Tuesday, July 22, 2008

Wow. A Betting Exchange, in 1998?

John Swetye is a founding member of the Horseplayers Association of North America. They are a grassroots movement for both harness and thoroughbred (and even quarterhorse) bettors, fans, owners, whatever. I will blog more on them at a later time, but this piece written by Mr. Swetye is absolutely fascinating.

It is about how he in 1998 had the betting exchange idea for US racing and began shopping it around.

The internet was still new in 1998. One of the biggest success stories was Ebay, the auction company that brought buyers and sellers together on-line.

So standing near the paddock at Churchill Downs I had an epiphany. Using the internet and an Ebay model, it would be possible for the little guy to play the role of a bookmaker -- really not much different from shorting wheat on a commodity exchange.

The big difference is that, for as little as a dollar, a horseplayer could become a bookmaker online and anonymously. (One problem with betting with bookmakers is that they get to know you and may not take all your action.)

Even more exciting than the little guy becoming a bookmaker was the thought that it would be possible for two people from anywhere in the world to bet against each other on any event where the outcome could be verified.

I knew this idea was so big that I was trembling in my shoes as my mind was flooded by all the possibilities.

So taken with the idea, he began to write a plan and even had a name - iBetcha. One of the people he sent his idea to was billionaire Richard Branson of Virgin. The scan of his rejection letter is here.

Undaunted, I started to submit my proposal to business people. I showed it to George Hoffmeister, who at the time owned The Vinery breeding farm and Real Quiet. He was a successful entrepreneur and liked the idea, but was not in a position to start a new company after having just bought a large breeding farm.

I submitted the proposal to Richard Branson of the Virgin line of businesses. You can read his reply to me at http://www.hypernormal.com/html/virgin.jpg. It was a rejection.

Of course this idea never got off the ground in the US. And John's work died. He sums up the piece nicely, and so does the comment to the piece: "We missed the original boat, but there is still one sitting in dry dock, waiting for the idea to get off to sea and set sail."

Fast forward 10 years later. Racing in the U.S. and Canada is not growing and is faced with stiff competition from lotteries, on-line poker and a proliferation of casinos.

The one thing that could turn racing around in this country is a betting exchange. Having had 10 years to think about betting exchanges and see a few of them in operation and having placed bets with the major ones, I've got some pretty good ideas on how to make them work in this country and how to improve them. The big question -- is U.S. racing ready to embrace this paradigm shift? Well, they better because they aren't going away and in the meantime U.S. racetracks and horsemen are giving up millions if not billions in revenue. This reminds me of full service brokerages complaining that it wasn't fair that they couldn't compete with discount brokers. Well, they had to learn how if they wanted to stay in business.

If we really want to sweeten the pot then we should embrace the betting exchange paradigm shift. Horseplayers have. I'm sure ADWs are interested in running betting exchanges. Horsemen would welcome the revenue. I know racetracks would welcome the revenue.

Come on, what are we waiting for? Bankruptcy? Slot machines?

I found this an amazingly interesting story. I hope you did as well. My snippets do not do the article justice, so read the whole thing if you found it interesting.

To sign up for HANA and become a member (it is free and open to all people in North America) click here. Their homepage is here. Perhaps you will be part of the next big thing. With people like John invovled, it seems that they are on their way.

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