The ROAR Podcast: Alex Kane

# ROAR Podcast: Alex Kane
**Guest:** Alex Kane
**Date:** 2025-07-24
**YouTube URL:** [https://www.youtube.com/watch?v=2NhAufRT8YY](https://www.youtube.com/watch?v=2NhAufRT8YY)
**Source:** YouTube auto-generated captions (no speaker diarization)

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(0:01) [Music] Welcome to the Revenue Above Replacement podcast. I'm your host, Adam Gman. With me today is Alex Kaine. Alex, welcome to the podcast. >> Thanks so much for having me, Adam. >> Yeah, thanks for joining. And we like to start this podcast the way we like to start every podcast, which is tell us a little bit more about your background and how you got to your position that you're currently in right now. >> Sure. My background by education is business law and finance. I attended and graduated from Jackson University in 2017 and I started initially as a business law major and then I added a finance major after my first co-op opportunity. Shrekes is on the quarter system. So did did six months at a law office realized and I maybe wanted to try something new. uh I added finance as a major and immediately I was a you know hooked you know learning what is how to value a company what a stock option is I took a whole course on stock options and I just thought to myself wow this is kind of crazy you can literally bet on the price direction of a company in the most obtuse way is very clean you know you don't have to buy the stock you can literally buy a bet an option or a future and if that future or option and increases in price, you can make a profit. And when I was at Drexel, I started to dabble into stock trading because a lot of the kids in the finance program wanted to sort of, you know, we had access to Faxad and to Bloomberg and were learning how to value company. And we learned that, you know, every so often companies come out with earnings.

(1:38) And so we started to trade those blue chip stocks because everyone around was using Robin Hood. It was easy to sign up. It was mobile. It was snappy. It spoke to us. It was commission free. And what I realized was a lot of the students were gambling. To me, there's not a huge difference between like buying the Phillies or buying Apple stock or the Apple call option or put option. And that's when it hit me that, you know, someone is going to create a sports betting if sports betting ever became legal. This is back in 2016. That mimics the ease and approachability and the transparency and the sleekness of Robin Hood. And so that anyway, that's that's how it started. We can get into like how it became came to be, but that was the idea. I graduated and I was like, I want to create a an exchange for sports betting. Sports betting wasn't even legal at the time. It was a wild idea. I had no idea. I had no background in technology. I had no idea how to build an exchange. I sat there and I thought to myself like, okay, well, if I can build something that looks like a stock exchange, that's probably a good place to start. And then I sat there, I'm like, I don't even know how a price of a company comes to be. Like I know how to value a free cash flow of a company and work your way back and discount the cash flows to arrive at a net present value. But like what what is Apple $154 per share? Like who comes up with that? And so thus began a very long journey in terms of how to build an electronic marketplace.

(3:03) >> Yeah, I think we we definitely want to talk about sport trade. Obviously that's how you and I got connected for an article that I ended up writing for John Wall Street which we definitely want to get into. But before we do that, I kind of want to start at the beginning. A lot of our audience are either currently playing sports in college or have played sports in college, including myself. I know you did that from a varsity golf perspective and that led you to start your first venture in the golf space. So, can you talk about a your experience kind of leveraging your experience and how you think of it impacting your work today?

(3:39) >> 100%. I still remember where I was. So, I I played golf in college. I was a golf nut. I watched every single golf tour there was. Even today, I look at a golfer and sometimes I could just tell by like the way they're approaching the ball like, "Oh, that's so and so." Which is pretty sad to be honest. >> What What golf What sport did you play in college? >> I played soccer. >> Very, but I played soccer in college. Yes. Well, I play golf even poorer just um and I watched Moneyball and that was like a that was a almost a life-changing movie to me. I watched the movie 21 and I began to realize that you could use statistics and mathematics to gain an edge and I just thought and still think that's the coolest thing in the world.

