Smarkets CEO On US Sports Betting Industry Shortcomings

This article is Part 1 of a two-part interview with Smarkets CEO Jason Trost. The outspoken CEO doesn’t pull any punches when it comes to shortcomings in the legal US sports betting markets or the current attempts to legitimize offshore sports betting sites.

Part 1 focuses on Smarkets’ experience in the US (the company’s SBK Sportsbook currently offers online sports betting in Colorado) and where the US is lacking compared to other sports betting markets.

In Part 2, the conversation with the Smarkets CEO shifts to the offshore market and how regulators and law enforcement should treat offshore sportsbooks as they reposition themselves for potential entry in the licensed US sports betting space.

Smarkets US Experience

Steve Ruddock: Coming from the European market, what is your experience in the US market thus far?

Jason Trost: It’s been a little bit of baptism by fire.

Even though I am American, I’ve been doing business in the UK for ten years, and I always thought America had a reputation for being business-friendly. I’ve really encountered the opposite. It’s been difficult to go live in the United States.

A lot of the problems have to do with federalism, and a lot of the problems have to do with states not being experienced enough or big enough to regulate sports betting to the level we see elsewhere. So, we have to deal with each state’s eccentricities.

It’s very different in each state, and they all have different regulations and different requirements, and that has definitely been a challenge, but one we are dedicating plenty of resources and time to.

On the positive side, the American consumer is very excited about sports betting. I think it’s a great thing that States are legalizing this and bringing it out of the shadows and turning sports betting into a legitimate industry that follows regulations and pays taxes. I think that’s a very good thing.

The Burdensome Regulatory Process

Steve Ruddock: Is it fair to say you believe regulatory bodies need to get up to speed on sports betting, which is one of the more challenging sectors of the gaming industry to regulate?

Jason Trost: Yeah. It’s not really their fault per se, just because it’s a very esoteric industry and it just takes a while to gain the necessary experience. But another thing that I think America got wrong is the fact that in most places, sports betting has been tied to land-based casinos.

I think that was a serious flaw in the way that sports betting has been rolled out in the US. I think closed markets are not good for consumers at all. They’re good for monopolies. And ultimately, the American consumer isn’t getting a good enough selection as he or she deserves.

Steve Ruddock: And where do you see that heading? Will that dynamic change in the future? Are there any states that show promising glimpses?

Jason Trost: I think the only promising States are States where they don’t have casinos or the casinos are quite small, but in general, I don’t think it’s going to change for some time, unfortunately.

Smarkets-SBK in Colorado and Beyond

Steve Ruddock: Smarkets SBK Sportsbook is currently live in Colorado. What has that experience been like so far?

Jason Trost: We’ve been live in Colorado since the beginning of June.

We’re still pretty below the radar in Colorado because it’s our first US state, so we’re trying to work out all the kinks with it before we begin to ramp up marketing. So, we’re still kind of keeping it below the radar.

We are getting great feedback from people in terms of our prices as we always aim to offer the best odds and fairest wagering experience out there. I don’t know if you’ve had a chance to look at our app, but it’s very different than everybody else with the social component. And I would say that the experience is very different compared to other sports betting websites.

Payments seem to be a common hurdle for all operators at the moment, and for most payment providers, it’s a very new thing. And for US banks, taking legal betting payments is a very new thing. So, we’re working hard to get them running as smoothly as possible at the moment.

Shortcomings in the US Sports Betting Market

Steve Ruddock: Aside from payments, are there any other deficiencies you see in the US sports betting market at the moment, compared to the more mature markets in Europe?

Jason Trost: As I mentioned, I think the biggest issue is the barriers to entry are too high. The fact that you have to pay a huge fee to a land-based casino is prohibitively expensive and stifles competition.

I think that’s the single biggest issue with the market. Other than that, the specific regulations of every state are burdensome, but, in general, I think payments are the most significant logistical hurdle besides regulation.

Differentiation in a Crowded Market

Steve Ruddock: You mentioned that Smarkets’ SBK Sportsbook app kind of stands out from the crowd in terms of user experience. Do you think, and I’ll use Pennsylvania as an example, where many operators are using the same supplier, there’s an opportunity to differentiate?

Jason Trost: If you talk to operators, most operators really don’t like working with Kambi, but there’s not that much choice out there. And unfortunately, the consumer is going to get a cookie-cutter product, and this is the direct result of the legislation. A state like Pennsylvania is particularly bad with its $10 million license fee and only so many available licenses. So, part of the reason you get the bland, cookie-cutter experience is the way Pennsylvania is structured. I don’t think consumers will be very happy with it, and I think it’s quite un-American that we’re limiting competition.

Steve Ruddock: Would you say that extends to the ability to innovate as well in the market?

Jason Trost: Flutter Entertainment is not exactly an innovative company. All these big companies are slow and bad at tech. I mean, how innovative can you be when you’re building on top of someone else’s product? You need startups in the space, but the way that the law is written, it’s so hard for them to do that.

I think ultimately the consumers are the loser, and the winners are the land-based casinos.

Stay tuned for Part 2.