🙃Business Models for Sports Betting Industry

SportKings Business Model as a practical alternative solution to a Decentralized Sports Exchange

The primary objective of the Blockchain movement has been to leverage Blockchain technologies to make various aspects of modern life better through decentralization. This is especially for fields which rely a lot on digital infrastructures

That is the main reason why in the world of gaming and sports betting, the idea of a decentralized sports exchange has been proposed and some stake holders have been actively trying to actualize it.

However, while we believe the concept of a decentralized sports exchange wields great potential, we have come to the conclusion that the idea is not likely to succeed in its current form.

There are two main business models in the sports betting industry: traditional bookmaking such as what bet365 does and sports exchange platforms like betfair. In a traditional bookmaking model, players essentially bet against the house.

The bookmaker then earns their profit from a margin in the odds. Therefore, bookmaking gives the house centralized control over sports betting while gamers operate by the terms stipulated by the house.

On the other hand, sports exchanges level the playing field for buyers and sellers, enabling them to meet and engage on equal terms. As such, control of the betting experience is less centralized than in the bookmaking model.

Reasons Why Decentralized Sports Exchanges Don’t Easily Succeed

It is therefore expected for people to find the idea of a decentralized sports exchange very appealing. However, a decentralized sports exchange is likely to fail or to gradually evolve into a traditional bookmaking model.

The first reason for this failure is the turnover and profits of sports exchanges like betfair is much lower than that of traditional bookmakers. That is because average sports gamers find it easier to place single and multiple bets (combo bets or parlays) than to trade on exchanges.

As such, the potential sports betting players that would make up the clientele of a sports exchange are more likely to continue betting with traditional bookmakers. Such players are more valuable to bookmakers in the long term as they tend to bring in a larger profit.

Secondly, decentralized sports exchanges are likely to fail because they are a vulnerable target to sharp, highly skilled players. Such players are able to quickly identifyand exploit bookmakers’ mistakes as well as make arbitrage bets, fixed matches, and late bets.

These sharp players are a lethal threat to newly established bookmakers because they can easily drain their resources and quicken the failure of such businesses. This is especially so for new bookmakers more willing to pay out profits in order to build a good reputation.

In the context of a decentralized bookmaker whose liquidity would come from liquidity providers (LPs), the risk would even be greater due to the "new bookmaker syndrome." This is because the first adopters of such a platform would likely be sharp players.

The moment such players get on the platform, they will quickly seek to exploit any vulnerabilities in the system. On the flip side, the LPs shouldering the risk will be left tailing behind and that would raise significant doubts on the viability of such a business model.

Perception Also Matters in Sports Betting

As such, risk management must be entirely automated through algorithms and artificial intelligence for a decentralized bookmaker to be truly sustainable. Unfortunately, such level of algorithmic and AI-powered automation has not yet been achieved for decentralized bookmaking.

Hence, the exchange business model where the exchange takes a commission from winning players rather than assuming the risk is a more sustainable option compared to decentralized bookmarking in its current state.

However, sports exchanges face the challenge of low liquidity which makes it difficult for normal players to participate and often leads to experienced, professional traders dominating the market.

It is also important to note sports betting is all about enjoyment and fun. Unfortunately, exchanges are not primarily perceived as a place for users to have fun and manage their bets but rather as trading platforms. This lack of fun appeal further hinders liquidity.

It is in light of these challenges that we resolved to adopt a more innovative approach towards sports prediction gaming. We believe there is a need for a new practical solution that addresses these issues and provides a more enjoyable, immersive and sustainable experience for players.

That is why we are focused on developing a brand new market solution that will satisfactorily address these challenges and meet the needs of players in a new and innovative way.