Sporttrade, the company aiming to launch the first legal US sports betting exchange, announced Monday a $36 million funding round with investments from some of the biggest names in finance.
The round was led by Chicago VC firm Jump Capital and also included Jim Murren, former CEO of MGM Resorts International, and Tom Wittman, former CEO of the Nasdaq Stock Exchange.
As part of the raise, Sporttrade also issued convertible debt to Nasdaq’s investment arm, Nasdaq Ventures.
Investors providing more than just money
Other investors in the round included:
- Chris Grove, Eilers & Krejcik principal
- Impression Ventures
- Hudson River Trading
- Tower Research Ventures
The latter two names are both quant trading outfits.
Sporttrade plan to launch its first product in the second half of 2021 in New Jersey, pending regulatory approval.
How will Sporttrade spend new funds?
Sporttrade said the new cash would be put toward:
- Customer acquisition
- Expansion into additional states
- Continued investment in staff
The company currently has an employee headcount around 50.
Finance meets sports betting
Sporttrade CEO Alex Kane told LSR the company wanted to apply principles from the financial world to sports betting. That starts with making an accessible app that non-sports bettors can understand.
“People without a financial background can open Robinhood and understand how to invest in stocks,” Kane said. “Why should sports betting be any different?”
“In finance, retail traders get a good experience but they also get good execution. When my sister opens Robinhood and makes a trade, it gets executed at the best price in America because of regulatory requirements. I believe the same things should happen in sports.”
Kane said Sporttrade’s market-makers were used to working on penny spreads in the financial markets, and could potentially lower the margins on sports bets too.
Bye bye US odds
For ease of use, Sporttrade will use percentages rather than odds, with winning contracts making up at 100.
For example, a trader might buy the Jets pre-game at 20, then close out at 40 after they take a 10-0 lead.
Those live prices will be “always on,” unlike sportsbooks, Kane said.
Retail offering as well
Jump Capital partner Yelena Shkolnik said Sporttrade had built a “retail solution for betting.”
“We are thrilled to back Alex and his amazing team at Sporttrade,” said Sholnik.
“To enable low-cost wagers, they’ve assembled a team from across capital markets and betting, locking in partnerships with institutional market-making partners to enable a powerful and liquid exchange.
“The US bettor will finally have a transparent open market of sports betting wagers to trade, and we couldn’t be more excited to be a partner.”
US sports betting has room for improvement
Kane said he was excited to bring financial powerhouses into the world of US sports betting.
“Nasdaq has the same vision we do,” Kane said. “They think sports betting looks like the stock market in the 1950s with huge room for improvement. They bring tech knowhow to the table along with market structure expertise.”
Nasdaq already provides bet matching technology to the Hong Kong Jockey Club and Swedish horse racing operator ATG.
The funding round is the second major crossover between US sports betting and Wall Street in recent weeks. Earlier in June, Susquehanna acquired a minority stake in US-facing sportsbook firm Smarkets.