Traditional sportsbooks and exchanges from American and European perspectives & The Future
Following the repeal of PASPA in May 2018, numerous US states have begun offering sports betting. However, it’s still one of the few industries where Europe, thanks to the popularity of the betting exchange model, remains competitive for professional bettors [1,2]. Both Americans and Europeans have a different image of what it means to gamble, with different products available accordingly. The market is polarized, with actors ranging from casual punters to profit-maximizing traders.
Table of Contents
THE MARKET
Betting exchanges and APIs in Europe
- Betting exchanges: the go-to tools for traders
- Operators now provide API access
In the US: growing market and foreign bookmakers
- Sharp bookmakers compete with soft ones
- Traders access foreign bookmakers via brokers
EXPERIENCE
Clubs, Horse Racing and Experience in the UK
- Fitzdare’s: forget the odds, we’re here for a good time
- Horse racing is for the bourgeoisie
- Will brick-and-mortar casinos disappear in the US?
THE FUTURE
- Bookmakers compete for attention with stock and crypto trading
- Are decentralized bookmakers the future of sports betting?
THE MARKET
Betting exchanges and APIs in Europe
Betting exchanges were a revolutionary model that changed the way a cohort of Europeans bet. These platforms enable players to bet not against the bookmaker but other players. The operator only takes a small commission of the winnings. Exchanges target bettors who can set trading rules to automate their orders like they would to trade stocks. On BetDAQ and Matchbook, you can even lay an event, which means to bet against it. BetDAQ, the second-largest exchange behind Betfair, holds a 7% share of the online betting market in Ireland and Britain³. In general, exchanges offer the highest or even superior odds than traditional bookmakers [4,5,6]. Unfortunately, as the punter is the only one backing the bet, the available liquidity can be limited, without a very large customer base that is consistently active. The largest bet for PSG to win the Champions League could be £10,000 at odds of 6.5 on Ladbrokes or Coral. On Smarkets, you may bet up to £100 but for odds of 8.6.
Operators are now sharing their APIs publicly for bettors to create complex strategies when placing bets, with considerable automation, rule sets, etc. These strategies resemble well what’s happening on the stock market. For example, during the infamous 2016 Election Night, Pinnacle and Betfair reportedly said they were “aware of the likely results of the election hours before official results on TV”. APIs are handy for hedging (a strategy to offset risks by taking an opposite position) your bets across bookmakers.
In the US: growing market and foreign bookmakers
Sports betting operators have expanded their businesses throughout the US in the last 3 years. As of 2021, punters in half of the US states may gamble online in some capacity. DraftKings and FanDuel have to date been the two major players in town, offering betting and fantasy sports, marketing aggressively, and ramping up their products, operations and teams. However, this oligopoly, and now alongside the rising BetMGM and Caesar’s sees high margins and generally, an approach that is anti-professional bettor. For example, a Premier League game on FanDuel held a vigorish of 6%, against 2.4% for Pinnacle. This is in part due to the regulatory framework in the US, but also differing operator strategies. As do casinos in Vegas, US sportsbooks restrict winning players by either banning them or denying their stakes.
Sharp bookmakers compete with soft ones
The betting community categorizes the previous US bookmakers as ‘soft’ because of their high vigorish and generally ‘casual’ user base (those betting favorites and overs, placing plenty of parlays, etc).
Excluding betting exchanges, two types of operators compete for market share: sharp bookmakers and soft ones. Sharp bookmakers use mathematical models and automatic adjustments to adapt their odds rapidly. Leading sharp operators like Pinnacle also introduced the reduced pricing model. They favour a very high turnover by cutting on the margins [8]. In the end, odds on sharp bookmakers tend to be the highest but are harder for value betting. On the contrary, most of the soft operators less frequently change their odds (only when there’s breaking news) and mainly target casual players [9].
Traders access foreign bookmakers via brokers
While they were at one time, Pinnacle is no longer regulated in many major jurisdictions across Europe and has entirely pulled out of the US. Subsequently, they should not accept customers living in these areas. For many, to access Pinnacle, you must use an online broker, such as Asianconnect88, an intermediary between you and Pinnacle [10]. However, while Asianconnect88 seems to hold a strong reputation, US customers’ legal backing is highly unclear on such platforms [11,12,13]. The authorities do not guarantee your deposit on these platforms.
