What Are the Biggest Hurdles for Sports Betting Disruptors? - 7investing 7investing
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What Are the Biggest Hurdles for Sports Betting Disruptors?

October 29, 2021

The investing audience has long been fascinated with legalized sports betting. That makes sense because there are tens of billions of dollars spent betting illegally each year. Take that money and move it into the legal realm and you have a huge market with the potential for more than a few winners.

The challenge, of course, is that there are already some giants in the space. Competing with the big casinos comes with a long list of challenges. First, those big players have millions of customers already enrolled in their loyalty programs. They can market to that audience digitally and offer them incentives to try digital products.

Big casinos also have an edge when it comes to juggling the challenging legal situation facing gambling platforms. While more states have legalized betting on sports, the rules vary greatly from state to state. Those slowly-changing rules add a layer of complication for new players in the space which have to deal with different rules in each market they operate in.

Challenging, however, does not mean impossible and there have been a lot of entrants trying to make their name in the sports betting space. James Seils and Greg Kajewski, the founders of BettorEdge, a startup trying to change the way people bet, joined Dan Kline on the October 27 edition of “7investing Now” to talk about sports betting, the problems any startup in the space faces, and why the big incumbents might be ripe for disruptuon.

A full transcript follows the video.

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Dan Kline: But let’s segue a little bit into talking about the broader gambling market, because you mentioned Daily Fantasy. You mentioned MGM. These are all companies dealing with, like, really ridiculous level of legality and trying to figure out like, if you’ve ever heard of like Bill Simmons do like his, you know, his little tag at the beginning of the show, we have to list out like the 17 states, you can gamble and then give you all the phone numbers, you can call it like the rules here are really tricky, and in my opinion, a little silly.

But how do you see the state of sports betting in the US right now? Like the way I look at it, and I might be wrong, is you’ve got these two giants in Caesars and MGM that have this like massive loyalty program. And I know like, if I have a choice to bet, and I’m going to get tier points at Caesars, I’m gonna bet at Caesars I don’t care what they do at DraftKings. And that’s why I’ve been very skeptical of anyone, but I’m gonna stop talking. I want to hear what you guys think of the marketplace.

Greg Kajewski  6:20  Yeah, definitely. I think it’s interesting how that, you know, history has come to be. So, you know, before the online kind of world, you go to an actual sports book, you’d have that interaction, it would be really fun as part of it. And then, you know, as they move that to online, as COVID occurred, it accelerated the opportunity for people to have that online platform. And I think a lot of those large companies have just lifted that, you know, transactional type experience to an online and whether you sign in at Caesars or if you sign in a different place, you’re placing that transaction as part of it.

And we took a step back and said, let’s think about this entire experience. What can an online opportunity look like? And it comes down to you’re collecting information. I look at it very similar to financial markets, for me to start making a position a stock, I tuned into 7Investing, I go read stuff on Twitter, I go do all these things. And our platform allows for you to get that information about sports betting, so that you can therefore place the transaction and you have that kind of end to end experience. And we’ll give you data analytics as well to say, here’s how you’re doing as part of that. I think the overall industry and kind of state of sports betting is what does the consumer want at the end of the day? And are they going to keep going to those loyalty programs because they get room upgrades, things like that? Or do they want to look at better products to say, Hey, I’m actually winning more money, I’m getting a better price, all those types of things as well. So it’ll be interesting to see how that plays out. But obviously, there’s a you know, to your point, there’s a lot of money being poured into this space kind of around user acquisition and things like that.

James Seils  7:52  Yeah, from the loyalty standpoint, I mean, our biggest one of our biggest challenges is we need to lead with an education campaign. At the end of the day, you’re getting those loyalty points because they’re making money off of and they’re doing that because they’re charging enormous fees on bets and you look at even like the some of the newer innovative books that are coming out and pushing macro influencer parlays where they’re even reporting 25% Hold on those bets in their you know, financial statements saying that we are pushing these out, people are buying them and we’re taking 25% fee from them. And so bringing that education to people and saying you know, you need to actually win 53% of the time to make any money on these old books.

On a platform like ours you win 50.01% of the time you make money because we don’t take any fees in the process and so like Greg said, I think you know once people realize that it’s aligned with their you know, thought process and just like when you look at the financial services industry and what Robinhood did and taking away commission’s on online trades I think the industry is gonna eventually need to go that way and these big books have very large overhead it’s going to be very hard for them to shift the revenue model as fast as what I think consumers will shift their behaviors

Dan Kline  9:13  That’s an interesting point because so it’s it’s also interesting that Robinhood gets credit for that when they were like the 15th platform to do that and they’re by far the worst of all the platform. I still can’t I tried to set up an account cannot link my bank account to it just just simply doesn’t work. But in the sports betting world that that’s interesting, because I don’t know that the average my level of gambler like and I’m much more of a blackjack player than I am a sports bettor.

But if I’m in Vegas, I’m absolutely putting 100 bucks in the Patriots or whatever team I happen to be following. I don’t give a ton of thought to what that take is. Do you think like some of the disruptors whether it be you guys who I think are really operating in a different space, you know, than say a DraftKings or FanDuel or any of these other sort of disruptors. Do you think part of that is just going to be you can offset the traditional by just taking less like is that, that that’s worked with stocks, but I think the stock market investors may be a little more sophisticated than the guy who’s putting 50 bucks on, you know, the Panthers to win or your God, the person who makes a bet in favor the Jets.

James Seils  10:20  Yeah, I think that’s where I said, it’s a challenge. We need to lead with an education campaign and show people that they are losing this money, and that they are getting taken seats, because it’s, it’s brilliantly done in the sports betting space, right. Like talking about a hidden fee, where you literally have no idea unless you understand the low detail level of numbers around American odds to understand how you’re getting charged this fee. And so in our platform, we definitely show you what you’re being charged and other books. And then we actually allow our users to donate that saved fee to a charity that we partner with as well. So if you’re on our platform, you definitely know that there’s a big out there and other places. And I think as you know, new companies in the space come on and do similar things, the education is just going to start having a groundswell and people are going to notice that, hey, my $10 Bet is going to win 10 Here, or it’s going to win $9. Here, I’ll take the extra dollar, as long as the friction to sign up is low.

Greg Kajewski  11:23  And to double click on that, you know, we did a lot of surveys, early users and a lot of different demographics. We said, Hey, what are your thoughts on this, etc. And multiple people came back right away and said, If I’m not going to charge a fee here, why would I go back and get charged a fee elsewhere? I think consumers are used to that trend. They’re used to lower fees. And that’s, you know, been set in a lot of industries, Venmo, the financial industry, all that type of stuff. So we expect that to continue to play out as well here.


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