide liquidity like a normal exchange in each state. Almost impossible. I should put a disclaimer here that most of the exchanges you see in somewhere like the UK are providing liquidity themselves like this. Except Betfair.
There is a single reason why this venture is destined to fail as an exchange though. They have boldly claimed that accounts wont be restricted and that extra charges will never be introduced. Let’s see how long that lasts. There was a reason Betfair went the route they did with Premium Charges. They had all the data in the world. Why would you think you are offering something so much better than they did at the time? They literally felt they had no choice. They understood how the exchange ecosystem worked and what was needed moving forward.
Good luck not having the ability to pick and choose your customers like the other sportsbooks do. Good luck having to keep trying to price up markets to low spreads and thin margins. In running. With no delays. Honestly, it feels batshit crazy. Sportstrade has lots of high profile supporters (who knows if they have skin in the game). I honestly see nothing more than a glorified bookmaker atm.
I desperately want exchanges to succeed but from what I have seen and heard so far if this is the answer then what was the question. It probably doesn’t matter because those involved will all make silly money selling a dream that seems so unlikely to properly succeed. Those in the financial markets just have more money than sense. Easy when its not your own money I guess.
ProPunting 