(4:28) And as a golfer, I began to learn more about advanced analytics in golf. It was a book written by Mark Brody came out in 2013 called Every Shot Counts. And that book changed my life. That if for those that don't know, there's this kind of methodology that Mark Brody essentially invented discover, which is moneyball for golf. that every shot you are gaining or losing strokes on an expected value basis to the field. It's a very simple concept. If you start on a par4 and it's 400 yards away and from 40 yards away the average tour pro scores exactly a four and you hit a 330 yard drive right down the center of the fairway and now you're 70 yards away.

(5:16) The expected average from there is around 2.5 2.4. You've picked up 6 shots. you've used once, you know, three, but you have an expected value of 2.4 from pedd up 6 shots. And you can do that on every single shot throughout the round. And you can adjust it to what the field is doing on that course on that day. And now if you watch it telecast, strokes gained is what everyone talks about. They don't really talk about fairways hit or greens hit or total putts or total driving. And Mark Brody does this incredible job of basically eviscerating the argument that those statistics matter at all. It's it literally was Moneyball for G. I remember where I was. I was at Borders.

(5:58) I picked the book up. I walked out of the parking lot and I didn't even leave the parking lot. I read the whole book and I was just hooked. And I just thought to myself, if people aren't doing this like the end of that the movie The Moneyball, if people aren't doing this tomorrow, they're going to they're going to knock me on tour anymore. people are still telling how many putts they hit, how many fairways they hit, they're making their own decisions. And so immediately I did it for myself and I certainly do it for others. And I worked with my one of my best friends who now is on the management team here at Sport Trade and we started to build these spreadsheets that you could calculate strokes gained.

(6:36) And then we figured out you could scrape PGA Tour websites and do it for the same. And then I real began to realize that there are PGA Tour pros that weren't thinking this way. And so we've approached our first one through a mutual connection and begun to collect his data and run automated reports and then share it each Monday and say you need to work on your putting from 3 to six feet. You need to do this, you need to do that. And that really started a project which became a company in college called tour analytics. And it was really a side project and I learned how to try to sell client and how to, you know, you know, give break down the data because I like to nerd out about it and maybe others don't in a very consumable fashion. And that was one of the coolest experiences I've ever had. So that was the kind of story of like trying to share that moneyball thought process with competent professionals that actually could do something with the data. And now every single tour pro has analytics people on their team. All one 200 of them on the PGA tour. And back in 2013 2014, less than 10% of the tour had that. So it was really cool to be a part of that.

(7:48) >> Yeah, it I did want to drill in into selling component. So what did you learn about selling? Selling is going to be something that or we talked to our students about and talked to and the audience is probably familiar with, but what did you learn particularly given what you said? this audience is professional golfers who are used to, you know, potentially hearing sales pitches in a variety of different contexts. >> Yes. I learned that perceived value is is way more important to the to a customer than actual value. that to me the actual value of being able to say, "Hey, if you have 25 hours to practice between now and the next event and you're spend 17 of them on this, I can save you 17 hours is a lot of value to me." Knowing how important the data is and how insightful it is for Torpro that has a college kid walking up to them with a pencil behind the ear and a spreadsheet essentially, there's no way that's going to stick. And so what essentially we did is he gave it away for free and said and worked with the coach actually to work it into part of his routine. So it was less the tour pro making the decision around I'm going to change the way I approach training and more working with the coach who was the mutual connection who was a huge believer in strokes sort of work that in. Then we started to try to work with other pros and we we sent out sample reports to like all these pros and their agents. And then what I realized is like Mark Brody was also starting to do it and I'm like okay well he's come up with it. He has the official data. He doesn't have to scrap the PJ tour website. He has the direct shot link thing. And then I thought to myself like I got to go to the PGA Tour and work for them because they could sell this directly to their 1099s and their 1099s are the are the pros who I think are our contractors.

(9:35) And at that point, I was in college. I was like, I would love to do something like this full-time, but it's clear there's not actually a business here. It was more of like a very fun project. And I just that was my first lesson of like you have to create so much value for your customer for them to even consider paying you one cent. And if you just absorb that as a fact, it will be very fruitful, I think, for you. And then how did that lesson at least at a high level because I don't think our audience maybe has as much familiarity with like how stock exchange works and stock prices.

