Smarkets Could Mull Reentering US, Bring Prediction Market With It
The Smarkets logo. The company could reenter the US sports betting market and potentially bring its prediction markets offering along, too.
Smarkets, the operator of one of the world’s largest prediction markets platforms, is showing an interest in returning to the US sports betting market, and it could eventually bring an event contracts offering with it.
As Citizens equity research analyst Jordan Bender points out in a new report, Smarkets is back in Indiana, where its online sportsbook has posted a year-to-date handle of $2 million. The London-based company was among those that flocked to the US following the 2018 Supreme Court ruling on the Professional and Amateur Sports Protection Act (PASPA). It was also among the operators that found the US market to be too cost-intensive, and one in which it’s difficult to gain traction against the DraftKing/FanDuel duopoly.
The catalysts for investing and reentering into the US were led by the rationalization of market access fees compared to expensive agreements signed during the early days of the industry,” notes Bender.
The Young US Sports Betting Industry
In regulated, post-PAPSA form, the US sports wagering industry is still young, but its graveyard is well-populated. As Bender out, Smarkets appears to be the first example of an attempted Lazarus act.
About Smarkets
Smarkets is a UK-based company founded in 2008 by Jason Trost and Hunter Morris, who are well-known as major betting exchange/prediction markets operators across Europe.
Across the pond, Smarkets competes with Flutter Entertainment’s (NYSE: FLUT) Betfair platform, among others, indicating it has the competencies and knowledge of competitive landscapes to potentially be a credible prediction markets player in the US, but the company is taking a pragmatic approach.
The Company’s Plans for the US
“For the betting exchange/predictions, Mr. Trost and the company are in a wait-and-see mode around the legality of the product in the US, yet it is currently going through the process of obtaining a betting exchange license, which can take one to two years,” observes Bender.
Future Potential for Prediction Markets
In the event prediction markets are permitted under Commodities Futures Trading Commission (CFTC) guidelines, we expect to see a push into the product through the Smarkets brand. The company’s sportsbook division, branded as SBK, is growing more rapidly than its exchange platform, but that could change if it brings its prediction market offering to the US.
Smarkets’ Tech Stack Compelling
Smarkets has one of the betting exchange industry’s few internally owned technology stacks, and that could be attractive to a potential buyer, but it appears the company wants to compete rather than sell. Naturally, we think that would provide non-exchange operators incremental value if acquired for top online companies in the space, given the time and money needed to develop the technology and become licensed as an exchange,” adds Bender.
About Smarkets’ Investors
Smarkets is privately held and its investors include Deutsche Telekom Investments, Eberg Capital, Passion Capital, and Susquehanna Growth Equity. Susquehanna Growth Equity is part of Susquehanna International Group, which is a market maker for event contracts giant Kalshi.
Conclusion
Smarkets’ interest in reentering the US sports betting market could bring about significant changes to the industry, particularly if it introduces its prediction markets platform. As the company continues to navigate the complexities of US regulations and licensing, we can expect to see a push for this product in the future.