Nasdaq has hosted athletes like U.S. Olympians and Paralympians for media events, but is now showing an interest in the growing sports betting market.(Mike Stobe/Getty Images for the USOC)
Last month, the Nasdaq financial services company signed a deal to provide gambling platform Football Index with access to its trading engine. The U.K.-based Football Index is a betting service modeled on a financial market—users buy and trade shares in soccer players instead of public companies.
In this partnership, Nasdaq will help the Football Index match buyers with sellers. But the corporation behind the world’s second biggest stock market—NASDAQ—and a host of smaller international markets has a growing list of sports betting clients. Its pari-mutuel calculation software Longitude is used by other operators such as the Hong Kong Jockey Club, Australia’s Tabcorp, and Swedish horse racing operator ATG.
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“Gaming and wagering is a really good example of one where you see certain characteristics that are similar to financial markets,” explains Scott Shechtman, head of new markets at Nasdaq.
One of those new markets could be the nascent U.S. sports betting ecosystem. Since the U.S. Supreme Court overturned PASPA in May 2018, two overseas data companies have gained a significant foothold in America. Swiss company Sportradar has fraud-detection deals with leagues such as MLB, MLS, NASCAR, and the NHL. British firm Genius Sports works with the NCAA, and also has a betting data deal with NASCAR.
SportTechie recently spoke to Shechtman to learn about how he believes the U.S. sports betting market will evolve, and why Nasdaq could provide pro leagues in the U.S. with more robust integrity services than they might have access to from sports data providers alone.
SPORTTECHIE: How is NASDAQ helping Football Index?
SCOTT SHECHTMAN: In general, the concept is our technology is a fit to facilitate their existing business. And what happens is they’re growing and they’ve grown beyond the point where they can manage the transaction volumes and complexity that they’re seeing. And our software is really good at handling large transaction volumes, especially when there’s complexity involved. And so they will be able to grow their business bigger and faster than it works today.
You see this in a lot of startup markets where somebody’s got a great idea for a business. They build what operates perfectly well as a marketplace when they’ve got x number of customers. When that number of customers becomes 2x or 4x or 10x, all of a sudden, the way they were managing that order flow is not sustainable. So you really need more sophisticated market technology.
SPORTTECHIE: How do you see the U.S. market developing?
SHECHTMAN: If you look at the way the U.S. sports betting market is developing, you have primarily U.S. based companies that [are] essentially license holders. They have licenses in these various states. If you want to offer sports betting, you need to have that license. But these companies like the big casino companies or race tracks, they don’t have the technical capability to offer the sort of sports betting experience and to run the sort of sports betting operation that you see overseas, where you have a very mature legal, popular industry. If you look at all these deals that have happened, you basically see overseas, primarily European, technology providers coming in and partnering with U.S.-based license holders. So most of the technology that’s being used for sports betting even in the U.S. comes from overseas.
We’d be thrilled if there was a U.S. based company that wanted to work with us and use some of our technology but the main providers of the sort of technology and the main operators of that technology are overseas. Because remember we don’t offer an end to end solution. We’re not providing anything related to customer experience or customer marketing or managing accounts. That’s not what we do. We do back end plumbing, we do things with data, we’re overseeing the integrity of markets. So a lot of what you’re seeing in terms of partnerships is overseas providers of white label or end-to-end betting packages that these casinos and race tracks can leverage.
And now you’re seeing those same technology providers coming to the U.S.. Even though they are not the headline grabbers because nobody really knows who Open Bet or SG Digital is, they know who Caesars is or MGM. They don’t always know the names of these companies that provide the tech that are primarily overseas.
SPORTTECHIE: How do NASDAQ’s integrity services differ from competitors like Sportradar or Genius sports?
SHECHTMAN: Now that the U.S. market is opening up, we’re seeing a lot of the leagues looking even more closely at the integrity issues that could come along with sports betting. It’s one thing to look just at the pricing, which is what you see from a Sportradar or Genius Sports. They are monitoring price changes across various bookmakers.
Our technology is capable of monitoring the actual betting transactions themselves. In financial markets, … there’s a lot you don’t see when you stay at that surface level of just the price. It’s when you see the order book, when you see the actual transactions that you can start to see where certain activity might indicate something. It’s that capability and that technology that we’re interested in bringing to help secure the integrity of sports as sports betting expands.
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SPORTTECHIE: What happens when suspicious activity is detected?
SHECHTMAN: As any marketplace, you may want to oversee transactions to look for patterns. We have a lot of customers of our surveillance business globally. These are equities markets, fixed income markets, options markets, electricity markets where electricity is traded. What we do is we deliver software that allows these markets, or regulators in these markets—we have a lot of customers that are regulators and we have a lot of customers that are banks overseeing trading within their bank—to detect these patterns. It serves them up alerts that say, “Hey something interesting may have happened here. Do you want to investigate further?” And then they are the ones that pursue any action. We are empowering them to detect when something may be wrong. Any investigation or further action would be for them to take.
SPORTTECHIE: Is sports betting the biggest growth opportunity for NASDAQ?
SHECHTMAN: No, not at all. In general, the fastest growing part of Nasdaq is the market technology division, which is where we provide technology to other marketplaces and exchanges and other industries. And I think [in] the part of the business that I oversee, which we call “New Markets,” sports and gaming is one industry vertical that we are focused on in addition to transportation and logistics, insurance, real estate, digital assets and so on. I wouldn’t call it the fastest growth area [but] I would say it is a growth area.
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