The pioneer US sports betting exchange powered by Betfair announces its exit from the New Jersey market after failing to gain traction. Sporttrade, a start-up company however picks up the baton by penning a deal with Twin River to debut a new exchange.
Betfair, the leading British sports betting exchange operator has officially announced that it will be pulling the plug on its race betting betting exchange operations in in the New Jersey market. The Betfair online gambling company falls under the umbrella of Flutter Entertainment alongside other well-recognized casino gaming and sports betting brands such as FanDuel, Paddy Power, Adjarabet, TVG, FOX Bet, Sky Bet, PokerStars and SportsBet.
Kip Levin, the COO (Chief Operating Officer) of the FanDuel Group – the owner of USA’s branch of the Betfair Exchange released a statement last Friday, indicating that the New Jersey exchange platform failed to “hit the critical mass” that was required for it to become a viable operation. On the same day, 11th of September, members of the exiting platform received communication that the platform will stop offering its services on 1st October.
Four Years of a Shaky Operation
Back in November 2015, Betfair made an ambitious debut into the Garden State’s sports betting market after getting an official thumbs-up from the New Jersey Division of Gaming Enforcement. A few months later in May 2016, after teaming up with Darby Development, the operator of the Monmouth Park, Betfair unveiled the first betting exchange in the US via its 4NJBets sports betting site. The online betting platform had also launched wagering through traditional fixed odds in the same year.
he exchange sportsbook however struggled to reel in sports bettors in the state to a form of betting that was completely unfamiliar to them. Even after hyping up its exchange product, the platform managed to rake in a mere $12.4 million in wagers for the fiscal year of 2018 – the last year that performance figures of the service were announced.
A Slew of Teething Problems
In his statement Levin pointed out that the betting exchange concept which was wildly popular in the United Kingdom’s sports betting market was futile in appealing to players in the USA. He also asserted that the poor results were because of;
Quote“...a variety of reasons including customer base used to exotic wagers and a reluctance by major US racing associations to embrace the different business model.”
Betfair was unsuccessful in joining forces with key players in USA’s racing industry such as the NYRA, the Stronach Group, Keeneland, Del Mar and Churchill Downs to offer exchange betting for races hosted on their tracks. Had Betfair managed to broker deals with more US tracks to secure rights to take wagers on their races, the story would probably have been different.
Industry experts also indicated that the takeout structure is also part of the reason why the operation failed to bear fruits. For the UK market, one of the secrets to Betfair’s remarkable success is because the UK exchange charges commissions that are far much lower than the standard takeout. Most sports bettors in the UK part with a low commission of 5% only, and Betfair was able to charge such low commissions because the company wasn’t obliged to turn over any of its proceeds for taxation purposes.
Had the company tried taking the same direction in the US, it would have been exceptionally challenging for it to get horsemen’s groups and tracks aboard its offering. Given that Betfair agreed to pay the tracks, it ended up charging its customers in the garden state a 12% commission, which is too high – over twice as much as what it charges UK bettors.
The other factor that put a nail in Betfair’s coffin was the fact that it was impossible for the company to grow its betting exchange customer base outside the Garden State. Aside from New Jersey, California is the only other state where exchange betting was legalized in 2012, but the plans never officially materialized thanks to endless stakeholder rows. As a result, there was no way that Betfair’s exchange could expand its footing in the US.
Goodbye Betfair, Hello Sporttrade!
In an interesting turn of evens however, while Betfair is packing its bags to exit New Jersey, the state is preparing for the premier of the first local sports betting exchange. Sporttrade, a Philadelphia-based startup confirmed last month that it inked an arrangement with Twin River Worldwide holdings to piggyback on its online sports betting platform for the launch of a betting exchange in the state.
Sporttrade’s site is still awaiting approval from the Garden State’s gaming regulators but if the startup is to succeed where Betfair failed, it should use a different approach. Well, at least Sporttrade plans to launch a fully-fledged sports betting exchange, rather than a horse-racing only exchange as Betfair had done.
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