(10:07) So I want to get into that but at a high level how did that experience inform your desire or interest in starting another company and what did you learn from that experience that maybe helped factor into the starters for trade? >> Yes, I think a couple of things. one, I learned how critical it was to how valuable it is to have technologists on your team. Even the person David that I worked with, that was his name, David, had skills that having to do with like SQL that I just did not possess. And that was a very early lesson for me of like any business that is scalable in in any way, shape, or form has technology the epicenter. So any sort of techn any sort of business you're going to build even something as simple as what I tried to come up with is fundamentally a technology company sales are the engine that drives growth but technology is what enables the transactions or or or value to be created and I was not a technologist. So that was a very important lesson to me of like oh I need to be very strong in that sort of capacity by bringing that core competency into the realm into the founding sort of ethos of the company.

(11:20) That was one thing I learned and it was just really great even as a student to not be looked at as a student to be looked at as someone selling a service than someone that had a quote unquote company. I mean it really was more of a side project but you know even going through the process ultimately of forming sport trade as a business law major of like I know how to submit first poetry wasn't actually an LLC and you put some intellectual property there provisional patent application a trademark and then ultimately in 2018 converted the LLC to a core knowing how to do that and like file a paperwork with a Delaware Secretary of State and then know enough when to bring an actual attorney in was was really helpful as well. And yeah, thus began a two-year sort of period where I really didn't know what I was doing and I learned a ton kind of on the fly. And my last year at Drexle, I would became I was like one course away from being a minor in entrepreneurship. And Chuck Sako, who runs the entrepreneurship program at at Drexle, when I talked to him about it, he was like, "Just go do it. that's what you're going to do after college and try to start this crazy business. Don't take another course and stay here another quarter so you can just go do entrepreneurship.

(12:36) And so I was pushed off and I began sport journey. And yeah, again, we I definitely want to get into sport trade and even just some of some things that you and I talked about in terms of like sports betting concepts more generally and what goes on and why you started. But just to start out with, you mentioned Robin Hood and stock exchanges and commission free and sleek trading. Like can you just give a like a short primer on like how that works? Like how does stock exchanges work? Like how does Robin Hood work and how do you when people are buying or selling stocks, why do they do that? And what's you know you mentioned options too. We could go into that but just the basics like these are why stock exchanges exist and how they work and why Robin Hood originally maybe achieved success that it did.

(13:20) >> Yeah. So stock exchanges and specifically the US online equities another word for stocks cash equities means they're cash shuttle. You pay cash for them is the envy of the world. It is probably the best market structure. Market structure means like setup of rules and regulations with companies to create the best possible customer experience. So companies can go public. When companies go public, they usually choose a venue to do that on predominantly NASDAQ, New York Stock Exchange. And then after some period, those stocks can be traded on any US exchange. There's, I believe, 16 registered SEVC exchanges. Exchanges are known as lit venues. Lit as in LIT light, meaning anyone can view the market data. And then there are countless other what are called alternative trading venues. There's ATS's, alternative trading systems.

(14:19) There are wholesalers. It is a rather complex system, but essentially you have all these venues that match buyers and sellers of stocks repeated. won't talk about equities and that would be like Apple, Google, Amazon as well as other products like ETFs and which are baskets of stocks and it's a very competitive market structure and what competition creates is tight spreads and a spread is the delta between a buy and a sell price and because there are so much liquidity which means interest and buying and selling equities and there are so So many venues that compete to deliver the best possible price means that buying or selling a stock even 2030 years ago became almost free to do if you were a participant.

