Smarkets is a UK-based financial exchange company that is on life support in the US, but the trail blazed by Kalshi and other commodity exchange platforms in the US sports betting industry has signaled a rebirth for Smarkets in America.
A Chance Return
People may know of Smarkets by its recent pullout of the Colorado market and its minute influence in the Indiana market through its sportsbook brand, SBK. But recent events in the US financial exchange market have given it hope that it can attract some of the market in the US political race market and, perhaps, the sports events contract market paved by Manhattan-based Kalshi.
“Politics are only interesting in the United States once every two years, four years, a little bit like the Olympics,” Smarkets CEO Jaon Trost said. “But I still think it’s worth doing, even if we don’t get sports. It’s a 1,000,000,000% no-brainer with sports, but I think it’s a 100% no-brainer with politics. So we’re going to do it, regardless of whether … sports gets struck down.”
“The water’s warm,” Trost added. “And, I mean, if that sports thing holds, like, why not? You have to.”
Financial Hurdles
But before we see the London-based company appear across all 50 states, Trost referred to the estimated $2 million cost to set up shop in America over two years as a Designated Contract Market (DCM) operator. The contract financial exchange would offer the user the option of betting “yes” or “no” on events tied to economics, pop culture, and politics.
Sports events would be the holy grail, but Trost insists that could come later, depending on the outcome of several lawsuits by state regulators attacking the exchanges for violating their state regulatory environments.
Meanwhile, the exchanges are governed by the US Commodity Futures Trading Commission (CFTC), which allows them to offer trading contracts throughout the nation. However, their dalliance into sports betting has cannibalized some of the wagering activity that has been the domain of licensed sportsbooks.
Sports Betting Market Could Be Opening Up
Kalshi has been the pioneer in sports betting contracts throughout the US, and it started with offering outcomes of political races, namely the 2024 presidential election, which forecast a landslide victory for Trump, and eventually began offering contracts on sports events.
Legal Uncertainty Continues
The CFTC under the present administration has been a bit obtuse regarding the issue, but early legal victories were scored by Kalshi and other financial exchange companies. Nevertheless, the legal battles continue, but Kalshi continues to offer its sports events contracts nationwide under the aegis of the CFTC.
This operation has attracted the attention of sports betting behemoths FanDuel and DraftKings, which are monitoring the situation intently to determine if they, too, should enter the exchange markets.
“The way I see this shaking out in 20 years is all these big brands are going to be brokers that sit on top of an exchange,” Trost said. “I don’t think any sportsbook will be making any of their own markets in 20 years.”
Derivative trading exchanges have been traditionally used as futures markets for commodity exchanges like the price of gold, silver, and even pork bellies. However, this new frontier has added a possible cash cow to these companies, but the ultimate verdict remains in abeyance until the courts rule.