EXPERIENCE
Clubs, Horse Racing and Experience in the UK
In Europe and especially in the UK, the sports betting industry is polarising to the extremes. On the one hand, bookmakers are sharpening their odds, sharing their APIs to attract high liquidity bettors. On the other hand, some wealthy amateurs are moving away from the odds’ arms race to only focus on the experience, leaving profits as a welcomed “perk”.
Fitzdare’s: forget the odds, we’re here for a good time
To give an example, let’s mention Fitzdares. In 2020, The Fitzdares club opened in Mayfair, London, with an annual membership fee of £600. The club offers bookmaking in a high-end environment, with complimentary food and beverages. The club’s owner, John Fitzdares, stated that “many bookmakers have joined a race to the bottom” by hunting for more bets from more clients. In contrast, his club heads in a different direction, with fewer clients but better handled. Fitzdare’s customers are more looking to have a good time with other members than sitting at home, maximizing profits at all costs.
Will brick-and-mortar casinos disappear in the US?
In sum, bookmakers focusing on increasing their volume of customers have left some niche markets at the top. The same top where well-off customers look for more than mere gambling. Regular customers in Vegas casinos enjoy complimentary services (private dinners, conferences). Club members can meet professional brokers and advisors who guide their wagers and protect them from excesses. [15, Reid, 2020]. In Vegas, casinos have survived well despite the Internet by providing an optimal offline and online experience [14]. These casinos target the casual, well-off players looking to have a good time and spend on extras rather than profit-seeking professionals [16].
THE FUTURE
Bookmakers compete for attention with stock and crypto trading
Marketline recently reported that the biggest threat for gambling institutions is not the other operators but the non-gaming institutions like theme parks, cinemas, and musicals. Stock and crypto trading also sparked the news with the GameStop gate and WallStreetBets bros. Furthermore, the COVID-19 pandemic wreaked havoc on the industry with hundreds of millions of would-be wagered on events canceled. As if it was not enough, in the UK in early 2020, the minimum wage rate increased between 4 to 5 percent for workers aged under 24 [17, Marketline, 2020]. The current wage for a betting shop employee is barely over the new minimum wage, at less than 9£/hour [18]. Low wages undermine the competitiveness of brick-and-mortar establishments.
In this digital era which increases the speed and breadth of information turnover within society, online sports gambling is changing the gambling industry with a convenient user experience and more secure and transparent transactions. A decentralized sportsbook like UBet Sports plans to stay at the forefront of sports gambling tech innovation and strive to provide the best experience by applying state-of-the-art methods from blockchain, smart contract, and AI & ML fields.
Are decentralized bookmakers the future of sports betting?
Thanks to the blockchain’s breakthroughs, decentralized betting rose in popularity in the middle to the tail end of the last decade. Decentralized bookmakers put customers against each other instead of against the bookie. Traders can also enjoy passive yield by providing liquidity to the network. This new form of gambling hopes to lower the transaction fee by bypassing intermediaries to increase the odds, remove the bet size limit, and provide instant payouts. While decentralized gambling stuck to lottery games until now, players can soon use platforms like UBet Sports to bet online and receive better payouts. You can see this post on “Why trade on decentralized sports exchanges over traditional sportsbooks?”
Marrying sports betting with blockchain technology is the natural direction to move forward. You can follow our Twitter and join our discord to follow the latest updates and advancements!
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Acknowledgment
We would like to thank Franklin Liot for sharing the market research on sports operators and bettors and providing the content.
Disclaimer: The above content is intended for information purposes only and is not intended to be gambling, trading, or investment advice. Please perform your own analysis before making any betting, trading, or investments based on your own personal circumstances or seek a duly licensed professional for gambling and trading advice. Accordingly, neither UBet nor its partners, directors, shareholders, or employees are liable for any damage, expense, or other loss that you may incur out of reliance on the above information.