Q&A: Smarkets CEO Jason Trost on pivoting to sportsbook and beating Betfair

If there’s one takeaway from the winners and losers in the UK sportsbook market over the past five years, it’s that product wins. Sky Bet and bet365 have ridden a slick, mobile-first UX to the top of the market, leaving slower, clunkier rivals behind. It’s a lesson that’s not gone unnoticed by Smarkets, a London-based betting exchange with a development office in Los Angeles.

Over the last two years, led by an American CEO, the firm has been completely redeveloping its tech stack, which means the product is among the fastest and most intuitive on the market. And as one would expect from a US CEO, the virgin US sports betting market is firmly in his crosshairs.

It may seem a daunting task for a company that is almost microscopic (106 employees) compared to some of the big beasts targeting the US, but the firm is deliberately lean and agile, with a tech start-up mentality that enables it to adapt to the complex regulatory environment.

The first adaptation will be the launch of a sportsbook as the primary product to attack the US, with Trost convinced the ‘simpler’ offering will provide an easier access point than the relative complexity of an exchange. Below, Trost tells EGR NA about Smarkets’ ambitions for New Jersey and beyond.

EGR NA: The fact you want to go sportsbook first suggests you don’t see a future for exchanges in the US. Is that fair?

JT: There’s a huge novelty to exchanges in the US, but I could see things playing out the same way as the UK. Betfair was all the rage in the UK 10 years ago, but nobody gives a shit about exchanges any more unless you’re a very serious bettor. So, exchanges have done a poor job of appealing to the mass market.

That’s why I’m so keen on the sportsbook idea. You get the benefit of the exchange with the great price, but you don’t get confused by a back and lay price. You don’t have to worry about trading in and out of positions. Ideally, we will launch the sportsbook and the exchange side by side and you can use what you want because our philosophy is, ‘what’s the difference?’ We’re going to try to go high volume, low margin on this thing.

EGR NA: Pinnacle seems to shy away from regulated and taxed markets. Can a low-margin sportsbook work with those added burdens?

JT: If it can’t be done, I will fail. Pinnacle does a good job of high volume, low margin but it’s a half solution. You can’t put up an offer – you have to wait for their traders to put up a price you want. So, Pinnacle is a half-baked trading platform. Granted, its better priced than William Hill, but that’s not hard.

EGR NA: With the plan is to use exchange liquidity to power sportsbook pricing, will you be able to offer a ‘full’ sportsbook like that?

JT: We already work with market-makers, so all major markets have prices. Of course, we won’t have it for everything, but then neither do sportsbooks.

EGR NA: But there won’t be any the Kambis or SBTechs of this world providing odds for smaller markets?

JT: We are the Kambi.

EGR NA: It sounds like there’s only going to be two skins allowed per licensee in New Jersey. Are you worried about getting squeezed out?

JT: We’re out fishing right now, but I don’t think there’s a real danger of us getting locked out. I don’t think there’s that many people trying to get into New Jersey. How many people are trying to get there – maybe 15 UK firms. BetVictor isn’t trying, for example. And we have a compelling USP, so there maybe scope for one traditional sportsbook and then us.

EGR NA: Do you have any idea of a timeline for launch?

JT: I don’t know the timeline; this is all brand new. I’m hoping we get a skin deal soon but it’s a possibility we get locked out of the market. There is something to the first-mover advantage because everyone wants to talk about those companies, so I do want to be in the first wave, but I also don’t care, if that makes sense. If we don’t make it into New Jersey in the next three months we will be locked out of the US market. There will be a host of esoteric rules and it’s going to be a slog until the Americans really understand sports betting.

Jason Trost

EGR NA: How do you see the DFS giants getting on in the sportsbook world?

JT: They have a giant email list of people with a propensity to bet but they don’t have the expertise in betting at all. The FanDuel deal was just an email list acquisition and while DraftKings is making all this noise about being a player, their product is going to be boring, just like every other sportsbook. It’ll get DraftKings going in the market because it’s not going to be like the UK where it’s a liberal market. It’s going to be very ‘inside baseball’ for a while, so if they can keep people like us out then the white label thing can work, but if we get in there, I don’t see why anyone would choose a shitty white label sportsbook over us.

EGR NA: So, you think product will ultimately be king?

JT: In America, people want to use good products. If there’s a better product, then switching cost is pretty low, especially if you don’t get sucked into a loyalty program. I would switch if I was using DraftKings for DFS and there was a better sportsbook available.

EGR NA: What’s holding you back at the moment?

JT: Time and money. If I had those, I’d go faster, but nothing else specific. My wrestling coach from high school had cheesy sign on the wall saying the only person keeping you from being a champion is yourself. well I still have that in my mind and I think the only thing stopping us is our internal execution. I’m not here to be the number three exchange. We’re here to change betting for legal customers around the world. I’m here to be number one, not number 38.

EGR NA: Is it fair to say the exchange market leader, Betfair, is vulnerable currently?

JT: My opinion is that Betfair has taken their eye of the ball and lost their soul. Before the merger, Paddy Power was this cheeky chappy, prevalent brand and Betfair was techie and  winners were welcome. By pushing them together I think they’ve lost both identities. That’s their core problem. Paddy Power isn’t funny and Betfair isn’t technical, so what are they? We’ll see if the new CEO brings it back. Breon [Corcoran] was a good short-term CEO because he made the stock pop, which is your job, but I think he hurt the long-term prospects of the company.

It takes a strong will and voice. They crossed the line in my opinion with the Floyd Mayweather stuff and ‘always bet on black’. I thought that was racist and unacceptable. Going over the line takes a strong voice and that guy [Paddy Power head of mischief Ken Robertson] left. You can’t do it without him. You can’t go to the board and ask for a racist ad to get in the papers without him. It’s going to be really hard to get the lead back in the pencil.