Sports betting dates back to the ancient times when chariot racing was a popular form of entertainment in ancient Greece, around 700 BC. Today, it is a billion-dollar industry featuring all forms of sporting events. But more importantly, sports betting has come a long way to find its footing in modern-day society. The first legal sports prediction markets popped up in the late 1800s and early 1900s; during this period, soccer became a popular sporting event in Europe.
While most regulators would later ban sports betting at the beginning of the 20th century, the sentiment had changed by mid-century. In Europe, people started placing wagers on sports events as part of their pastimes. The biggest evolution, however, came about in 1996 when the first online sports betting site allowed fans to bet on an FA cup replay between Tottenham Hotspur and Hereford United. Since then, this industry has experienced tremendous product diversity and market share growth.
The flaw in online sports betting models
Although it seemed like a wild concept in the early 80s, the internet significantly changed many industries. One of them is sports betting; people across the globe can place wagers on their favorite sporting events regardless of their location. Arguably, this accessibility has increased the popularity of sports such as soccer, football, and boxing to some extent. But what exactly are the underlying mechanisms involved in sports betting?
If you have ever placed a wager on any sporting event, there is a probability that you have won a payout or lost the funds placed as collateral. Let’s take the example of the ongoing World Cup tournament; anyone can leverage online betting sites such as Caesars sportsbook, Mybookie, BetMGM, and Fanduel to place a wager in any of the matches. But there’s a catch; bettors must win over 52.4% of their bets to break even, given the costs attributed to compound interest.
More often than not, sports bettors end up losing their money; the professional win rate is slightly below 55% in the long term. Online betting sites (the house) take home the lion’s share of the revenues generated while bettors keep coming back hoping to get ‘lucky’. Unfortunately, the house has mastered the game in the new era of technology. Offer alternative products such as live streaming, more diverse wagers, competitive odds, and promotion features to keep the circus going.
And now to the big question, is there room for a ‘no risk’ sports prediction model? As much as there is no free lunch, the emergence of decentralized sports betting markets powered by Non-fungible tokens (NFTs) is proving otherwise. This crypto sub-niche has been making headlines in the recent past, given its value proposition in changing the dynamics of online gambling.
NFTs cutting edge
Over the past two years, NFTs have ballooned into a billion-dollar ecosystem, becoming the pioneer crypto assets to be integrated with other industries. Their underlying value has particularly been felt in the online gambling industry. But before going into the details, NFTs are unique blockchain-oriented tokens that can be used to represent real-world assets, including collateral for placing a wager on a specific sporting event.
So, how are NFTs introducing a risk-free model for sports betting? The concept is pretty straightforward; imagine an online betting site where one can purchase an NFT that allows them to place bets and increases in the value based on the win rate. For practicality, let’s take the example of Pooky, a unique football predictions game built on the Polygon blockchain. This decentralized sports betting platform allows players to use 3D NFT Pookyballs to make predictions and feature on various leaderboards.
Unlike the traditional betting platforms, the players on Pooky are not bounded by a ‘win or lose’ situation. The 3D Pookyballs have fixed and variable attributes that determine how much value the NFT can accrue based on the number of wins. Assuming a player wants to bet that Manchester United will win a match against Chelsea and the outcome favors them, their NFT becomes more valuable based on this particular outcome.
Should Chelsea win the game, the bettor still retains their NFT and stands a chance of winning experience points (EXP) if they had predicted other scenarios such as a ‘home or away’ win. Ideally, decentralized sports prediction markets like Pooky are solving the dilemma in today’s sports betting market: the choice between ‘high risk, high rewards’ on traditional Web2 betting platforms and ‘no risk, no rewards’ with free-to-play options.
Despite being a nascent space, NFTs are creating an array of new possibilities in the online gambling economy. More importantly, these digital assets can be sold in decentralized marketplaces, which means that players who wish to opt-out can liquidate their value-adjusted NFTs at market value. What better way to create an engaging avenue for sports bettors to actively participate while minimizing their risk exposure? So far, NFTs are proving to be instrumental on this front.
As mentioned in the introduction, sports betting goes a long way back and will probably continue to thrive as newer technologies pop up. That said, it is fundamental for the ‘house’ to develop more innovative ways of leveling the playing field. NFTs might seem like a technical concept for now, but as explained, their decentralized and permissionless nature gives them quite an edge in sports betting. A fairer betting ecosystem where it does not have to be black or white; that’s the future of sports prediction markets.