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A daily podcast delving into the biggest stories of the day throughout the sports betting and igaming sector.
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And you're gonna tell millions of Americans that they're no longer able to do that because casinos don't aren't getting a big enough part of the cut that I I just can't see a world in in this day and age where Americans are so self-directed in how they invest and how they spend their time and money that a platform that allows you to offer your own price to plug in and be an entity and trade or to trade algorithmically or to connect through an intermediary where I might want to keep my personal funds on Robinet Coinbase.
And you're gonna that's all gonna go away. And to David's point, no one's gonna step in and plug that hole. I I think that's unimaginable at this point.
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Hello and welcome to the special edition of iGaming Daily, live from the show floor at SBC Summit America's in Fort Lauderdale. I'm Martin Elliott, Media Director of SBC, and I'm delighted to be joined by Alex Kane, CEO of Sport Trade, David Aron from Lowenstein Sandler, and Ian McGinley from Sidley, Austin. And we're gonna be talking a little bit about prediction markets today and
It's a bit of a different format from from normal because we're going to have some questions from our live audience coming in. Hopefully. Hopefully we're gonna have some questions. So there's someone out there with a microphone who is gonna be taking all all those for you. So just just before we get into this, I I should of course mention that as always iGaming Daily is brought to you in partnership with our friends at Optimove. the creator of P
Positionless marketing and number one player engagement solution for the eGaming and sports betting industry. Yeah, let's let's start anyway. I mean, you've all you've all just been taking part in a a conference panel about prediction markets, the future and so on. And much as I I wanted to make this a a pop quiz about the two hundred and seventy-six page document the CFTC published yesterday, I I might be a little bit harsh if to
To do that, I guess. But It was this morning. It was this morning. Okay. well, hey, you've you've had plenty of time to to to do that. So that that came out very quickly after the consultation as well, I guess. still. where where shall we where shall we start? let's start a little bit with Jason Robbins. Obviously,
I'm guessing if you're listening to a podcast about the gambling industry, you you you will understand that he's the CEO of of DraftKings. He spent a lot of time, Alex, recently really trumpeting prediction markets and other members of the C suite team at DraftKings have doing this the the same thing. Is this perhaps a bit of a a tipping point, do you think, in in mainstream adoption compared to Sports Betty?
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Well, I I think the first thing I'd say is if anyone is not following this guy, Matt Kalish, who used to be one of the I think one of the co-founders is still on the board, his tweets on prediction markets are nothing short of phenomenal. He definitely has an opinion. I don't know if you guys have read his tweets. They're pretty incredible. I think it's a reaction to look, the stock price has not done anything, despite the fact that they announced the acquisition of Railbird, I think, in Q three of twenty twenty five.
And now finally we're starting to see some momentum in the stock price. And I think Jason is probably seeing that and leaning into it. They're going about to relaunch now DKEX, I think is the name of the venue. They're going to to announce. They have the super app ambition. They're, I think, getting approved in the process of an FCM. So there's a lot of things moving in that direction. And now he's finding its World Cup. People are excited. Volume, people are seemingly sort of very fixated on that one metric. And now he's
joining that train and pushing hard. But if you're paying attention, the stock prices up twenty, twenty five percent over the last six, seven trading days. So I think he's riding that wave. yeah, I mean I I am paying attention because I not very long ago sold my DraftKings shares cause having decided they weren't gonna they weren't gonna recover sufficiently for me to make a profit. So yeah the main prediction you should take from me is don't follow my share trading tips. I I think is it and what are you saying Ian
In terms of sort of this this kind of a adoption and so on, taking becoming a little bit more mainstream, people people in the media now quoting the sort of the the probabilities and so on as part of political coverage and financial coverage and so on. Yeah, I mean, we were just doing in a panel and and one of the panelists made this point, which I agree with, which you know, I think y next year or or even, you know, in in the next few months.
