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While planning to expand its business in the United Kingdom this spring, Smarkets is one of several working to join the potential land rush of sports betting in America. The company hopes to find partners for its online and mobile services, should the US Supreme Court remove the federal ban on single-game wagering outside of Nevada.
The case argued before the court last December originated from a New Jersey law looking to allow the state’s casino and horse racing tracks to offer sports betting. In states like New Jersey with established casinos and regulations, Smarkets would most likely need to partner with an existing brick-and-mortar venue, according to Peter Hammon, the company’s US director of government relations and business development.
“In the short-term, what we’re looking at is, how can we partner with casinos to provide their online and mobile product?” he said. “That’s where the future of sports betting is going. In ten, five, three years from now, no one is going to walk into a casino and place a bet at a book. We want to provide that next step, that online and mobile product. Legislators desperately want to protect the interests of land-based casinos.”
As a betting exchange, Smarkets isn’t the same as a traditional bookmaker. It offers a marketplace where bettors can set odds and bet against one another. It makes money by taking commissions from winning bets. Betfair is another well-known exchange operator. The company also has plans to offer a traditional sportsbook., devoting $5 million to develop the product.
Hammon referenced the emergence of daily fantasy sports as precedent for the way online betting could develop in the US. DraftKings and FanDuel fought to earn legal recognition and did so without connecting to established casinos or local racinos.
In states like Virginia that lack physical casinos, Hammon believes books operated online wouldn’t need those partnerships either. (While he’s right they aren’t necessarily needed, states like Virginia aren’t favorites to pass any kind of sports betting law in the short term. And casinos, lotteries and existing gaming entities are likely to be given an advantage in any sports betting law.)
Overseas companies like Smarkets and others look to bring their experience to the states. Betting online or through your phone is commonplace in Britain, even with kiosks at football stadiums. Books and football clubs enjoy harmonious relationships, as the betting houses have become more visible in signage around pitches and even on team jerseys.
In the US, leagues have taken a more distrustful stance on betting. The MLB and NBA have both introduced “integrity fees” in state legislatures, asking for a one percent fee from all betting receipts. While these fees exist in a limited fashion in some countries, they do not in the UK.
Hammon’s role allows him to advocate for the sports betting and gaming industries. He opposes the fees, which would significantly cut into operating income and make legalized betting less desirable to the wary consumer.
“At one percent, that’s 20 percent of our business gone to the NBA,” Hammon said. “If your state gives the NBA that one percent, it’s going to make it impossible for us to compete with illegal books. They’re not paying and overhead costs or compliance costs, nor are they paying state and local taxes.
“Obviously, they’re not going to pay the NBA or MLB tax. We’re going to raise the prices on customers, thereby there’s no reason for them to ever use a legal sportsbook. The states get no tax revenue, no one transfers over to the legal market.”
Hammon notes the leagues can profit from sports betting through other avenues, like sponsorships. He pointed to ancillary benefits from game action, like ratings spikes during games. Now, a boring game getting no attention can explode on social media with a backdoor cover.
Smarkets is looking to expand its offerings in the UK in preparations for one of the biggest betting events in sports, the World Cup. The company will offer odds compiled from user activity, operating more like a pari-mutuel.
The company also recently announced a partnership with Squawka to offer more statistics for their customers. (Disclaimer: Squawka is owned by Legal Sports Report publisher Catena Media.) Hammon noted this service would offer potential casino partners a chance to track user activity and offer members comps points, a key element in the traditional casino business.
Will Smarkets be one of the companies that becomes a part of the future US sports betting market? It is attempting to enter a crowded marketplace, as nearly every regulated sportsbook operator has its eye on the US. Some have a headstart in the US, like William Hill, Paddy Power Betfair and Amaya, to name a few.
But for casinos or other gaming interests in the US looking for a unique product, offering both an exchange and a sportsbook could be intriguing.