Micro sports betting might be changing the game. Read more below.
From Sportico.com:

Thomas Halikias (founder, Drives Football) believes in-game micro sports betting will transform the way sports fans wager on games. But the former UBS managing director (he ran their structured equity desk) says one aspect of the pending shift largely being overlooked is the synergies between micro and traditional betting that could enable sportsbooks to execute in-game hedges, increase the size of their trading books and improve their return on capital. As he explained, the current iterations of micro betting products often focus on rather binary events (think: run/pass on next play) or multiple selection markets (think: result of an at-bat will be a single, double, triple, home run or out) that lack a holistic relationship to game scoring and the traditional lines.

The markets and risk expert believes the advent of micro-betting products like (a platform that provides play-by-play markets valuing the likely outcome of a drive) will push gaming to resemble Wall Street’s financial markets. As Halikias explained, “a game’s final score will [start to] act [more] like a stock’s closing price, with the play-by-play action throughout the game building towards that price.” The resulting continuous micro-economies for traditional lines would enable “traders” to hedge their betting exposures. “Sportsbooks will look like Wall Street derivatives desks soon enough,” he predicted.

JWS’ Take: The introduction of live in-game micro betting products within a sportsbook should drive bettor engagement—at least initially. But as Halikias explained: “Binary wagers are like flipping a coin. We could bet on that, but it gets boring. And once you realize the odds are stacked against you, you lose interest pretty quickly. That’s why existing products [will] experience bettor fatigue.”

Halikias suggests the way for a sportsbook to keep bettors engaged is to integrate characteristics of the capital markets into their micro-betting products. “Effective markets allow traders to express unique and varied opinions in one location, in a single price,” he said. “And the continuous nature of live markets, the tick-by-tick call to action, is engaging.” He also suggested that communities often form around the news cycle of these markets (think: reddit’s WallStreetBets). “People like sharing their opinions, whether it is a stock’s potential or a team’s chance of scoring. The instant feedback from live markets makes it even better,” he said.

Drives Football incorporates these capital market tenets. Once a user buys or sells a drive, they find themselves constantly reassessing their position: Should they double down? Hold or sell their “option” on every play of the drive? “It is exactly [the mentality] that makes day-trading compelling,” Halikias said. “You never buy the bottom or sell the top. You’re always second-guessing yourself.”

It should be noted that Drives Football, an early stage company, is only currently offering a free-to-play product via its app. Halikias noted: “Successful quant models require more than just historical data. They must incorporate market dynamics and psychology (think: the wisdom of the crowds) to be successful. Our for-fun market data will influence our real-money models.”

Casual sports bettors will need to embrace continuous, forward-looking markets before books can use them to offset risk. “Before micro-betting becomes a financial product, it has to become a game first for the user. Gamification precedes liquidity,” said Bhu Srinivisan (founder, NXTSCORE). “Across the industry, the experience needs to feel like something Epic Games with Fortnite, Blizzard or Electronic Arts produces. This will create enough trading volume to create markets.”

But Halikias has no doubt that once introduced, that will occur. It is just classic business optimization. “I ran one of the Street’s largest derivatives desks and saw the derivatives markets and requisite technology transform the financial markets. Now, everything is led by the derivatives markets and the stocks actually just follow. The same will happen with sports gaming,” he said. Of course, that does not necessarily mean Drives Football will end up being the consumer’s micro-betting platform of choice.

While a product that resembles a live futures market could be used to acquire customers and drive engagement, Halikias suggests that if integrated properly, it will also increase and improve returns on existing wagers. “Whether it’s a continuous markets or binary prop bets, these micro-betting markets increase a book’s hedging opportunities exponentially,” he said. “The rapid turnover of micro-wagers requires far less capital, and sportsbooks can adjust their micro-markets to mitigate traditional exposures. If micro-markets grow as many expect, the ability to manage risk in-game will allow sportsbooks to increase their traditional exposures tenfold.”

Advancements in sports betting tech are needed before in-game, options-style trading, for real money, can scale to a size that would meaningfully impact sportsbook exposure. But Halikias predicts those developments are on the near-term horizon.  “The evolution of the derivatives markets transformed the capital markets, and its technology, crypto’s DeFi markets, are redefining finance, and real-time gaming will require the same type of tech evolution for sportsbooks,” he said. He predicted “a future where stadiums will have microwave radio towers, like financial exchanges, sending video data almost instantaneously to the most sophisticated sportsbooks for high-powered analysis.”

The state-by-state nature of sports betting regulation makes it difficult for a true betting exchange to exist. Halikias envisions the larger sportsbooks instead aggressively acquiring micro-betting flow as a workaround for those limitations. “There is a network effect to trading volume,” he said. “The more flow you have, the larger you can trade.” He foresees the biggest players acting as clearinghouses (think: mini-exchanges) with peripheral operators becoming brokers that attract customers via their brand, content or properties. “Understanding how and why the financial markets evolved is informative to the future of sports gaming,” Halikias concluded.

The only real plausible reason why sports betting would not evolve to look more like Wall Street’s markets is if incumbent operators are resistant to innovation. That is not difficult to imagine. “Established players like the status quo—even if it is in their best interests to optimize their books,” Halikias said.

This post was originally published on here