it won't be i our prediction markets mainstream. They they kind of already are, right? When you think of who's adopted them, you know, both traditional gaming companies, and then you think about the partnerships that that they've had with some of the obviously the biggest exchanges in the world. I'm I'm thinking you know, CME, ICE, others. and then you you talk about outside of the sports con con context where you have partnerships with with
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really all the the main media outlet. So I don't think it's a I don't think it's a question of will they be mainstream. I think they they probably already are. Sure. And is that is that what you're saying, David, as well? Is that, you know, your your customers in this in this space? I should should point out your I I believe a lawyer operating operating this space? Yes, that's right. I think
It's there's still a ways to go. I mean, I think Ian's right. I mean, there are partnerships with major entities and Ice made big investments and I think it's polymarket, right? but there's there's still a ways to go. There's still people who are on the sidelines. and then of course, you know, the litigation, like everyone's assuming it's gonna go fine, but if it doesn't
It'll be interesting speaking of share prices, it'll be interesting to see what happens. But I I gotta think that Congress is gonna fix it. Even if it even if the Supreme Court rules against the prediction markets, I gotta think that Congress is gonna fix it because there's so much money that's been poured into the space and you know, people obviously like it. Sure, and I I guess that it's gonna take quite some time to get to the Supreme Court and then for any kind of firm resolution there'll still be a an air of uncertainty about this for
couple of years might be. Ian could probably speak more to that, but I I know I've heard like a year or two for the Supreme Court for it to get up there and be resolved, depending on the, you know, the posture, what happens in the the courts of appeal. But well, I mean, if Congress doesn't do anything, the Supreme Court rules clearly one way or the other, then that's kind of the end of the story. But then Congress either before the Supreme Court rules they could change the Commodity Exchange Act or pass another law, or they can do it after the fact.
So they still retain the ultimate power to decide what can be traded, where? Ian, obviously you as I didn't introduce you a bit earlier, formally of the CFTC. and the CFTC has taken a really quite firm and interesting stance on on on this stuff. You know, we regulated it, the states don't. And in our view, it's perfectly legal. Let's get on with it. is that gonna be enough? Do you
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Do you expect to carry weight when it comes to the court decision or or with Congress before then? Well, you know, it used to be actually that the agency interpretation of the law was given, and I'm I'm gonna paraphrase because it gets very nuanced, was given real deference by the courts. That that's changed a bit, but it is still a factor that the courts look at, right? And so when you see the CFTC's posture right now, you're right. They have filed lawsuits.
on behalf of of their interests, but also aligned with the prediction markets in a number of states, which I think is is fairly un unprecedented. and they and they've put out rulemaking. So I I do think though, it is an interesting distinction because obviously the CFDC is very pro innovation for these markets, but but you know, today's today's rule, right, and and and like you said, we we haven't read it all. It it it it's quite long. But it it does look to to really emphasize some guardrails.
on on the industry to make sure that they're not contracts that are susceptible to manipulation, like contracts, you know, generally in the control of one person. and then also contracts on topics that you know, that I think everyone would agree there should not be contracts on, you know, war, terrorism, assassination. So so so I think, you know, very much the CFTC will be pro innovation. but with guardrails, as David mentioned though, you also have other people in the space, right? Congress,
has taken an interest. There there have been numerous bills that have been suggested. None has passed except the one bill preventing Congress people from trading on prediction markets. But you could see a scenario in the future depending on how the you know the Supreme Court or or other courts decide where Congress decides to get involved. And I would I would add to what David said, like I really think it's probably hard to imagine a world where the genie can be put back in the bottle.
Like let's talk about from the customer's perspective for a second. I love trading, what do you call it? Trader betting. I love trading golf. It's amazing. And to be able to I'm in a bit of a honeymoon phase right now because I'm not currently a registrant. When we are a registrant, I won't be able to use these DCMs, but right now I can, which is awesome. And I log on to Calci during the masters and I see that Justin Rose is trading seven percent. And I decide to try to get a little greedy and I bid six point eight percent and I get filled. And he birdies the first hole and then he
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makes it a credible shot if you watch the Masters final round. He has this incredible shot on the seventh hole at about an inch. And he goes from 6.8% to 26%. And I'm able to sell. And you're going to tell millions of Americans that they're no longer able to do that because casinos don't aren't getting a big enough part of the cut. That I I just can't see a world in in this day and age where Americans are so self directed in how they invest and how they spend their time and money that
A platform that allows you to offer your own price to plug in and be an entity and trade or tr to trade algorithmically or to connect through an intermediary where I might want to keep my personal funds on Robinet or Coinbase. And you're gonna that's all gonna go away. And to David's point, no one's gonna step in and plug that hole. I I think that's unimaginable at this point because of to your point, Ian, the the cat's out of the bag and I think it is now mainstream and it's just
To tell so many of those customers that, like, nope, you got to now go use a sports book where you can't do any of those things. You can't trade in and out of positions. You can't bid your own price. You can't connect through an intermediary. You can't start a business and become a market maker and be the supply side of the market in a country like the US is like unthinkable. So I I sincerely hope on behalf of the customer, wherever this model goes from a legislative and regulatory perspective, that it is allowed to exist because it is incredible for the types of customers that care about the things I just mentioned.
