Traditional sports betting organizations won’t adopt innovative technology that put customers first. Tokenized communal ownership threatens traditional bookmakers.

It was amazing

Online sports betting is hot.

The combination of freshly opened markets (the US) and the acceleration of internet betting because to Covid-19 has led to an online bookmaker boom.

DraftKings’ stock is over 400% since its reverse merger public offering last April. Sports betting companies are thriving right now.

Some European bookies have had to modify due to land-based businesses and new restrictions that hurt profitability.

Bookmakers have never had it better:

Since 2005, global sports betting income has grown at a 9.5% CAGR (Source: GBGC. Sports betting companies are predicted to continue growing at double-digit rates for the next 5–10 years.

Making books

Bookmakers offer odds on sports and political events and take a “vig” from gamblers.

This vig is usually included into the odds offered. This implies they charge more for favorite bets and pay less for underdog bets.

Example NBA odds:

• $140 to win $100 on Toronto (-140).
• New York +120 ($100 wager, $120 win).

As the favorite, Toronto requires $140 to win $100. Similarly, a $100 wager on New York will return $120. If one person bets $140 on Toronto and another bets $100 on New York, the bookmaker will always make $20. Basic bookmaking.

Bookmakers’ Problem

Contrary to popular belief, bookmaking isn’t simply about balancing the book and taking a spread. Each bet against the bookmaker is zero-sum. Bookmakers only make money if their customers lose… a lot.

Bookmakers provide a service and deserve payment. Bookmakers are incentivized to go beyond what most bettors deem acceptable. Bookmakers go over and beyond to make sure their customers lose as a for-profit business with a zero-sum relationship.

Bookmakers do the following to make sure you lose:

Bookmaker sites offer no market data for analysis. Bookmakers aren’t required to divulge betting volumes, order flow, or liquidity. Sports betting is opaque. Bookmakers prohibit winners from their platforms. Bet365 reportedly has a team and software to blacklist winners. No other financial market restricts lucrative participants.

Bookmakers charge 5–7% of bets as transaction fees. As the only odds provider, users must accept them or leave. Why don’t bettors leave? Bookmakers are infamous for making it difficult, slow, and expensive for customers to withdraw money.

Bettors would flock to a startup that addresses these problems and creates a true sports betting free-market. Centralized betting exchanges held this belief.

Centralized betting exchanges’ false promise

Traditional betting exchanges can’t avoid being extractive. Source Over 20 years ago, centralized betting exchanges like Betfair were founded to capitalize on these negatives. Betfair and its competitors offered a peer-to-peer market for improved transparency, reduced prices, and no winner bans.

Short-lived.

Centralized betting exchanges are better than sportsbooks, but they all degenerate with time.

Centralized exchanges are for-profit businesses managed by a single extractive operator. The exchange’s for-profit operator has too much motivation to raise fees, ban customers, and become a bookmaker. Complex UX and inability to offer popular bet types (like Parlays) harmed exchanges’ market share.

This inherent conflict of interest is why traditional betting exchanges, while promising, have failed to challenge traditional bookmaking. Centralized betting exchanges have never captured more than 10% of the internet betting market and are on the margins.

Cryptonetworks

Cryptonetworks have been enabled by Ethereum and other blockchain-based smart contract platforms. Variant’s Jesse Walden coined the name.

Cryptonetworks use open source code, shared state, automated “smart contracts,” and 24/7 global marketplaces. These networks that treat their users fairly may be quicker and cheaper to build since early players can share in the value they create.

Members own and run cryptonetworks. Ownership and control can be encoded in a crypto token. Crypto tokens let humans transmit digital value clearly, instantly, and cheaply.

This ability to affordably encode and transfer ownership makes community-owned digital platforms conceivable.

Community-Owned Betting Platforms

The NYSE began as a member-owned exchange. Sports betting is primed for community-first disruption.

Traditional bookmakers exploit customers. Community-owned betting platforms share economics with users.

Bookmakers are for-profit businesses that enhance user value. Users own and operate community-owned betting platforms. Programmatically, users vote on the platform’s direction, fees, strategy, and budget.

Bookies offer short-term deposit bonuses to keep bettors interested. Community-owned betting platforms offer network tokens. These tokens vest over time to align user and platform interests.

Bookmakers control the entire technical stack. Community-owned betting platforms leverage open-source technology, a blockchain’s shared state, and transparent APIs that won’t be gated.

Bookmakers spend millions on marketing to promote their product. Word-of-mouth marketing grows community-owned betting platforms. Because they own it, community members evangelize.

It’s impossible to describe all the benefits of community-owned betting platforms. Community-owned betting platforms are superior in practically every way (bettors, market makers, developers, etc.).

Bookies can’t adapt

Community ownership is disruptive, thus incumbents won’t survive it.

Traditional for-profit organizations can’t adapt to the community-owned model’s advantages.

Open-source, community-owned betting platforms give participants the best odds.

Traditional incumbents won’t adopt a model because it requires giving up control, profit margin, and intellectual property.

Any for-profit company with millions in revenue will find this difficult.

We believe community-owned betting platforms are an extinction-level event for traditional bookies who can’t adapt.

SportX’s Thesis

Non-custodial exchange enables users transparency, security, and fairness. Built using open-source smart contract software SX Protocol. It provides unprecedented transparency into the platform’s functioning. We’re also constructing the SX Network blockchain, the first public blockchain for sports betting.

When you bet on SportX or an app using SX Protocol, you get SX tokens. These currencies control SX’s blockchain and protocol. All SportX or SX Protocol revenue goes to the SX Community Fund, which is managed by SX tokens. No value leaks; SX earnings flows to community-held SX tokens.

Studies suggest democratic militaries fight better than dictatorial ones (source). Soldiers are more motivated, organized, and aggressive. Enfranchisement boosts battlefield performance. SportX bets that empowering bettors will do the same in sports betting. Enfranchising bettors is an unbeatable advantage.

Enfranchising bettors is an unbeatable advantage. SportX’s main argument.

The downfall of existing bookies will clear the way for fairer, more trustworthy, community-owned betting services.