LineLibrary: The NASDAQ of Sports Betting?

Update from the editors: LineLibrary was changed to Vigtory, then sold to FuboTV, and is now closed. This post will remain live for a historical archive.

LineLibrary is a Chicago-based startup that has its sights set on completely changing the way sportsbooks do business. With a vision of “creating the NASDAQ of sports betting markets,” LineLibrary wants to create the first independent betting exchange designed primarily for sports betting operators.

The idea behind the company is to create a marketplace that can show sportsbook operators a massive amount of line movement data in real-time and allow those operators to offset risk on a business-to-business (B2B) exchange. LineLibrary aims to position itself to be able to handle the estimated $400 billion sports betting market, all on one platform.

A marketplace showing millions of different positions in real-time allows sportsbook operators and other users to perform risk management at the highest level. What this means to the books is that rather than needing to adjust their lines to manage liability, they now have a faster and more efficient way of accomplishing that with no line movement necessary – by essentially laying off wagers on the LineLibrary exchange.

Sportsbooks typically make their money on the margins. A book will charge 10-percent “juice” and with even action on both sides of a game they are guaranteed to make a profit. But enticing even action on both sides is a challenging endeavor.

In your average sportsbook, when the Patriots are taking 90+ percent of the money on a game at New England -3, the book will move the line up to -3.5 and then to -4 to encourage betting action on the other side. While the bookmakers may believe that the “true line” is -3, they will adjust the line to balance their liability.

According to LineLibray’s website, “there is currently no efficient mechanism for hedging imbalanced action without shifting lines to entice wager creation.”

LineLibrary wants to change that. By using its marketplace, anyone with a subscription can gain access to a new way to manage risk by heding imbalanced action on the exchange.

The Origins of LineLibrary

LineLibrary was developed as a risk-management platform that claims to have the capacity to track micro-transactions across the $400 billion sports betting industry.

Recently, LineLibrary received valuable industry-related press coverage by winning the ICE North America LaunchPad competition. ICE is a major gaming conference in Europe that for the first time held a North American version of the event in Boston this past May.

The company was started by Chicago native Sam Rattner and includes an engineering team uniquely equipped to create a financial-based product. LineLibrary’s Principal Engineer was a lead software architect for Betfair, which itself is the largest business-to-consumer (B2C) exchange betting provider in the world.

The team also includes a lead developer who previously worked for Citigroup’s trading platform and a former energy commodities trader who built the backend risk management API for a new cryptocurrency.

The LineLibrary Product

The problem, as LineLibrary sees it, is that sportsbook operators are leaving vast amounts of money on the table as they balance their action. By using an inefficient method of hedging imbalanced volumes of bets, there is a lot of money left on the table.

The solution: the LineLibrary marketplace.

How Are They Doing This?

The primary keys to the LineLibrary product are to eliminate latency (information delays) and provide an independent B2B exchange. With a low-latency product, LineLibrary will have a network that can process an enormous amount of information and can handle quickly-changing datasets in real-time.

LineLibrary is not the first sports betting exchange to come along, but it is the first with a B2B focus rather than B2C. LineBrary will not cater to everyday customers; it will primarily serve sportsbook operators.

The exchange betting business model is nothing new, but LineLibrary will be the first designed specifically for sportsbook operators. Smaller operators may lay off risk onto exchanges from time to time, but traditional exchanges are not purposely designed for that use-case.

Additionally, traditional betting exchanges serve their own customer bases first; their business model is completely B2C. LineLibrary, on the other hand, is designed specifically for sportsbooks around the world to manage risk on an indpenedent exchange that is not subject to its own biases.

A slide from a LineLibrary slideshow compares sportsbook operators and betting exchanges to financial brokers and exchanges. In the financial world, B2B exchanges serve brokers and brokers serve customers. For example, you don’t see NASDAQ or the NYSE operating its own exchange:

LineLibrary founder Sam Rattner put it this way in an interview with EGR North America:

“Bookmakers operate straight to the consumer, like TD Ameritrade and Charles Schwab but they are not the NYSE. And the current exchanges all either have a sportsbook or are actively trading on their own exchanges.

“If TD Ameritrade launched their own exchange, would Charles Schwab send their client there? Because I don’t know if TD Ameritrade would execute others’ trades before their own clients’. The NYSE doesn’t have a brokerage for a reason. In theory, an exchange is built for the betterment of the market and it perceives no risk because it is not involved in the market. So, having independent infrastructure allows us to be more efficient. We don’t have the overhead to make sure we are hedging our positions or making sure we have liquidity from other retail users so we can charge much lower fees than those competitors.”

LineLibrary plans to monetize its service via three different methods:

• 1% Trading Fee
• Annual Sportsbook Fee
• Data Deals

Will LineLibrary Succeed?

Through 18 months, the startup has raised $2.5 million. They’ve won an award which puts their product in front of a much wider audience, which should lead to continued investments.

If their product can genuinely perform as promised, LineLibrary could be a huge success. However, harnessing the behemoth that is the collective sports betting market is an ambitious bar to set.

The real test will be when the LineLibrary network is live and proves it can handle the information it claims it can. Until then, further investment will be the main factor to follow.

LineLibrary is still a young, growing company that has many hurdles to clear before reaching the pinnacle of its potential. But it will be a company that the sports betting industry will want to watch closely in the coming months and years.