Learn how Optimove's positionless marketing is changing how iGaming teams operate. Discover how operators are using Optimus positionless marketing platform to launch personalized CRM campaigns, dynamically change casino lobbies and bet slips, and create engaging gamified experiences. Learn more at Optimove.com. Yeah, I think the the one thing I really like about them is the simplicity. It's so intuitive when you go onto it, everyone can understand what what they're doing from day one, whereas
I think a lot of sports books now, everything is on the parlay, everything is on the yeah, you know, the the pre-filled parlays and they want to push you in a certain direction, it feels like as a as a better. So I I I really think you're right that the you're onto something there. I mean, do you see once you're sort of up and running with this, do you think sport is gonna be the the big thing for you? 'Cause I I know one of the other
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real advantages prediction markets have over traditional sports books is you can offer essentially markets on almost anything, right? I th I think you're asking from a sport trade specific perspective. I think that this industry is going to be a heck of a lot bigger than just sports. Like prediction markets, like Ian's mentioned, you can go on and see like what is the probability that the Clarity Act passes, right? And that's actually really intuitive and helpful and actually has a benefit outside those that are directly using it.
I think from sports trades perspective, we really feel like we have a l right to win. I mean, it's in our name in sports and understanding, okay, Justin Rose is now on the twelfth green. He has a bogey putt. How can we have the quality of market in that moment in time where millions of customers are watching CBS's telecast, listening to Jim Nance and Trevor Emmelman talk about the putt? How can we make sure that that market is as tight as the market when before he's able to tee off? And so I think
That is where we have a competitive advantage and that's where we want to offer a product to brokers and consumers. I don't know if we have a competitive advantage or right to win in offering electron contracts. Will you see us offer those? Absolutely. But I I won't sit here in front of you as passionately and tell you that the quality of execution trading, who's going to be the Dem nominee in 2028, is going to be that much better on sport trade. But I can tell you emphatically that that is going to be true for these live in-game, high volatility kind of sports moments, because that's what we've been doing for the better part of the last five years.
Yeah, I I I I find it interesting that a lot of the publicity and the debate has been generated by essentially Calci polymarket moving into sport. I mean they they were around previously, without causing such such fuss and you know, plenty of trading on you know, e elections, obviously one thing. financial news, things like that. It d
You think that's likely to continue in that you think people will still be interested in that kind trading? I mean, why trading in on outcomes of say share prices and things like that when you could actually just go and buy the shares? Interesting. I I I think so. I mean, you you saw recently a a prediction market got approval from the CFTC to offer perpetual futures in in in in in Bitcoin. And so I think that you know, coming back to the prediction market context.
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You know, a lot of a lot of event contracts have always existed and there there were not there are not litigations over them in the non sports area. I think they've only become more and more popular with with the public. You know, as Alex said, some of some of the contracts that people follow, they don't need to just go to an expert or or watch an expert on on TV. They'll they'll consult the prediction market to see
you know, who will be the next nominee. I you know, I know in New York we had a rough winter. We had a lot of snow. I was curious how much is it gonna snow? And, you know, you could go on on the the prediction market and it was it was a pretty good estimate, you know, as not much different from my local, you know, weather person. And so I think as you see more and more people on these platforms and the the breadth of the contracts that are that are offered, and then you know, you add in retail being very, very interested and, you know,
That dovetails to your point because it is a very simple market. Like we David and I are derivatives lawyers. I think, you know, and and and Alex is in the space now a lot. It it's derivatives are complicated, complex things. And and and parts of prediction markets are for sure, but the interface is is very intuitive and simple. And so you've seen a a real influx of retail. So I think that while sports is now the majority of the contracts, it'll be interesting to see going forward if these other categories make up a larger percentage. I I think they will.
Okay, that that's that's real really interesting. so perhaps just looking back, David, a a step back from that, there was a report by the investment bank Jeffries probably about two months ago, where they they surveyed a lot of prediction market players and perhaps the headline was quite a lot of them were in California and Texas. But one of the other things that came out is they were really likely to be
crypto traders and share traders and and all these things at once. And there was a real demand. They were asked, you know, would you be able to would you like to be able to do which of these things on the same platform? They all wanted to be able to have options and crypto markets and be able to trade their shares and so on from that one platform. Is that a realistic thing legally and how complex would that be for perhaps
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one of the prediction markets who are now now doing it or perhaps it might be a any Toro or one of those sort of trading type platforms. Good question. I think it is all they have to do is get the right licenses. So if you want to offer securities related products or securities themselves, you've got to go to the ICC. If you want CFTC products, you go there. If you want to offer sportbook, you go to the States. So I think there's not
barrier there except for if you have enough money to go through enough patience, like Alex can talk about that. but I guess I've I wonder like I mean, everyone should be able to compete. I just wonder how big the space is. You know, are you gonna have 50 successful DCMs? Like yeah, Alex touched on this in the last panel. It's and then also like, you know, the air has seemed to come out of Bitcoin a little bit. maybe it'll go back in with with the perps.
