Last September, when the brutally boring Denver Broncos took on the somehow more brutal Oakland Raiders in an NFL snoozer for the ages, a New Jersey man laid down a $110 bet.
When he went to cash in his winning slip, he was denied the $82,000 he rightfully won. FanDuel, the daily fantasy, and sports book company that took the bet claimed their automated system mistakenly generated odds on the game and wouldn’t honor the bet. It was only after a rash of negative media coverage that the company did a one-eighty and agreed to pay out the man’s winnings in full.
He wasn’t the only person who benefitted from their mistake that day, but his payout was large enough to draw big headlines. What is shocking is that it was clear that the company’s original decision to cancel the bet would have stood had it not been for the media coverage and public outcry.
With $39 billion bet at licensed sportsbooks across the world annually, including more than $6 billion on the Super Bowl alone earlier this month (not to mention an estimated $200 billion bet on black market sports books last year), you can be certain the man from the Garden State wasn’t alone in losing a wager for a mistake that wasn’t his.
Those types of mishaps and post-outcome rule changes are driving bettors, or “punters” as they are often called in the UK and Australia, to look for solutions that ensure their bets can’t be canceled, changed or leaving them feeling, to put it candidly, ripped off.
The solution is applying blockchain technology and allowing the benefits of a decentralized network to revolutionize the sports betting industry.
In a 2018 article analyzing gambling industry trends, Inc. Magazine wrote: “…the underpinnings of the [blockchain] technology hold substantial promise for bringing the element of trust into online gambling. By integrating blockchain technology, all parties benefit from the permanent record of a verifiable, unchangeable transaction ledger. In other words, an online gambling platform using this technology provides transparency at the transaction level.”
With such giant sums on the line, the pressure to maintain perfection in execution is massive. Sportsbooks need to ensure that all betting data is safely delivered without being tampered with and that all bets are resolved quickly and correctly. There are several hiccups preventing this in a traditional sportsbooks model: altered or mistakenly input data leading to incorrect resolutions, severely delayed deposits and withdrawals due to archaic systems, and as previously mentioned, errors in line setting leading to voided payouts.
A blockchain-based book can significantly improve bettor protection in these types of situations by creating a trustless ecosystem. When betting using smart contracts, the blockchain creates trustless transactions, which enable bettors to wager without having to rely on any centralized party. All facets of a wager are handled by decentralized actors, and the automatic execution of the smart contracts ensure that transactions occur exactly as intended. The betting data written to a public blockchain cannot be altered.
The inherent security of blockchain alleviates many of the issues associated with data integrity. In a traditional transaction, the data travels between data providers, agents, regulatory bodies and operators. By decentralizing the data using blockchain technology, not only is it publicly shared, which helps prevent illicit tampering, but the flow of data is streamlined. What was previously a highly complex system that required enormous coordination between data processors is now simplified. And best yet, it is accomplished at a fraction of traditional costs.
By allowing the market data to be shared through an incentivized oracle network, oracles and bettors who contribute data to the network can be rewarded for contributing data. This betting ecosystem not only rewards oracles for contributions to the network but also provides the operators with a lower bottom line cost. This, in turn, allows them to redistribute these savings back into either friendlier lines for bettors or more valuable promotions. In turn, this helps operators attract more bettors to not only their sportsbook but the entire betting industry.
Furthermore, once the bets are resolved via smart contract, the bettor will have the funds in their wallet and have the ability to withdraw nearly instantaneously. Traditional sportsbooks often have issues with immediate withdrawals, especially with larger amounts. With cryptocurrency payouts, these issues are a thing of the past.
And making these issues obsolete is especially important for events such as March Madness, which saw bettors wager more than $10 billion on tournament games last year, a sum certain to go up next month given more U.S. states have since changed their stances on legalized gambling. 52 games are played over the first six days of the tournament, featuring games across the country ending within seconds of each other in rapid-fire fashion. The ability for bettors to get paid and get access to their funds quickly, as well as be assured their bets will be honored is absolutely paramount.
In addition to the aforementioned increased bettor protections, enhanced data security, flawless bet execution, and total information transparency, applying blockchain to sports betting also brings another massive benefit – the use of cryptocurrencies. Utilizing cryptocurrencies will result in a significant reduction in fees associated with payment processing. One popular payment processor, Aliant, already announced free crypto processing for select merchants and is diving headfirst into crypto-based gambling and gaming opportunities. It won’t be long before others follow, lowering transaction costs even further, which will lower sportsbooks margins and give players better chances to win.
It’s rare that both sides of the betting equation win, but blockchain sportsbook technology is paving the way for both the bettor and the book to come out ahead.