(15:12) And brokers like Rob's a brokerage, TDI trades a brokerage. Schwab is a brokerage. Their job is to connect the end user, myself, you, anyone that has a mobile phone or computer that wants to link a bank account and begin investing and saving for college or whatever's next that links that target to the global markets or in this case the US online equity system. And the amazing thing what a brokerage does is because there's a rule called regms passed that we did in 2007. basically said that if you are going to you have if you're a broker you have a duty to find the best possible execution for your customer and that means that no stock trade can happen outside of the NDBO national best bidder offer to take all the 16 exchanges right now and there's bids and offers people trying to buy and sell all of these equities take the highest possible bid to buy Apple across all 16 take the lowest possible offer. So someone trying to sell Apple across all 16 and that creates a synthetic NBBO, the national best bidder offer. And usually even for $150 stock, it's only as pennywide, which means you could buy Apple for $150 and one cent and you can sell Apple for $150.

(16:30) And brokerages have a duty to execute all trades within the NBBO. And it was the advent of Robin Hood and making stock trading completely commission free. It used to cost you $10 to do so even 1015 years ago. And now you know transacting truly in online stock market is essentially free and Robin Hood really democratized that and brought the power of that through a sleek mobile UI to customers. So that's what Apple is. Rob is it is a brokerage and a brokerage connects users to the online stock exchange structure and stock exchanges are venues electronic venues that match buyers and sellers.

(17:15) >> So then how and again we should get into sports betting more generally but how does that concept apply to what you created with smart you know how are you doing that in terms of matching buyers and sellers from a sports betting perspective? So, I would say the coolest thing about Sport Trade is going back to like when I wanted to start the business. I'm like, "Okay, I want to create this exchange." And I kind of already established in my mind that a sports bet and buying a share of stock is pretty identical. And if I could figure out how to build a stock market, I could figure out how to build a sports betting exchange. That seems pretty easy, right?

(17:51) with figure out how the stock market works. RIP is there are people that have dedic dedicated decades of their professional career and are still learning the best way to build a stock exchange. And what ended up happening was I ended up connecting with all these people in the online sports betting community just learning learning about the the the friction that customers have in placing sports bets. And I was not surprised to find out that the same sort of friction that customers were reporting to me, they were experiencing in that day and age real time were the same issues that stock traders used to, you know, face 40 years ago. And that is wide spreads. Talked about the tight spread of being able to buy Apple at $150 at 1 cent and sell it at $150.

(18:39) Essentially completely free to trade. Very tight spread. lack of access, unable to trade desired stocks. >> Before we do that, what's like a typical, you know, spread in a sports bin, if that's it's like 1 cent for a stock trade, what would you say is a typical spread or was when you first started the company? >> Yeah. So, the typical spread in a in a stock trade is about 1/100th of a percent. The typical spread in a sports bet, and let's keep it simple, a straight sports bet, I want to bet on the Eagles or I want to bet the over, is 4.7%. >> Yeah, you're talking about 47,000x the fees.

(19:23) >> Because there is no competition in sports betting. In the same way, there are no right where are no online sports betting exchanges where there was competition. And one of the key reasons why and one of the key reasons that really made the online the stock markets in the 70s and 80s and 90s more competitive is that more and more participants and ultimately in the early 2000s were able to enter a limit order. And a limit order is like hey I don't want to just transact at the best available price. I want to choose the price at which I want to transact. I don't want to buy Apple at $150 and1. I want to buy that $149.99.

(20:06) And when multiple participants enter limit orders, it collapses in the spread even more. And so between like 95 and 2005, there was this unprecedented shrinkage of spreads to the point where the online stock markets started to produce prices in what were called decimals. There was this decimalization that happened in the late during the 90s where stocks used to trade in eighth of a dollar and then 16ths of a dollar and then 302 of a dollar. So Apple might be 100 and a 16th bid at 101. And as spreads started to collapse, it didn't really make sense to use fractions. It made more sense to use actual decimals, pennies. And now the conversation is about going to a hundth of a penny or a thousandth of a penny. That is how competitive the stock market is. And so it I thought, you know, to myself it would make a lot of sense if I could build an exchange for sports betting that I could solve the same problems that were solved for retail traders 30 years ago and 10 years ago if you had an end of Robin Hood for sports betterers.

