The countdown is on for Sporttrade. The Philadelphia-based sports betting exchange is in the final stages of preparations for its initial launch. Come September, the company, led by Chairman and CEO Alex Kane, plans to be live in New Jersey.
The company was founded in 2018, and last year, it secured $36 million in funding to grow its team, gain market access to other states, and invest in its workforce. Among the investors taking part in that round included former MGM Resorts International Chairman and CEO Jim Murren and former Nasdaq Stock Exchange CEO Tom Wittman. Wittman also holds a seat on Sporttrade’s Board of Directors.
As an exchange, Sporttrade seeks to creak a market where bettors trade wagers with each other rather than making them with a conventional bookmaker. Exchanges give bettors more flexibility. Rather than losing their whole stake, they can reduce their losses by trading out of a position before it zeroes out. Likewise, they can also secure a profit by trading before the event ends.
New Jersey won’t be the only market for Sporttrade. It also has market access deals to operate in Colorado, Indiana, and Louisiana, with plans for more in the near future.
Kane has also been outspoken about how some states have legalized sports betting. For example, saying states that set expensive license fees or require partnerships create high barriers to entry for emerging operators.
Kane spoke with Casino.org earlier this month at the SBC Summit North America about starting in New Jersey and the future for his company.
Q: Why start in New Jersey? Is it because it’s a big sports betting market that’s close to New York?
AK: Yep, and that trading audience (in New York) and the regulatory body (New Jersey Division of Gaming Enforcement) is so revered and so respected that starting with them is a great stamp of approval for other states.
And in the way we’ve done it, it is so critical to create that trust because this is totally new. They allow exchange wagering, but the nitty gritty, it’s never been contemplated before because they’ve never had to contemplate it before. So, that’s where we’ve really leveraged our NASDAQ relationship and really tried to say, ‘This is the way we think it could work to maximize consumer protection,’ and that’s our goal.
Q: Has there been any thought of going to the federal government and seeking approval?
AK: I think it’s challenging because the CFTC is the regulatory body that oversees futures trading, and the outgoing commissioner (Dan M. Berkovitz, who departed last year) basically was very clear and said that sports betting is an event contract. Event contracts are a future, and we are the Commodities and Futures Trading Commission. So, it would go through the CFTC, and I think, more and more, people are looking at the CFTC to do something. You see Kalshi has launched. CME is launching their product for event contracts.
The CEA (Commodity Exchange Act) is the statute that regulates the CFTC, and it was very clear when it said the CFTC-regulated DCMs (designated contract market) merchants can’t list event contracts if they involve assassination, war, gaming, or any other type of contract that would be contrary to public interests. So the word gaming is a very interesting selection. Does that mean sports betting? Does that mean casino wagering?… So that could change, and what it would require is an amendment to the CEA. Which would mean Congress, and I just think, right now, that’s a really long shot. Like one cent out of $100? So .01%.
What I think is inevitable at the same time, you’re going to have exchanges like CME. NASDAQ’s an exchange that invests in our business. It makes a lot of sense that the markets going to go this way. It’s not going to be 100% of the sports betting market. I think it’s going to be 20% of the revenues. I just don’t think (federal approval) is a short-term possibility.
Q: How much does it hurt being excluded from states like New York and, potentially, California?
I would lie if I told you that it didn’t hurt us. It will hurt us. But the long term is this will exist. It will exist in every state, regardless of the operators that don’t want to compete against (exchanges). It’s just a fact. Could you imagine if Florida said Robinhood’s not allowed? People would be so upset,” Kane said.
I think that if we can prove that this product is better for customers. It’s cheaper. It’s more engaging. It makes more sense. If it grows the overall market, then the government would look at that and say, ‘Should I listen to the will of the people that want this product, or the will of the three operators that don’t want to compete with something that’s going to compete with them?’
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