Why getting behind US exchanges is a safe bet

Enjoy this post from our very own VP of Operations, Michael Halperin, on how the US consumers can benefit from betting exchanges!

Ask any sports betting executive what it takes to succeed in the US right now and nearly all of them will tell you one thing: a massive pile of cash. The industry has been dominated by big players with deep pockets willing to spend at a greatly inefficient clip in order to drown their competition. Smaller brands don’t stand a chance following the same gameplay. That’s why we’re going a different route at Prophet Exchange.

The fact is, nearly all of our prospective consumers are currently placing wagers at one or more of the traditional sportsbooks (traditional sportsbooks set their own lines and take on large amounts of liability; Ex: Draftkings, FanDuel, Caesars).  As a new product, Prophet Exchange will need to convince customers that signing up and placing bets on an exchange is worth their effort.

When PASPA was repealed in 2018, gaming companies around the world were counting the dollars in their heads. These companies thought they could just spin up an operation in the US and create a significant amount of additional revenue with ease. Each company, despite best efforts, suffered the same fate when trying to acquire customers for their traditional sportsbook products in the US. Most of these companies outsourced all of their technology and simply did not offer consumers any compelling reason to choose their products.

The current sportsbook ecosystem in the US currently isn’t suitable for a smaller startup to come in at all, let alone compete as a traditional sportsbook. However, a sports betting exchange is uniquely positioned to acquire customers without spending irresponsibly.

Exchanges won’t compete with the larger and more established sportsbooks in many areas - you won’t see 50+ ‘odds boosts’ available each day. You won’t get a $5 free bet for placing 20 Same Game Parlays.

What you will get on an exchange, however, is the best price on moneyline, spreads, and totals. We view ourselves as a permanent promotional product, one that offers a ‘discount’ on traditional -110 lines and high-hold moneylines. This is due to the fact that exchanges don’t take on risk, and therefore, allow its users to bet at +100 instead of -110.

Exchanges rely on users and market makers to set the prices. Get enough users competing on a market price, and you’ll see prices tighten and the market become more efficient. A liquid exchange will nearly always offer a better price on your bets when compared to a traditional sportsbook. Just look at Betfair compared to the sportsbook landscape in Europe.

But why does that matter?

Often I get asked by individuals not familiar with an exchange (or sports betting in general) why a customer would choose to use our product. At first glance, when I tell someone that they could bet $10 to win $9.80 or $10 to win $9.09, their reaction is somewhat muted. The reality is 71 cents, on the surface, is not enough to convince anyone to change their behaviors. But that 71 cents adds up over time. The math says you’re voluntarily giving away $1 for every $30 you wager on a sportsbook vs an exchange. The simple fact is that you will win more and lose less every single time you bet with an exchange. Who does not want price efficiency?

The big spending sportsbooks like to say people use their product not to make money, but for entertainment. The reality is, if you use an exchange, you will get more entertainment. By placing wagers at a better price, you are maximizing your chances to actually win money betting on sports.

With exchanges, the US consumer is getting something new with a clear value proposition: the best price on straight bets. Few startup sports betting companies have been able to make a true dent in the space to this point. We believe that by consistently winning on price, exchanges are uniquely positioned to change that, and give US consumers a clear reason to join an exchange.