(21:18) And so that was the general sort of concept. I'd connected with a lot of betters and learned about their issues and through that I met who is now our largest investor and they were one of the largest highfrequency trading market makers on the world's largest stock exchanges and they started as sports betterers and it was through that relationship where I basically learned how to build a stock exchange and fast forward to 2020 they made our their first investment in sport trade and they said hey Alex we have a that could build the exchange. I'm like, great. Who is it? They said, "It's John Ross." I'm like, "Well, no, not that John Ross. Not the John Ross that built, you know, what is the online, you know, market microstructure that every almost every exchange is built on." And they said, "No, yes, that John Ross." And so got very lucky, but ended up meeting just from the the the network and the community meeting John. And John is was the CTO at NASDAQ. He wrote their matching engine and he wrote our matching engine. And when I say our platform works like a stock exchange, it is pretty much a carbon copy of the NASDAQ stock exchange except for you're not buying shares of Apple. You're buying a share of the Phillies to it.

(22:35) And the market structure is almost exactly the same. Yeah. I want I want to get back to that because that's probably a novel concept. But you mentioned a couple things you mentioned there. One, you said that there wasn't competition. And then he's talked about the exchange. >> When you say the competition, competition with who exactly? Are you talking you're just talking about the betting operators or who would you say is why are betting operators charging h such high spreads? The short answer is because they can. >> If you were to think the audience were to think about a sports bet, most if they've heard about sports betting have heard about, you know, minus 110. that when you think about an NFL point spread, usually the book defines the handicap. And the handicap is a amount of points to give to or take away from a team such that it's basically a 5050 proposition. So let's take Eagles versus the Giants.

(23:29) Eagles might be minus three and a half. So take Eagles final score minus three and a half points and match it up to the Giants final score. And obviously the higher score wins the bet. And usually you have minus 110 is the predominant sort of price that you have to pay for either side. That means you're betting 110 to win 100, which means you're betting 110 to return 210. If you take 110 and divide it by 210, you get roughly 52.4%. So you're paying 52.4%. for a proposition that the bookmaker knows is a 50% chance win. So now turn that back into a stock trade. You're paying $52.4 for a share for a stock that's worth 50.

(24:16) Huge spreads. There's where your 4.76% comes in. You're overpaying for that asset by about 4.76%. Which is 52.4 minus divided by 50 minus one. And the reason bookmakers do it is that no one in the ecosystem can say, "Hey, wait a minute. I think that this asset is worth 50%, not 52.4%. So I want to pay 50% for Eagles miners through." You can't do that on a sports book. There's no way for you to put in what's called a limit order. And so sports books simply don't allow customers to enter their own prices. And that's how the stock market used to work 40 50 years ago. And that's why spreads were super wide. There is no way for you as a participant to say I don't want to pay this for Apple. I want to pay this for Apple. Think about millions of people doing it at the same time. Spreads get very tight. That's the first reason. The second reason less practically, more figuratively, is that a lot of people look at sports betting as entertainment as they should. Sports betting is entertainment. It is not a way to make money. It's not an investing tool or instrument and they're less sensitive around price and because there's not the same regulatory rigor around consumer protection in sports betting as there is in financial trading. There's no sets of rules like I talked about reg earlier which is a a regulation that forced a broker to to get the best possible price for their customer whether they were buying or selling Apple or any other stock that also doesn't exist eports betting. So if you know MGM is offering a price where you have to you know buy the Eagles minus three and a half at 52.4% but DraftKings is offering at 51.2% 2% which is minus 105 and you bet on MGM, you're going to get 52.4%. You have literally overpaid by a$120 1.2%. For placing that bet and there's nothing that operators have to do to give you that best execution and they want to create as captive as a customer as possible. And so what they tend to do is they give you a lot of bonuses and they put a lot of things in your face and they kind of distract from the fact that pricing is very bad and it works for the most part because customers aren't really aware that well if you bet three times a week that percentage really starts to add up. And so those are the two reasons. One, bookmakers don't allow you to enter your own price.

