Intrade Founder Takes Another Shot at a Sports-Betting Exchange

(Bloomberg) -- One of the founders of Intrade, a popular marketplace for political predictions that shuttered in 2013, is betting that Americans are ready to gamble on sports like they trade stocks.

Ron Bernstein, who helped launch Intrade two decades ago, is bringing back Intrade spinoff Tradesports as a sports-betting exchange. The brand is starting a free-to-play beta test this week, with hopes of being licensed and active in some U.S. states next year.

Tradesports offers exchange betting -- a peer-to-peer model where users buy and sell positions on sporting events. It’s a format that generally offers better value for gamblers, but in a more complex way.

There are already popular exchanges in Europe, such as Betfair, but none yet in the U.S. Bernstein is hoping to attract Wall Street types, plus others who trade stocks in more casual ways.

“As long as we can create an offering that isn’t too intimidating, we think there’s a really big niche in the professional trader market,” Bernstein said. “But you can really broaden the definition of a ‘trader’ to include anyone who uses Charles Schwab or TD Ameritrade. Everyone trades now.”

Bernstein has tried this before. Tradesports first launched from Ireland in the early 2000s, but Intrade’s customer base was largely American and sports betting was banned in the U.S. In 2014, when daily fantasy sports approached their zenith, Bernstein relaunched Tradesports as a fantasy product. It lasted about a year and a half.

Since then, Bernstein has been working in cryptocurrencies, both as an investor and as a developer. Last year, he was running Paradex, a token exchange, until its sale to Coinbase.

Changing Times

Now he believes the time is right for another shot at Tradesports. For one thing, 19 states have legalized sports betting, with more on the way. Also, the proliferation of no-fee trading from companies like Robinhood and Ameritrade have widened the pool of people comfortable with bid and asking prices.

“Trading is a thing now,” Bernstein said. “People understand what it is.”

Though the odds and spreads are similar, exchange betting is different from traditional sports betting. Instead of placing a wager, for example, on the New England Patriots to win by at least three points -- with the casino taking the other side of the bet -- exchanges match you with another trader on the other side of the deal. You buy a contract on the Patriots to win by at least 3, which might be offered for $48. If the Patriots cover, your shares settle to $100, and you win $52. If they fail, you lose your money.

Like stocks, these markets can be highly fluid. If the Patriots are winning by 10 at halftime, you might be able to sell your contracts for $78 in the middle of the game, immediately netting $30.

Exchanges also generally provide better value for bettors. While casinos and sports books typically hold around 6% or 7% of wagers -- or more -- Tradesports will take between 3% and 4% off the winner’s cut, Bernstein said.

‘Fat Middle’

While that’s a better bargain, its unclear how much the sports-gambling masses care about price, according to Chris Grove, a managing director at research firm Eilers & Krejcik Gaming.

“Think about credit cards,” Grove said. “There are some rewards credit cards that just offer demonstrably better value than others, yet there are still millions of Americans that use suboptimal rewards. That’s because there’s a fat middle of the market that is only willing to spend a few minutes of time comparison shopping, and then they want to get it done and go on with life.”

The free beta tournament, which launches this week, will start with markets on three different NFL games. Bernstein said the company is preparing to go through the licensing process in a number of states, with the aim of being operational by the start of the 2020 NFL season.

Bernstein declined to comment on how much money was being invested in Tradesports, or who the backers are. He said it’s many of the same people originally behind Intrade, except for the two most famous investors -- Paul Tudor Jones and Rupert Murdoch’s son Lachlan -- who exited years ago.

Tradesports will have some hurdles. Beyond the barrier to entry, the patchwork nature of U.S. sports betting laws means that it will need to silo all of its markets within each state. A gambler in New Jersey, therefore, couldn’t buy a contract from a seller in New York. Also, it’s competing for market share against massive casinos and sports betting operators, which have a lot more money.

Still, Bernstein is optimistic. When Intrade was getting off the ground in Ireland, almost 85% of its user base was in the U.S. Those customers would mail a paper check to Dublin, and then wait for weeks before they could use the money in their account.

“We have really good evidence that this is popular,” he said. “And we think this is much better circumstances than 15 years ago.”

To contact the reporter on this story: Eben Novy-Williams in New York at enovywilliam@bloomberg.net

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net, Kara Wetzel

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