While traditional sportsbooks count on users to lose money over time, Sporttrade counts on customers to profit from sports betting.
Part of the ability to profit comes from Sporttrade’s business model. Sporttrade takes a commission on winning bets, so it doesn’t have to be on the “right” side of the line. The first two-and-a-half weeks of its New Jersey launch have already shown how popular it can be.
“As of … 17 days of being live, we’ve matched over 6,500 contracts,” Sporttrade founder and CEO, Alex Kane, said. “We’ve had over 1,500 trades and 27% of them have been risk off. That’s where customers are selling out in-play.”
On Sporttrade, bettors buy their wagers between $0 and $100. If bettors win, they receive $100. If bettors lose, they win nothing. Because of this pricing, a bet’s price is its probability of winning.
Sporttrade has also recruited large trading companies to accept bets, ensuring that most bettors can buy and sell bets as confidence in a bet’s outcome changes. That’s how it can give customers so many chances to sell their bets in-game for a profit instead of having to ride a losing bet to the bitter end. (Although, that doesn’t stop every customer from embracing that sports betting strategy.)
Profit from Sports Betting and Tight Pricing
Sporttrade’s business model isn’t the only reason its bettors can profit on the app. Its tight prices are the other reason. Tight pricing means the buy and sell prices are close together. So, the markets only have to move a little for bettors to profit from sports betting.
Kane offered the example of a line with -115 odds on both sides of the line. At a traditional sportsbook, that has about a 7% vig. That’d be like if buy and sell prices were $7 apart on Sporttrade’s platform, a 53.50/47.50 split. On Sporttrade, a line with -115 odds at a traditional book “would be more like 49/51 or even closer — 49.50/50.50.”
“If you were to buy at $50.50 at Sporttrade vs. $53.50 at DraftKings, then you need a much smaller movement in price to be able to make a profit,” Kane said.
Price Gaps, Uncertainty, and Profit
Even when the gap between buy and sell prices widens, the gap is smaller relative to other prediction markets. The gap between buy and sell prices is a measure of uncertainty. If the prices are close, then all the buyers and sellers agree on the odds. But if the gap widens, then bettors are more unsure about the odds and how the next play or decision will affect the game.
“I think the general rule of thumb is somewhere in the $2-3 range,” Kane said. “Our big difference is … we have the institutional market-making component.”
With companies in the background making sure bettors can buy and sell, Sporttrade can keep the price gaps caused by market uncertainty low. Other prediction markets have larger price gaps in their uncertain markets.
For example, PredictIt’s election markets can have overrounds as high as 10 cents. (Its prices range from $0 to $1.) Instead of an $11 price movement, Sporttrade users usually only have to wait for the price to move $2-3. (Sporttrade users also have a shorter time to wait — sports games go by faster than elections.)
Trading Sports vs. Betting Sports
Sporttrade’s trading market doesn’t guarantee profitable sports wagers. Instead, it gives bettors a chance to profit in the long run. Bettors can sell their wagers mid-game to profit from bets that may ultimately end up losing. This is all possible because Sporttrade ensured its platform had tight pricing and smaller gaps between prices than other trading and prediction platforms. Many of Sporttrade’s earliest users are taking advantage of the strategies in-play trading opens up.
“On Sunday, roughly 60% of our volume was in-play only,” Kane said. “It’s a very high number to get to so short in a company’s life cycle.”
Sporttrade is only live in New Jersey. However, it has plans to slowly expand to new legal sports betting markets, creating the possibility for the slow spread of sports trading across the United States.
Over the next five years, sports trading could become a popular competitive alternative to sports betting.