(26:55) And two, for the most part, a lot of people aren't really aware that getting the best price really matters because they've never had to think about that. When they make a stock trade, it just works for them and it's super efficient and sports betting is not regulated at all in the same. >> That's a that's a really interesting point is that maybe stock trading has influenced the spreads. I actually would have been a good point to put in our that we had that I had you featured in. That's a really interesting idea. something I think we could explore in more detail. But the the second part you brought up before again before we get directly into sport trading is market making. And I don't think our audience is as familiar. You've kind of talked about it and like obviously the stock markets are >> kind of a a way of describing market making, but can you talk about a the concept of market making and how it applies in stocks and then how it applies in your business?

(27:43) >> Yep. So I'll go back again to when I was at Drexle. I remember sitting just graduating like all right I'm going to there was a very just before graduation I'm sitting in the finance course and on the main floor of the Jerry C Labau Hall in Philly which is the name of the the the building of the Labau school at Drexalt is a stock ticker now all these logos GE GM Apple Mandel International Pepsico and there was a stock price and whether it was up or down and by how much percent I remember looking at that I'm thinking to myself, how the hell what does that mean that Pepsi is trading $68.40, who sets that price? Is that the price at which shares were just bought or sold? Is that the price at which I could buy Pepsi? Is that the price at which I could sell Pepsi? I had no idea. I had been a finance student for four years.

(28:35) And if I went to any other student in the finance program, I said, "Why is what does that mean that Pepsi is trading 6840?" They would all say the same thing. They would say, "Well, that's what the market believes it's worth." That's a free cash flow just in the back. No, no, no. Practically, where did that 6840 come from? Why is it not 6841? Why is it not 6830, 6839? Why is it 6840? And so that began my sort of foray into learning how prices has come to be. And if you think about what a stock exchange is, it's simply just a venue that lists PepsiCo and then matches buyers and sellers. But in order for there to be a trade on PepsiCo, a buyer and a seller have to agree on a price.

(29:17) And so in order for a buyer and seller to agree on a price, one of those two parties has to offer that price or bid that price. And the other counterparty has to agree to that price. And even in the stock market, if you take natural buyers and sellers, so me, you, anyone that uses a retail brokerage, there's not really enough of us for how quickly prices move to play both sides of that transaction. To play both the liquidity providing side, oh, I'm willing to buy PepsiCo at 68.40 as well as the liquidity taking side. Oh, great. I'll sell PepsiCo. I have 10 shares to sell.

(29:54) 6840. Done. We as retail investors, we usually just take what is available. And that's just easy. It's easy to think about. There's no education required. Oh, I want to Pepe's up 10% today. Sell. Boom. Done. And so, okay. Well, if retail investors aren't going to play that liquidity provision, liquidity providing side of the market, someone does, needs to, because without that, no one's going to transact. You're going to have a bunch of people willing to transact, but waiting for prices to populate. And that is why market makers are so critical.

(30:28) Market makers facilitate natural buyers and sellers. Market makers are always willing to both buy and sell in this example PepsiCo. Any instrument of an exchange list at a spread. So an market maker might say, okay, PepsiCo, I believe PepsiCo is worth around $68.40. So I'll be willing to buy a,000 shares at $68.39. And at the same time, I'm willing to sell a thousand shares at $6841. And it's that spread, and it's the the existence of multiple market makers all competing on that spread that creates a vibrant marketplace. So without the market maker, the exchange is worthless because it just sits there and it's a technology platform that's willing to buy, match buyers, and sell. But if there's no one willing to kind of be the party starter and take that first step, no one's ever going to transact.

(31:24) That is what a market maker is. And it is 2:44 here. Eastern time, which means the stock market is open. And if all market makers on the NASDAQ and NY today, and the next minute decided to turn off their systems, entire financial system would collapse. That is how important market makers are. And so less important in the sports betting sense because again it's entertainment but the same general concept without them there's no liquidity without any liquidity who are people going to transact against for you and I we want it to be simple we want hey I want to sell PepsiCo hey I want to buy PepsiCo done market makers do all that hard work of finding out what the true price of PepsiCo is and they take a very very very very very slim spread for file multia transactions. So let's get into your business then. So obviously we've talked around it a little bit and you've mentioned it, but just can you provide just a description of how you've applied kind of market making, stock trading to sports betting and what sport trade is and how it's how it kind of changes the paradigm and directly addresses those friction points that you mentioned.

