The state of the crypto sports betting industry in 2016

Contents

    For bettors

    The crypto sports betting industry is in a state of rapid improvement; from the poor user experience of a couple of years ago to the best betting experience in the world that crypto sportsbooks will achieve within a couple of years.

    In 2013 the industry was immature with mostly amateurish operators offering low quality, underdeveloped services. Odds were poor and scams and closures were common.

    Today the industry is maturing with a handful of good quality established sportsbooks. We are seeing the first good attempts at

    Near-term future

    In the next 2 years the industry will continue to improve towards the great user experience offered by the best government currency sportsbooks. When a trusted crypto sportsbook offers a great user experience with a 2% overround or less, it will be the best betting option in the world.

    In the same time span we will see some of the best licensed government currency operators offering end to end crypto accounts (deposit, account balance and withdrawal) when their licensing jurisdictions allow it. The perceived legitimacy and trust that these operators offer will attract many crypto gamblers in those operators local markets.

    However even when offering end to end crypto accounts these legacy operators will still have to store and share their users private data due to know your customer (KYC) and anti-money laundering (AML) laws. They will still have to pay taxes and license fees and they will still have to exclude bettors from the USA and other restricted jurisdictions.

    Native crypto operators will continue to have a competitive advantage by avoiding those burdens. This gives them a lower cost base and higher conversion rates, particularly in restricted jurisdictions.

    Mid-term future

    In the next 3-5 years the main story will be decentralized, censorship resistant, semi-autonomous, near 0% house edge prediction markets and pari-mutuel betting services. Details here and here.

    The first promising projects in this direction include Hivemind and Augur. It is still too early to say what the winners will look like but it’s fair to say they will be very different at the back end from the current centralized sportsbook model.

    For sportsbooks

    The main challenge currently facing crypto sportsbooks is the small size of the crypto ecosystem and the large number of gambling options crypto bettors have. There may be around 3 million people using crypto. Such a small group of potential users cannot sustain more than half a dozen large successful operators.

    The lower barrier of entry that crypto allows new operators, has created a saturated marketplace. The only way around this problem for an operator is to have a great product, great marketing and be willing to operate on low revenue.

    Hackers, extortionists and governments

    Hackers and extortionists are a major risk as crypto sportsbooks are prime targets. Any incidences of downtime or delayed withdrawals at a sportsbook can undermine users trust causing them to go elsewhere.

    Legal risk looms large over crypto gambling operators. The current lack of licensing, KYC, AML and blocking users from restricted jurisdictions may not be allowed to continue unchallenged by the authorities such as the US Department of Justice.

    Given the authorities cannot cutoff customer deposits and withdrawals like they do with non-compliant government currency sportsbooks, crypto sportsbooks may instead face more direct actions. This may include server and domain seizures, office raids and targeting of individual owner/operators, such as what happened to Bryan Mycon of SwC Poker.

    If such actions were successfully taken simultaneously against several of the top crypto sportsbooks the short term effect on the industry would be devastating. However the industry would recover much more robustly and censorship resistant within a year.

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