now, but there seems to be a little bit of a flavor of the month. And, you know, maybe it started during COVID when people had nothing to do except drink at home and and trade. So I think the there's still some momentum there. But I mean, you know, I don't know how big the market is and and I mean I don't sit around and trade all day. When I go to Vegas I like the free drinks and I I might put a little bit I think the first time I went there I only put a a quarter in the slot machine in the airport on the way out of town, which is pathetic, but
And I'm not the average Vegas traveler, obviously. But anyway, I think I'm going off of topic here, but I think I answered your question. Yeah, it did. Certainly did. So one one other thing. Perhaps we could look even further back than my last question, which is to how much you know about the the history of Betfa, which is now part of Flutter. I when I was a much younger man and I
probably bet a lot more than I do now. bet fair exchange, which is essentially peer to peer betting. So similar, not exactly the same, but similar, was all the rage, right? Everybody was going on there. You could find better odds. you'd often lose more money as well as win more money and as well. but then that kind of got pushed out and in in part because it was owned by a sports book company who wanted you to go to the sports book
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Because the there's margin there, it's not just the fees and so on. Do you think there might be a danger, Alex, that the same thing could happen here when it's, you know, DraftKings and and FanJul, they I mean they think, don't they, it's pretty obvious from what they're saying publicly, they think they're gonna be able to beat everyone else in this market because they've got the the brand awareness and so on to when they can spread out. So do you think they might look at this in in the long term and go, you know what, sportsbook just more profitable for us?
Well, I think this is the key part of why the CFTC has to be very thoughtful in this proposed rulemaking on how to how to crystallize the operating model that we have all come to know and and and respect, which is the DCM model, the designated contract model, which is an exchange model. and I think the really interesting thing about why this model maybe didn't take off as much in in in UK, like we saw on BetFair.
Is that there's intermediation, right? Like imagine if the London Stock Exchange started offering those soccer markets and then you could connect through your favorite broker. I don't know, a broker in UK, maybe Free Trade or something like that. I think Robin bought free trade. But anyway, that never existed. And I I think in in America, there's such a when I walk into a dentist office, there's either Fox Business or CNBC or Bloomberg, right? There's such a effort and there's such an energy towards being self directed and
We're talking about you selling DraftKings a little bit early and too bad or you bought this stock or I think there's so much of that charisma and like act interest in the US that I I think that you're gonna see a breakout of it being much more successful here. But to your point, sportsbooks would rather that model. They would rather they be the house. And I think that's why it's so important that the CFTC establish those rules in the road, double down and say you can't effectively create a pseudo sports book by buying a DCM, buying a DCO.
owning your own affiliated market maker and then making the fees so high for every market maker that you're effectively the only one. Because that would be that would really concern me as a market participant and as a competitor in the industry that that's not actually an exchange. Right. And so sure they're going to want to do that, but the reality is they're going to have to do both. And for customers, you're going to have the option like my dad's going to love to use DraftKings forever and ever. And I'm going to use Robinhood forever and ever. And there's going to be a product for every single type of customer. And I think I think that's great for the end consumer.
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Sure. And just just finally, coming back to you, Ian, do we think the CFTC will will get this right in the end? Are we are we confident about that with your your background there? You know, you you know the inner workings of things. Yeah, I mean they look, they they put out the w the way the rule process works is they put out a request for comment before they issued today's and this is not even the final rule.
and I think they got something, and David could jump in if I got it wrong, like three tho over three thousand comments, right? or or or something of of that nature. And so I think that's a good sign, right? You need to hear from every every stakeholder in an industry when you're in government to make sure you get the the regulation right. So now there will be an opportunity now for comment on this proposed rule. And that, you know, that's the way the system should work. The questions were the were the right ones.
And now we'll see, you know, how the process plays out. Okay. That that is that is great. And I think that's going to to bring us to to an end. our producer is looking at me in the it's getting to time signal signal point of view. So thank you very much for for joining us today on iGaming Daily. for everyone who is listening in live, you can head over to the prediction markets exchange.
Sponsored by Edge Boost in Hall B, Conversation Caller, apparently. That's at 4 p.m. And I believe you'll have the chance to meet all these guys in in person. if you're very lucky, of course. And then come back to day two of SPC Submit America's here in Fort Lauderdale tomorrow, where we have a full day of content all around this stuff in great detail in the Prediction Market Forum. But for now, thank you very much.