Two vices intertwined in Americana lore through the ages…
Yet, it’s the only legal way to gamble online in more than half of the 50 states, 37 total, to be exact.
The misplaced dichotomy of potential decline could be drawn from when online poker was extirpated in 2011. The U.S. Justice Department ended up annexing 76 bank accounts across 14 countries and five domain names, including the three most popular poker websites at the time in PokerStars, Absolute Poker, and Full Tilt Poker. Most poker players just went on to play at live games or stopped entirely, hoping to simply receive full reimbursement of their money from their accounts.
Any comeback for legalization seeming more fleeting than anything else.
The states of California, Pennsylvania, New York, and Massachusetts have made proposals in recent years to join Nevada, New Jersey, and Delaware for online poker to be legalized. Other attempts for its adoption have included Nevada granting licenses to poker sites, new websites emerging for those willing to take the risk of not getting caught, and even Bitcoin-acceptable ones. These communities have increasingly shrunk in size domestically versus what’s available abroad, too.
The full house–pun intended–of activity surrounding these efforts suggest that this prohibition may not make sense. The Poker Players Alliance (PPA), a non-profit membership to promote and protect online poker players, remains a strong party in favor of legalization to happen at some point. Three key reasons underscore chances for edited legislation. Online poker is continuously taking place–regardless of what policies exist–be it unlicensed or unregulated. There’s a plausible case to be made for the revenue streams it can generate for the government. And, its perception, by and large, for having it project as rather logical or innocuous.
Still, with poker being an individual-based game, and not a team sport, it’s been a detriment to its own cause for practical change. The Unlawful Internet Gambling Act in 2006 enacted a simpler way for the government to go after whatever they deemed to be illegal gambling websites. It was this very ruling that brought the genesis for PPA, which has since seen a hard time fielding a group to campaign for the collective well-being of poker.
Although Advance Deposit Wagering units (ADWs) proliferate the gambling industry, the opportunity to disrupt a healthy niche in an emulous market exists. A New York City-based startup, Giddy Apps, formed in 2013 with an online wagering website called Derby Jackpot, which is vying to penetrate the futile state of online betting through horse racing. The sport of horse racing presents a viable answer to fill this void in the overall marketplace.
Nonetheless, the startup’s space–not so much its premise–can make it challenging to raise the necessary funding for it.
“Getting investment for online gambling is difficult,” Walter Hessert, Derby Jackpot’s Co-Founder and Chief Product Officer, tells SportTechie.
“Most venture capitalists simply cannot invest in gambling companies because of restrictions from the investors who invest in their funds. Many institutional investors in New York told us they loved the concept, they believed in the business, but they could not invest. As a result, we were dealing with a much smaller universe of potential investors,” continued Hessert.
In fact, one of the lone significant transactions to date in online gambling comes from CVC Capital Partners buying British-based Sky, a satellite television company, for $1.25 billion. Domestically, VCs have favored daily fantasy sports–due to its legal exception and broad appeal–with FanDuel being a recent example, raising $70 million. The lifetime value of these users prove to be quite profitable over the long haul, especially given its rapid adoption rate and expedited nature for playing these games.
Derby Jackpot’s first angel investor happened to be a close friend and mentor, coming after pitching numerous other New York investors and making very little headway. Apparently, all it took was a five minute pitch during lunch; and then $400,000 was wired to them on their train ride back to Manhattan from Greenwich.
Bullpen Capital’s Paul Matrino–one of the notable investors along with Steven Levitt, Co-Author of “Freakonomics”, and Alexis Ohanian, Co-Founder of Reddit, among others–led the latest round of $6.2 million and told Silicon Valley Business Journal their interest for Derby Jackpot: “We go into an area where other people are little unsure or nervous and get the founders the extra year to demonstrate how big the business can be.”
The attraction for Derby Jackpot’s investors stems from the huge potential and their distinct approach of offering the product as a form of social gaming.
They’re going after the 40 million Facebook users that play social casino games instead of the avid horse racing enthusiasts. The interaction between their users have even led to some organizing trips to attend the track, whom, otherwise, never would have gone. They’ve created a platform that, in some respects, brings the race track to these users and customized the website’s experience accordingly.
To play, users must create an account with name and address to ensure that reside in permissible states, and, of course, over 18 years of age. They must fund their account via credit cards, while first time depositors receive an instant cash bonus. Once the user cashes out, they can come right back; and the money gets instantly wired digitally or send as a check.
The frequent ADWs users have been accustomed to placing bets on current or upcoming races from several tracks; Derby Jackpot, on the other hand, lets users bet on a single race that’s really close to post time. There’s upwards of 50 tracks, where new races and betting chances come up in a matter of minutes between each other. Of those used to playing the slot machines or roulette, the site’s configuration, huge graphics, and the manner in which bets are placed becomes a very familiar scene. It’s virtually inconsequential to know horse racing expertise at a high level since Derby Jackpot hones in on wagering numbers, horses’ names, and system-produced quick choices.
In turn, all bets are compiled together with pools from the host track via Xpressbet, a streamlined software system; and bets have their own unique names, like The Fiddy for a trifecta.
“Our job is to make the new player understand that it is safe, legal, and that it is easy to win without knowing a thing about horse racing,” says Hessert.
Again, there’s a misperception that a loophole exists for legalized horse racing bets online. The federal statute known as the Interstate Horseracing Act recognizes the position of horse racing has in the majority of states as a legal form of gambling and it’s permissible to occur across state lines. Those within horse racing circles likely have noticed how the key stakeholders of the sport promote this reality. American online horse racing does achieve over $2 billion per year. Derby Jackpot is just presenting this game in an entirely new way to a segment of the population that has never experienced it.
A key part of the gaming dynamic for Derby Jackpot comes from integrating live video juxtaposed to what else is shown on the screen. They have partnered with over 150 tracks across America to bet on their races and show video of it on their platform. While the horse racing industry has broadcasted their races for years as well as online, its accessibility and complementary role for this user-friendly site only makes sense. It’s worth noting that players on this medium–who are mostly picking randomly–are winning almost on par with the average horse bettor who reads the race form, studying the horses, and utilizing some “developed strategy” to select their respective wagers.
Thus, the monetization model is quite elementary: for the bettor, it’s exactly the same as if they were to place a wager at the track as on Derby Jackpot. Most of their bet is paid to the winners. The rest is shared between the race track and Giddy Apps.
Derby Jackpot’s popularity has risen significantly since its inception coming at two years now. They handle $20 million on a yearly basis for 200,000 players, with 80 percent of them never having placed a bet on horse racing before and half of whom are women.
Giddy Apps is in the process of introducing a new game that targets people who play the lottery at the early part of this new year. There will be chances to win $50,000 to $5,000,000 every day for as little as 10 cents.
NBA Commissioner Adam Silver has been proactive to make a stance towards legalizing sports gambling. Online poker is in a flux, opening the gates for horse racing to take off.
Going forward, Hessert envisions closing a ubiquitous gap in the sport of horse racing: “It’s tough to get people out to the physical track. It’s been a steady decline that’s tough, if not impossible to reverse. The internet will be different for horse racing…And, ultimately, that will get some new fans to the physical track.”
Sometimes certain vices need a gaming jolt to resurrect its sport and resonate it for the new breed out there.