The minds behind the grandfather of betting exchanges are set to make their mark on the 21st century person-to-person betting industry.
"Sports bettors have never had direct access to betting markets before. Instead, they've been kept apart by bookmakers, whose hefty margins have remained unchallenged for decades."
- Joseph Lee
The creators of Antigua-based Internet sports book World Sports Exchange (WSEX) pioneered the exchange betting concept in the mid '90s, but ultimately morphed the site into a more traditional sports book because the wagering world wasn't quite ready for P2P.
A decade later, individuals with close ties to WSEX are key investors in a project that seeks to bring the vastly popular exchange-betting model to the U.S. market. The site is called Matchbook.com, and it went live in March.
The proprietors of the new service believe that removing the bookmaker from the equation will appeal to U.S. bettors.
"Sports bettors have never had direct access to betting markets before," Joseph Lee, a spokesman for Matchbook.com, explained. "Instead, they've been kept apart by bookmakers, whose hefty margins have remained unchallenged for decades."
Mirroring the success that leading exchange Betfair has had in the U.K. and Ireland markets, however, will require tweaking the betting exchange model so that U.S. bettors are comfortable with the interface. Matchbook.com Director of Development Tom Ramsey believes the system, which was built entirely in-house, accomplishes this.
"We have tried to make it as easy as possible for new users and included traditional odds on the platform instead of the decimal odds that some may find more confusing," Ramsey said.
Ramsey said the Matchbook.com team will continue to fine tune the system over the summer and hopes to have a robust site running in time for the upcoming football season. There are no short-term plans to add a race betting service.
Under Matchbook.com's commission format, clients pay a minimal 2 percent commission, and only when they win, thus slashing the standard bookmaker's commission by about 75 percent.
While some of the site's biggest investors are affiliated with WSEX, Ramsey stressed that the exchange is its own operation. Nevertheless, he said, having close ties with key executives at WSEX has been a boon.
"We were able to find investors that had a lot of expertise in online betting," Ramsey said, "and we leaned on them during that process."
Haden Ware, one of the co-founders of WSEX, said Matchbook.com should have a major impact on the American betting market in the long term.
"The exchange story is too big to ignore," Ware said, "and while bookmakers and exchanges make strange bedfellows, we prefer to think of it as hedging our bets, in a very literal sense."
"The exchange story is too big to ignore, and while bookmakers and exchanges make strange bedfellows, we prefer to think of it as hedging our bets, in a very literal sense
- Haden Ware
Ware and his original partners, including Jay Cohen, who is well known for his legal battle and subsequent conviction in the United States for activity related to his role with the company, launched WSEX.com in the mid '90s as a betting exchange. Cohen and Ware had a history as commodity traders and envisioned a market that matched "sellers" and "traders" of sports bets, but the concept never took off, and WSEX changed its model to one of a traditional sports book.
Lee points out, however, that times have changed since the early days of WSEX.
"Modern technology has already slashed the prices of long-distance telephony, airline travel and stock trading," he said. "Now we're applying it to the $90 billion recreational betting market."
While Ramsey has big plans for Matchbook.com, he understands that the betting exchange concept might take some time to catch on in the United States. But eventually, he says, punters will be flooding to exchange sites.
"The biggest barrier to entry into the U.S. market is the initial cost," Ramsey said. "If you look where the growth is, it is in the market-driven ones. Ultimately, as people get more price sensitive, and bookmakers reach a level where they can't go any lower--and some operations are getting close to that level now. They will flock to the exchange model."
Such a scenario would emulate what's already happened in the poker space, and that's fine by Ramsey.
"Party Poker is still the biggest canary in the coal mine, but these are exciting times for the exchange industry and for Matchbook.com as a whole," he said. "We would love to get a million people on our site making bets, but that will take at least three years. Now is the time to start building up the liquidity, and we are confident we can reach our goals."
The short-term goal is to have enough liquidity (100 frequent users and 1,000 or so part-time punters) by the start of the U.S. football season so that, as Ramsey puts it, the markets will be "organic enough to grow themselves."