(32:37) >> Yep. So sport trade is a sports betting exchange. So, we are the exchange that matches buyers and sellers. And we are the brokerage. We are the mobile app, whether that's Android or iOS that connects you to your bank, allows you to deposit, allows you to set responsible gambling limits, allows you to create an account, and allows you to place orders. We take those orders and we submit it to the exchange. We execute them and then we send them back to the client and say, "Great, you just made your bet on the Phillies or the Bears or whatever." And the instrumentation that is used is something that's called a share. And a share is simply $100 of potential return. that if I wanted to buy, let's say the Phillies are playing the Nationals, that the price at which I could buy or sell the Phillies is going to be representative of the market's estimated projection of the probability of the Phillies to beat the Nationals.

(33:40) So knowing that the Phillies to win share pays out $100 if the Phillies win, the price to buy the Philly share or sell a Philly share may be $68 per share, which means the market believed they have a 68% chance of winning. That if I buy one share of the Phillies at $68, I'm risking 68 to win 32. And at any time, this is really the magic of Sport Trade because it's a real time marketplace. every single pitch, market makers on the platform are receiving that data and changing what they think the true price of the Phillies to win is. So, if the Phillies start out at a 60% chance of winning and I buy one share of the Phillies, then the Phillies take down the Nationals one, two, three in the top of the first inning. Maybe the chance of them winning goes to 72%. And so now as an investor, as a sports better, what I bought for 68 is now worth 72. And I can actually sell the share I bought at 68 for 72, make a profit, have no more risk, and get out of my position. The Sport Trade facilitates realtime transactions between buyers and sellers, and it's all enabled by the exchange technology that we built as well as our partnerships with market makers that flood every single thing we list.

(35:01) could be Phillies to win, nationals to win, over eight and a half runs, under eight and a half runs, Phillies to win the World Series, Phillies to lose the World Series. All of the things we list are two-sided markets and customers at any point are able to buy and sell into um the market. And the price is simply just a uh you know, a function of the probability. And that's all enabled by a share which is essentially a futures contract that settles at 100 if the outcome occurs and settles at zero if the outcome doesn't occur. That's what this portrait is. And how were you able to get you know you talk about the importance of market makers. How are you able you know this is a novel a novel product idea. How were you able to get market makers into the platform to be able to facilitate these trades? a lot of alignment and a lot of yeah a shared right a shared alignment really on on on what sports betting could look like. If you think about sports betting now, even now, the transaction costs are so high.

(36:03) Inplay betting is there and it's growing, but the transaction costs even go up even more. People really like the concept of cashing out. You know that I bought the Phillies at 68, I sold them at 72. Even that's not really novel. It's cashing out your bets. But bookmakers tend to offer really poor, crappy cash outs at times. There's no ability to cash out. So you as a customer really aren't in control of your bet. And so there was this for us like a shared vision on what sports betting could look like if we both between the exchange i.e. sport trade and the market maker did their jobs really well. And doing our jobs really well means the exchange for trade, getting licenses, setting up our business, being able to host all the technology that that transacts, you know, between buyer that that matches buyers and sellers, build all the mobile app, acquire customers, which is a critical feed in any online sports betting platform. And the market maker, can they actually provide a tighter quote than any other bookmaker? Because if they could provide a tighter quote and we can facilitate fairer and faster transaction and we can enable customer activity that you can't do anywhere else and we can make customers aware of that.

(37:21) The idea is we can build a really really business and we fundamentally believe that. So the way we were able to kind of get market makers involved was to have them participate on the cap table of the business that if they could help us facilitate awesome transactions, a ton of transactions at a very low price just as a a line in you know a line in the sand. We customers on our platform inclusive commissions which is how we make money pay around 1% on every single bet. And in the industry it's anywhere between 7 and 10%. So it's about you know 5 to 10 times cheaper to transact on sport trade you know than we could then we could create a big business. And so there had to be that alignment for the market maker to say well I may not make money in the first year or two years providing these ultra tight quotes. But if I view that more as a marketing investment in the overall platform, then by me doing that and facilitating these transactions at a low cost, I might not make a ton of money on the bid ask spread price at which I'm willing to buy and sell affiliates, but if the value of Sport can grow and I own a piece of that, I'm willing to do that.

