Colossus Bets CEO: Without innovation, racing will continue to lose ground on sports betting

After going live with its first US horseracing partner this month, Colossus Bets plans to launch its cash-out function on North American racing pools within the next few months.

Although adoption is slow in the US, Colossus CEO Bernard Marantelli anticipates that horseracing operators will quickly realise they need to adopt new innovations or continue to lose ground on sports betting.

Marantelli speaks to EGR North America about the regulatory and technical challenges Colossus Bets faces in penetrating the US horseracing market.

EGR NA: What is the outlook for Colossus Bets in the US for the next year?

Bernard Marantelli (BM): For us in America we’ve got a couple of irons in the fire, we’re on the verge of releasing an esports product, a multi-leg esports jackpot with cash-out. We are looking to add these features to the North American racing pools because currently we’re selling access to British and Irish racing pools in North America with these features and that is well received, but these features are not on the US pools yet.

That is the main opportunity for US horseracing to have a modern product line and to compete with sports betting which already has all these features. For us from a commercial standpoint, the sales of British and Irish pools will always be vastly inferior to that opportunity due to regional content and timing.

EGR NA: What setbacks are you facing in launching US racing pools?

BM: It’s a mixture of legacy technology and a lack of competition pre-PASPA. With sports betting not a legal alternative [to racing], innovation was less urgent.

There are a couple of slight regulatory hurdles to navigate because cash-out wasn’t written into the original racing legislation, understandably when it didn’t exist. Some of the state legislation says things like you are not allowed to sell a pari-mutuel ticket for profit but that was meant to stop someone re-selling tickets in other states rather than to prevent cash-out.

I think what’s interesting about all of that is that with cash-out being an essential component of sports betting companies in North America, racing and racing regulators won’t be able to sit around for long and say ‘we’re not doing this’ because they will just lose more ground to sports betting. In that case it becomes another reason for punters to choose sports betting over racing.

With this in mind we expect to launch cash-out on North American racing late this year or early next year, perhaps state by state initially.

Colossus Bets recently won the Innovation in Horseracing award at the EGR Marketing & Innovation Awards 2019, collected by CEO Bernard Marantelli, (centre)

EGR NA: You’re planning to offer pari-mutuel sports betting pools in future, where does the value in that product offering lie?

BM: Sports pools are uniquely complex in North America because there would be a lot of discussion over whether they’d be allowed across state borders considering the Wire Act, and there may need to be some innovation or Wire Act re-interpretation there.

There is a ridiculous imbalance between what’s allowed and what’s not, DFS is not considered betting, so is pooled across state lines, but it does look and feel like betting and is regulated as such outside the US. The same DFS pool in the USA has fantasy entrants from New Jersey and betting entrants from London, so that in contrast to sports betting not being allowed the same pooled liquidity seems unsustainable.
I think the sports betting guys will say ‘hang on a minute why can I have a global sports pool on a fantasy points format but I can’t have one on point margins or winners.’ There are some real inconsistencies there which I think will have to be dealt with.

They’ve specifically got a carve out in the Wire Act to protect pari-mutuel betting on horseracing. While there is strict interpretation of the Wire Act, our pure sports betting product is limited in North America. But our patent portfolio for putting cash-out on a fixed-odds accumulator is an area which we are in dialogue with a number of operators about.

We’ve licensed our patents in the US to two companies to date. Through those licenses we would generally supply technology as well but you’ll see our first license without technology in about a month. We’re in the final stage of legal sign-off at the moment. We also have a fantasy product in development that will be live for the NFL season.

EGR NA: What are your main regulatory concerns in providing sports pools?

BM: With the restriction of the Wire Act interpretation our pure sports pools, whether they’re on European soccer or American football, won’t matter because they will probably need to be limited to separate pools on a state-by-state basis.

It could work in New Jersey, and maybe in New York, Florida and California. There are probably a few states which could support single pools and still have a significant prize in that single pool but generally it would be far better for everyone to have one large commingled pool.

The British and Irish racing pools we have recently launched are a stepping stone. It’s the first public license of our patent in the US. It gives Americans the chance to play a modern product. We are licensed in Oregon and the bet is being transacted through the Oregon regulator, with cash-out and our syndicates feature.

It is new to racing and it sometimes takes a little more effort around getting everyone comfortable with it but we have worked through a lot of that. We are looking forward to taking the next big step of offering it on North American racing where cash-out should become as mainstream as it has on sports.