Undaunted by the relative lack of traction sports betting exchanges have gained in the two states where such wagering is expressly legal, three men with backgrounds in the finance, legal, and gaming sectors have moved a step closer to launching their straightforwardly named Sports Betting Exchange (SBX) in Colorado.
Co-founded by CEO Peter Karahalios, CTO Billy Smolen, and COO/General Counsel Mike Roselli, SBX recently emerged from “stealth mode” to announce a market access agreement with the Gilpin Casino in Black Hawk. The Colorado Division of Gaming still must grant regulatory approval to the peer-to-peer exchange, a stock market-like platform where bettors set their own limit orders and match one another, before it can launch.
“We are excited to partner with SBX on their innovative platform that will bring sports betting to Colorado in a unique form that we think will appeal to both casual and hard-core fans,” Gilpin Casino General Manager Ben White said in a press release.
How broad a demographic betting exchanges are capable of appealing to is something that's been hotly debated by industry analysts since PASPA's repeal in 2018. While Lloyd Danzig told Sports Handle in 2023 that he felt there was a “substantial underserved cohort of high-volume, price-sensitive, expected value-maximizers” who would be well-served by exchanges, Chad Benyon said, “I think it's still going to be an area that's gonna take a while from a regulatory standpoint. What we've seen in gaming in general is if an item can be regulated, it's incremental, and there are consumer protections [that] they take a hard look at it.”
“People have flirted with this since the repeal of PASPA, and it's yet to be determined if they can make it stick,” said Brendan Bussman. Bill Pascrell III added, “I'm a big proponent of exchanges, but it's hard. You have to build liquidity. How do you build liquidity? You have to spend massive amounts of money on marketing, plus you have to educate.”
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Among the exchanges that have jumped into the fray so far, Sporttrade has been the most durable. Meanwhile, Novig (at least temporarily) shuttered its Colorado operations after just a few months and Prophet recently pulled out of New Jersey – although the latter exchange announced Monday that it intends to relaunch under a sweepstakes model in more than 40 states, including New Jersey, California, and Texas.
None of this appears to discourage Roselli, who told Sports Handle, “Our aim at SBX is to welcome all comers – both sophisticated and recreational bettors – but we see a big opportunity to attract recs in particular to the exchange concept with our product. The first six years of the post-PASPA environment have shown us that exchanges can be intimidating to the casual bettor. But in our view, it’s still very early on in the game, and if we present the concept to them in a way that is easier for them to understand, coupled with a product that has a look and feel that they’re already familiar with, there’s a very strong chance we can gain traction quickly. We believe the approachability of the app we’re building is one of our many differentiators.”
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Taking stock of more traditional sports betting apps available in the U.S., Roselli said, “The DraftKings and FanDuels of the world are moving further away from traditional sports betting with the proliferation of SGPs and other higher-hold, lottery-style products. I personally believe there are sustainability issues with the way they’re doing things, which is often at odds with responsible gaming best practices, and that there’s a better middle ground to be found in the long term.”