Peer-to-Peer Online Sports Betting Is the Future of Gambling

Global sports betting is a $104 billion business. In the US alone, the sports betting black market is estimated to be anywhere between a conservative $2.5 billion and a wildly large $10 billion (for the NCAA championship alone). Regardless of which estimate is correct, the market opportunity is huge, and, more importantly for casinos, about to become legal and widespread.

A recent Supreme Court ruling overturned a 1992 prohibition on legal sports betting at the state level. And now, as states legalize sports betting, that massive black market is about to become legally up for grabs. Casino stocks rallied after the supreme court decision, and they’re itching for the opportunity to become the dominant sports bet player in the market. As it stands, sports betting is fragmented, but as the market grows, we see an opportunity for a platform to capture the lion’s share of the market.

Online sports betting is a perfect platform business opportunity

We’re not the only ones who think so. In September 2018, ZenSports launched a peer-to-peer sports betting platform that operates outside the US, Canada, and Europe. On the platform users become either bet makers or bet takers. Because there is no bookie setting odds, the odds tend to be better. Traditional bookies stack odds that favor themselves as part of a hedging (and profit-making) strategy. Instead, ZenSports captures a percentage of all bets that transact on the platform.

Already, even before the May 2018 Supreme Court ruling, casinos and territories within the US where sports gambling is legal could have been operating a platform like ZenSports on their property. The beauty of a casino-run betting platform is that the casino provides bettors with a method of placing bets on events that the casino doesn’t want to bet on itself. The casino still collects a transaction fee and in addition gains reams of data on betting trends and interests.

The betting platform could even expand to other event-type betting such as award shows, political events, and other cultural moments where permissible (more on that further down). Of course, the legal sports betting market was small in the U.S. (in 2017, legal sports betting was worth only $270 million) and would-be bettors had to travel on-site to legally place bets. Casinos could be forgiven for not leaping at the opportunity to build a peer-to-peer betting platform.

But now we’re in the middle of a sea change in legal sports betting, and the need for a peer-to-peer betting platform has become a strategic imperative for all casinos. According to Bloomberg, the May 2018 Supreme Court decision opening up a sports betting market that alone could be as big as $4 billion. Our research puts that figure on the conservative end of estimates.

Legal sports betting roadmap

Since the May 2018 Supreme Court decision to overturn a 1992 ruling that had prohibited states from legalizing sports betting, 7 states have legalized it. New York is semi-legal and on the cusp to full legalization, and 14 additional states have proposed legislation to legalize sports bets. The time is ripe for a traditional casino to build a betting platform, before ZenSports figures out a way to accurately geo-fence betting by state. Or, online sportsbooks DraftKings, Betstar, and FanDuel figure out a way to facilitate peer-to-peer betting on their sites and apps.

While ZenSports may be ahead of traditional casinos on the technical aspects of a peer-to-peer betting platform, it lacks the institutional knowledge, brand recognition, and data that casinos have regarding sports bets. This competitive advantage may be worth more than the technical product once a casino builds a platform, or they could simply buy ZenSports.

Whoever builds a betting platform can easily expand that platform to include residents of states whose betting laws have opened up. However, time is of the essence as a sports betting platform, like all platform business models, benefits from winner take all dynamics in which one or two winners win the market (e.g. Uber/Lyft, Apple/Google app store, or Tencent/Alibaba).

Two additional points must be made about the betting platform. First, non-sports bets can also be easily added around award shows, game shows, political events, and other culture moments, laws permitting. And there is reason to be optimistic that restrictions on non-sports betting will loosen too. For example, New Jersey decided to allow pre-event wagering for the 2019 Oscars only. New Jersey’s cautious experimentation with Oscar betting (which is still illegal in Nevada and is something The Academy resists) seems to signal a willingness to entertain different types of legal betting which can open more markets for the betting marketplace owner.

Secondly, that $4 billion market is only the US market. According to a study by Zion Market Research, “the global sports betting market was valued at around USD 104.31 billion in 2017 and is expected to reach approximately USD 155.49 billion by 2024, growing at a healthy CAGR of 8.83% between 2018 to 2024.” An online betting platform can cross international lines (as Zen Sports does) so long as it is in compliance with local laws.

The opportunity both domestically and abroad is huge. Large casino owners like MGM. Caesar’s, the Sands, Crown Resorts etc., are well positioned to compete against companies like ZenSports, DraftKings, and FanDuel because they can offer a better deal than online-only companies. Physical casinos can offer product discounts and experience packages with their physical locations, such as discounts on viewing-party tickets for platform bettors, and deals on other gambling products such as on-site and online table games and slots.

And this opportunity is as good for the bettor as it is for the casino. Fun and unusual bets can be made on a peer-to-peer betting platform, bets that casinos wouldn’t normally want to make. For a small fee, bettors can use the platform to find counterparties and have a good time betting on some of the more quirky aspects of sports too.

Originally appeared on Inc.

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