Hometown Disadvantage: Due to PA Laws, Philadelphia-based Sporttrade Has No Way to Launch App In State

Posted By Katie Kohler on July 15, 2021

Alex Kane and his company, Sporttrade, were born and raised in Pennsylvania. The company is headquartered in Philadelphia where Kane now calls home. Kane goes to Phillies games and nearly pulls out his red hair when the bullpen implodes (again).

During an interview with PlayPennsylvania, Kane is very much in PA (he just finished a Wawa Sizzli for breakfast). Sporttrade, a “sports betting meets the stock market” platform might have been born in Pennsylvania but right now, there is no clear path for it to go live in its home state.

High barrier of entry for sportsbooks in PA

In Oct. 2017, the Pennsylvania legislature passed House Bill 271. It expanded gambling in the state to include online casinos and sports betting. However, the barriers to entry are high. PA casinos only have one “skin” for sports betting. License applicants are required to pay a one-time fee of $10 million for approval to offer one online sportsbook.

“By creating that market structure, the Pennsylvania legislators, maybe not on purpose, have blocked out any entrepreneur from Pennsylvania from being able to participate in their own market,” said Kane.

When sports betting became legal in Pennsylvania and other states outside of Nevada, casinos wanted to partner with companies who had a track record of success in sports betting or DFS. However, since sports betting has only been legal in the United States outside of Nevada since 2018, companies based overseas have a big head start.

“By creating the policy, they tilted the deck toward companies in other jurisdictions and other countries. Open and free markets are one of the things that are great about America. By making sure everyone can compete, we have to make sure that includes Pennsylvania.” 

Kane said Sporttrade plans to launch in New Jersey later in 2021. But he admitted, right now, as things are, there is no way for Sporttrade to enter the Pennsylvania sports betting market.

“I hope that changes. We are going to try to find a way in. But we don’t have a way in right now. These laws being created have real repercussions and they are blocking out people who come to the market with innovative ideas. We should create markets where everyone is able to compete.” 

What is Sporttrade?

When it does go live in New Jersey, Sporttrade will be the first regulated sports betting exchange in the United States.

Pennsylvania currently has 13 sports betting apps and New Jersey has 19. Sporttrade will look more like options trading or futures trading than DraftKings or FanDuel.

When Sporttrade launches, users will be able to bet on who is going to win the game, the point spread, and other types of markets. Instead of American odds (i.e. Milwaukee Bucks -180), Sporttrade uses a probability of zero to 100.

For example, in Game 4 of the 2021 NBA Finals, the Milwaukee Bucks were -180 on the moneyline meaning their win probability was 64%.

“Not everyone may understand stock trading or American odds but almost everyone understands probability,” said Kane.

Sports betting stock market style

The Phillies bullpen is a source of frustration for Kane and other Phillies fans. But it’s a great example to show how sports mimic the stock market.

For example, the Phillies are hosting the New York Mets and the Phils win probability is 55%. You could “buy” the Phillies (55%) or the Mets (45%)  for $100 (or another denomination). The Phillies go ahead 4-1 and the win probability changes. Now the Mets’ win probability is 15% which might be a hard price for some to ignore knowing the reputation of the Phillies bullpen. So, you “buy” the Mets at 15%

Just like a stock portfolio, check back in. Especially after the Phillies have gone to their bullpen. You might find that after the Phillies have turned the game over to their middle relievers the Mets rallied and now lead 5-4 and their win probability went from 15% to 60%.

“We want to make the action as simple as possible. Sporttrade is about making sports betting more approachable and more efficient so people feel like they can be entertained.” 

The idea

Kane’s idea for Sporttrade came when he was a student at Drexel University (he graduated in 2017). When he was studying finance and learning about options he noticed the similarities to sports betting.. The idea grew when he and his father placed a wager on a Thai golfer during the 2016 Masters Tournament. Kane felt the golfer was undervalued at 1000/1.

“At Sporttrade, I would have bought in at ten cents (.1%) and by Day 3 of the Masters he was at 10%. That’s a big return.”

Kane also saw people his age using apps like Robinhood and Coinbase in addition to buying NFTs, cryptocurrencies and trading cards. He noticed the rising popularity of PredictIt, an online prediction market that offers exchanges on political and financial events.

Now, on the verge of its first state launch, Sporttrade will take principles from capital markets technology to create a liquid betting experience

 “Over time, people agree that this is inevitable. We are just trying to make that first step a reality,” commented Kane.

Kane answers some FAQs about Sporttrade

How will Sporttrade work on a state-by-state basis?

“If this were poker or DFS it would be hard to do on a state-by-state basis because those games are peer-to-peer in nature and you need a pool of players. Our exchanges will be ring fenced but the critical difference between this and poker and DFS is it’s built like a stock exchange or equity options exchange. We use capital markets thinking and technology to make sure that liquidity is in every state we launch.”

Sporttrade will face a higher bar for educating customers since it is different from other sports betting apps.

Kane said that people who use apps like Robinhood and Coinbase are their initial target audience.

“We want to build this for people who we think are going to be early adopters. They are comfortable using apps like Robinhood who have done a good job of making their app approachable and bringing more people into stock trading. If you watch sports and trade stocks you are going to love Sporttrade.”

Over time, the educational bar, and the spend required to educate should be lowered. While you must be 21+ to bet on sports, you only have to be 18 to use apps like Coinbase and Robinhood which means people are becoming more adept at trading.

Sporttrade Raises $36 million from group of investors

In June 2021, Sporttrade announced a $36 million funding round which was led by:

  • Jump Capital
  • Impression Ventures
  • Hudson Rivers Trading
  • Tower Research Ventures
  • Jim Murren, former CEO of MGM Resorts International
  • Tom Wittman, former CEO of the Nasdaq Stock Exchange

In addition, Sporttrade issued convertible debt to Nasdaq Ventures in connection with the transaction.

Sporttrade said the funding will be put toward:

  • Customer acquisition
  • Expansion into additional states
  • Continued investment in staffing

“It’s been the biggest privilege and it’s an absolute dream job,” said Kane. “I wake up most days and pinch myself. We built an incredible team and have done great things. We’ve been able to get NASDAQ to make an investment in the sports betting space. It feels like a transformational moment.”

Photo c/o Sporttrade.

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Katie Kohler

Katie Kohler is a Philadelphia-area based award-winning journalist. She is the Managing Editor at PlayPennsylvania and covers the Pennsylvania gambling industry with an emphasis on sports betting, online casino/poker and the lottery.

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