Sporttrade CEO Kane discusses pros, cons of prediction markets
The evolving landscape of sports betting was recently illuminated during a groundbreaking webinar featuring Alex Kane, CEO of Sporttrade, who has been a pivotal figure in the development of prediction markets within the industry.
As prediction markets gain traction in the United States, they’re reshaping the dynamics among stakeholders within the gaming sector—transforming adversaries into allies and vice versa. This transformation reflects a landscape where traditional alliances are evolving, with industry players listening closely while also preparing for potential challenges.
A prime illustration of this shift occurred during the Indian Gaming Association’s New Normal webinar, where Kane provided insights sourced from both conventional sports betting and prediction market viewpoints. Sporttrade, which operates as a state-licensed sportsbook, is at the forefront of this new market model, distinguishing itself from federal designated contract markets (DCMs) like Kalshi and others.
The crux of this distinction came to light when Kane addressed the Commodity Futures Trading Commission (CFTC) in April, advocating for Sporttrade’s operation as a DCM. The CFTC, traditionally a niche regulatory body, has found itself thrust into the limelight as the popularity of prediction markets soars.
In the webinar, Kane took on the role of a conciliator, articulating the benefits and potential drawbacks of emerging platforms. Conference chair Victor Rocha remarked on the difficulties of securing participation from representatives of Kalshi, highlighting Kane’s unique position as a mediator in this crucial discussion.
Right Place, Wrong Time
Sporttrade operates in five states: Arizona, Colorado, New Jersey, Iowa, and Virginia. Kane described the company’s model akin to the Nasdaq exchange, where outcomes in sports—rather than stocks—are the core assets. “We list those outcomes and facilitate matches between buyers and sellers,” he explained, emphasizing a transparent system that delivers optimal market results.
This model shares similarities with sports event contracts commonly found in prediction markets; however, Sporttrade opted for the state-by-state regulatory framework instead of the federal DCM route. This strategic pivot was informed by a previous attempt by ErisX to self-certify NFL contracts, a venture that faced significant regulatory backlash.
Reflecting on this journey, Kane expressed regret over the resources dedicated to pursuing regulated operations: “We invested significantly in doing things the right way. That money could have built a stronger brand.” This sentiment positions Kane as a tragic figure in this rapidly changing landscape.
Death to American Odds
Kane articulated several compelling advantages of prediction markets, notably their potential to break free from traditional sportsbooks, which he characterized as often anti-consumer. “Bookmakers act unilaterally in setting lines, limiting bettors, and voiding payouts,” he claimed.
In stark contrast, betting—now referred to as trading—is driven by the market participants. Market makers ensure liquidity by facilitating trades, allowing prices to adjust organically to market dynamics. Co-host Jason Giles labeled this synchronized response the “essence of entrepreneurialism.”
For customers, the user experience is often simplified, presenting odds as straightforward percentages rather than complex betting jargon. Kane observed that younger generations find traditional sports betting terminology overly convoluted, asserting, “American odds obfuscate the reality of betting.” In a lighthearted nod, he noted that if he were to get a tattoo, it would read: “American odds should have never existed.”
Make No Mistake: This Is Betting
In this complex web of relationships, Kane also boldly stated that exchange betting should be classified as betting—distancing Sporttrade from the nuances of economic investment often championed by proponents of prediction markets. This stance places Kane and Sporttrade in a unique position within the betting continuum.
One of Kalshi’s main arguments underscores the legitimate economic hedging benefits that prediction markets can offer. While validation has emerged within contexts like election markets, critics remain skeptical, questioning the true hedging value of specific sports contracts.
Kane argued that downplaying the betting aspect of prediction markets undermines consumer understanding. “If you assert that prediction markets aren’t betting, you risk losing your audience’s trust,” he warned. He emphasized that the topic is far more complex than such oversimplifications suggest.
Get In Where You Fit In
The webinar’s timing was particularly significant, coinciding with a report from InGame indicating the CFTC’s engagement with tribal entities regarding potential virtual meetings. This evolution highlights a shift from previous cancellations, offering a glimmer of hope for stakeholders interested in prediction markets.
Although tribal interests do not inherently oppose prediction markets, they express concern over potential intrusions into their gaming rights. “We don’t dislike everything we encounter,” Rocha stated. “It’s about having had negative experiences in the past.”
As the industry evolves, both tribes and bookmakers appear to recognize that embracing prediction markets could be more fruitful than contesting them. Kane pointed out that any entity is free to pursue a DCM license, with affluent gaming tribes now possessing the resources to create viable predictive offerings, especially in states lacking legal sports betting like California and Oklahoma.
However, this scenario raises concerns about market saturation. Would prediction markets retain their appeal if faced with a flood of exchanges offering similar contracts? Most panelists concurred that competition could dilute attractiveness, underscoring the need for strategic consideration moving forward.
