is bringing exchange betting back to the United States starting this weekend. It all begins with a series of free-to-play tournaments that will get underway on Sunday, December 8th.

These free contests are designed to introduce sports fans to the concept of exchange betting ahead of Tradesports’ planned real money launch next year.

For those unfamiliar with the term, think of exchange betting as the sports equivalent of stock trading. But rather than trading shares of public companies, exchange betting customers trade shares in yes/no sports predictions that work a lot like binary options.

Sports fans from every state except Washington are welcome to join the action starting with Sunday’s contest. After the initial run of free contests, Tradesports plans to launch a real money sports betting exchange in states with legal online betting in 2020.

How the Free Tradesports Contests Work

The free tournaments that will be hosted by Tradesports starting on Sunday will be structured as fantasy contests with each user starting with a virtual bankroll of $5,000. Contestants will use that money to buy and sell contracts in YES/NO sports predictions revolving mostly around the week’s NFL games.

Each contract expires at either $0 or $100 in virtual currency based on whether or not the predicted outcome happens. If the predicted outcome happens, the contracts expire with a final value of $100. If the predicted outcome does not happen, the contracts expire worthless.

For example, a prediction market may ask users “Will the Colts beat the Buccaneers on Sunday?” Contestants would then buy and sell shares for prices ranging from $0 to $100.

If you think the Colts will win, you can buy shares of that prediction at the current market price. If the Colts go on to win, your contracts expire at a final value of $100 to net you a profit. If the Colts go on to lose the game, your contracts expire worthless and you book a loss.

If you buy a batch of contracts backing the Colts at $40 a piece and the Colts win, your contracts will settle at $100 and you’re up $60 per contract. However, these are dynamic markets with prices fluctuating constantly. If the Colts get up by a touchdown and the price moves to $60, you can sell off those contracts before the game is over to net an instant $20 profit.

The goal in these free contests is to build your bankroll through savvy buying and selling. The users with the biggest virtual bankrolls at the end of each contest win cash prizes.

Contest Schedule and Prizes

Tradesports will be hosting nine contests beginning with the first one on Sunday the 8th. The first eight contests will involve that week’s games and will be open to US residents 21 or older and located anywhere except Washington State.

The ninth contest will be an invitation-only contest coinciding with the Super Bowl. Winners of the previous contests as well as standout players selected by Tradesports will be invited to participate in the Super Bowl contest.

  • Contests 1 – 5: $1,000 in total prizes
  • Contests 6 – 8: $1,500 in total prizes
  • Super Bowl Contest: $3,000 in total prizes

Introducing Exchange Betting to the United States

After its inaugural run of free to play contests extending into early next year, Tradesports will turn its focus to introducing exchange betting to US sports fans in states with legal sports betting.

The exchange betting concept is well established in European markets with Betfair acting as the most popular platform in the world. Betfair does operate an exchange betting platform for horse racing in New Jersey, but Tradesports is set to become the first full-service betting exchange in the US.

Tradesports founder Ron Bernstein told Bloomberg this week he hopes to attract sports fans and casual stock traders alike in the US.

“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,” he told Bloomberg. “But you can really broaden the definition of a ‘trader’ to include anyone who uses Charles Schwab or TD Ameritrade. Everyone trades now.”

Exchange betting has a bit of a learning curve compared to traditional sports betting, but it also provides benefits of its own. When customers buy and sell shares on Tradesports, they will not be placing wagers against the sportsbook; they will be trading among themselves.

This peer-to-peer form of betting provides greater flexibility when it comes to entering and exiting wagers. Tradesports will have no interest in who wins or loses any given wager, does not have to employ teams of oddsmakers or protect itself against big upsets, can charge a significantly lower commission and has less incentive to limit sharp bettors.

Whether or not the concept picks up steam in the US remains to be seen. Exchange betting is popular in Europe, but it has yet to displace the major sportsbook companies in the region. US sports fans are a different animal, but the simplicity of traditional sports betting will always be a big selling point.

Third Time’s A Charm?

This will not be Bernstein’s first attempt to break into the US market. He has introduced variants of exchange betting to US customers twice before but was forced out both times for different reasons.

The first attempt came via Intrade, which Bernstein co-founded in 2003. Intrade focused on political markets and rose to prominence during the 2008 and 2012 presidential elections after accurately predicting the outcomes of numerous state-level elections. For a while, Intrade served as a shining example of “the wisdom of crowds.”

Intrade proved highly popular in the US, even after banking institutions stopped processing credit and debit card payments. However, Intrade ceased operations in 2013 amid increasing pressure from US regulators.

Bernstein took a second shot with the launch of Tradesports in 2014 just as the daily fantasy sports craze swept the nation. In this iteration, Tradesports operated as a daily fantasy website that hosted contests in which players were given virtual bankrolls to buy and sell prediction contracts. The players who amassed the biggest virtual bankrolls won real money payouts.

The daily fantasy / exchange betting combination never really caught on in the US and Bernstein pulled the plug on Tradesports after 18 months in business.

Now, Bernstein is bringing Tradesports back to the US but this time as an actual sports betting exchange. The free contests will serve to introduce US sports fans to exchange betting, but the plan is to offer real money exchange wagering in 2020. Bernstein told Bloomberg he hopes to have it active in one or more states by the beginning of the 2020 NFL season.

New Challenges: Competition and the Wire Act

With regulatory issues behind it and no longer restricted to hosting fantasy-style tournaments, Tradesports is in a better position to make a third go at it. However, Tradesports will face a new set of challenges this time around.

Not only will Tradesports have to educate US customers on the exchange betting model, but it will do so in an increasingly competitive environment. Major sports betting operators such as DraftKings, FanDuel, William Hill, MGM Resorts International and more come to the market with simpler products, deep pockets and large customer databases.

There is also Flutter Entertainment to consider, which in addition to its US operations, runs the world’s largest betting exchange (by a wide margin) in Europe. Should Flutter Entertainment bring Betfair Exchange to the US, Tradesports will have a well-funded and highly experienced direct competitor on its hands.

Tradesports will also have to contend with the Wire Act. For as long as the Wire Act remains in effect, Tradesports will have to separate all betting pools by state. This means customers in New Jersey will not be able to buy contracts from customers in Pennsylvania or Indiana, for example.

A company spokesperson told iGB North America the Wire Act will hamper operations and that Tradesports supports federal regulation:

“Once we open Tradesports for real money trading, we won’t be able to pool liquidity between states. This will result in inefficient silos.

“We are in favor of federal regulations around sports betting even if a federal tax may be implemented. We believe a federal ‘overlay’ will further open up the market and increase volumes exponentially…”

The Tradesports representative also told iGB the business will be very competitive from the beginning:

“As the market becomes increasingly crowded, operators will need to lower their margins in order to compete. By contrast, Tradesports plans to offer lower margins (likely 3-4%) from the jump; this is possible because we’re a peer-to-peer exchange, so we don’t need to protect against a ‘bad beat.’”

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