The next evolution in fantasy sports is poised to arrive in time for March Madness.
TradeSports.com, an Irish company powered by Intrade, is bringing its version of sports investing to the United States. TradeSports will allow players from the vast majority of states to show off their in-game trading skills, while financially investing in who wins and how many points are scored in a single game.
Intrade, a popular online prediction market, was sued by the Commodity Futures Trading Commission (CFTC) in 2011 and eventually ceased operations in March. On Tuesday, the company published a press release, announcing that all market members and investors, in the United States and internationally, will be repaid in full, with account balances restored no later than Nov. 18. Intrade director Ronald Bernstein declined to comment on the status of the legal battle with the CFTC, but is confident about the company’s future.
“The company has sufficient resources now to progress some of the initiatives that we had been planning in the past,” Bernstein said in a Wednesday phone interview. “We’re really, really glad that we could come to the arrangements we have, where no U.S. customers, no international customers have lost any money due to the problems that befell the site.”
In the release, Bernstein, a former trader on the floor of the New York Board of Trade, also announced the return of TradeSports. He said Wednesday that the NCAA Tournament is being targeted for the initial launch. The markets will be centered on specific sporting events, for example, a Dallas Cowboys-Philadelphia Eagles game. Contestants will trade contracts based on the likelihood of certain events during the game, including the final score.
TradeSports will use Intrade’s high-level trading technology to operate the game. The business model is similar to the “rake” model used by daily fantasy sites, with TradeSports taking 10 percent of the total entry fees and paying out the rest to winners. The biggest difference in TradeSports compared to daily fantasy sites is what is being traded.
In the TradeSports model, a player will enter a contest for a set amount, $10, for example. They will receive $10,000 virtual dollars in their portfolio and then will trade multiple contracts based on events in the game. Bernstein says which team wins or loses, how many points are scored by both teams and whether or not the quarterbacks combine for 500 yards are examples of contracts that will be traded during a game.
“You watch the game, and the markets fluctuate based on the likelihood of those events occurring,” Bernstein said. “Markets are always between 0-100, just like a stock or a futures market. Whoever trades the most successfully win the contest.”
Bernstein rejoined the Intrade team after CEO and good friend John Delaney died while attempting to climb Mount Everest in 2011. Bernstein visited with BettingTalk.com on Wednesday to discuss the legality of TradeSports in the United States, the importance of prediction markets and the future of Intrade.
Q&A with Intrade Director Ronald Bernstein
Q: Does the TradeSports model comply with the legal regulations for skill-based fantasy games?
Bernstein: Yes. I think the more important body of law that we’ll respect is that sports trading contests in the structure that we’ve designed are games of skill.
Q: Do you feel like you’ll be hearing from the CFTC or any of the sports leagues about this?
Bernstein: No, because I think we fall clearly in the realm of skill-based gaming with fantasy sports. The winner of our contest isn’t solely decided by a particular team or a particular player, and it’s clearly basis on your skills, your analysis, your reaction time and your intuition on making trades, just the same way a professional hedge manager trades. We have overwhelming commentary about the skills required to be a successful sports trader as opposed to participating in a game of chance.
Q: An academic paper, “The Promise of Prediction Markets,” authored by 19 business professors in 2008 highlighted the value of prediction markets. Five years later, after the rise and fall of Intrade, why do you believe there is still promise and value in prediction markets?
Bernstein: What we’ve learned in our operating experience is that there is a tremendous thirst for market data. And what I mean by market data is a very measurable way to analyze the current opinion about things. When we say opinion, we don’t mean what people hope will happen, we mean what people think will happen. People need to know that, because life is moving so quickly now and in so many different directions, it’s very difficult to be completely informed, even on things that matter a lot to us. And by having a way to see what other people think about things, helps us reset, compare and gauge our own reactions accordingly. Sometimes it could lead to preparation about things or sometimes it’s just for entertainment. Sports is the ultimate market for that. But there’s also things like who will be elected? What might happen if a Democrat gets elected? Will interest rates grow up? Should I lock in my mortgage now? Should I take my money out of CDs or put my money into CDs? Prediction markets take a snap shot of the wisdom of the crowd about any particular question that can be answered ‘yes’ or ‘no.’ And help us plan for those things ourselves. That’s why I feel they’re very important.
Q: What is next for Intrade?
Bernstein: Intrade always operated with the absolute best motivator, and that was cold-hard cash. Putting your money where your mouth is. The challenge now for Intrade it to understand what else will motivate people to try very, very hard to vote on things. You need a very active and engaged community to try to do their best to provide the opinions and results that they think will come true. Otherwise, the data doesn’t have that same grip on reality.