(38:36) And that to me is the most feasible way of trying to build a new platform and a new space that's very competitive is to create that alignment with all parties. say, "Hey, we want to make this platform as big as possible." And that was not a novel idea really. That's how multiple exchanges, the BATS exchange as well as members exchange, which is now a a regulated SEC stock exchange have built their venues. They've partnered with banks and brokers and market makers and they said, "We all want to bring as much flow as possible to this venue. So, let's all be a share in the upside of of the success of the business." And you mentioned customer acquisition. How did you acquire customers or have you gotten the word out about Sport Trade and what's been the response? So, this has been the area where we've learned or I think I've learned the most. Initially when I started when we launched sport trade in New Jersey in September of 2022 we started at where I think ultimately sporting will be perceived over time which is we're this new fancy marketplace where you can buy and sell based on the changing probabilities of any sporting events.

(39:46) And even when we launched, she's a very compelling comment. And what I learned very quickly was that sports sports betterers speak in a very a bit of a different language. Sports betterers prefer what's called the American odds system. Sports betterers have been predisposed to never cash out because it's so historically bad. the sports bar. Yeah. What we learned is that while those are very solvable issues for customers via our offering, they require education and time. And it's a very noisy world. And so, how do we how do we slightly pivot our brand and our message so that we can be fundamentally solving a problem for the customer first as opposed to teaching them a new way to bet? And if we can solve a problem first, then we can teach them a new way back to that later. And so now almost 100% of the interest in sport trade and 100% of the marketing investment that we make is for higher volume betterers, bettererss that are banned or limited. I didn't even mention that. The tradition sports book, you know, myself included, I'm not even like a successful better. If you aren't losing your money fast enough, the bookmaker can decide, well, you know, you're not going to be able to bet $100 on this event. You're going to be able to bet $30 and that's it. Can't bet any more on this, which I think is insane.

(41:14) And so, we really pivoted Sport Trade to be the place where in the finance world, in the finance syntax, our spreads are tighter. In the sports betting world, we have the best odds. In the finance world, we're able to facilitate transactions with zero friction. In the sports betting world, we have zero delay in play betting. And so we've really pivoted to those two. So we the best prices, the best odds, and zero delay in play betting. And our customer, our average bet on our platform is over $400 per bet. The majority of our customer are limited or banned or other venues.

(41:47) 60% of our transactions, 60% of the bets happen after the game starts, which is about double of any other platform in the US. I do believe inplay betting is the future of betting and I hopefully think that with what we've the technology and the user experience we offer we can really catalyze that in the US in Europe 90% of the bets in some sports happen and play and in the US it's less than a third of that and so that is our customer acquisition message those are the customers that care the most about sport trade high volume betterers professional betterers avid betterers price sensitive betterers betterers that look for more of a value experience in sports betting as as opposed to a fun experience in sports betting. Not to say sport trade isn't fun and again it's more fun. We are solving a problem for customers that say hey you have the best price for Phillies so I'm going to bet the Phillies on sport.

(42:45) >> Yeah. Two final questions as we get towards the end of the time an end of our conversation that that is the one question I you were talking kind of maybe we talked about in the column that I wrote but the sharp problem right where people are getting banned from sports books. How does you you started to talk about this, but can you provide more detail about you know particularly high volume traders who or high value bettors who are successful betterers how that works on the exchange and how that is different from betting against the house and how you can kind of facilitate potentially an increase in those betterers on your platform.

(43:21) >> Yep. So, as an example on our platform here in the last, just looking at our trades, the last 10 minutes, the last four bets were $660, $757, $485, and $250 on, let's see, WNBA, MLB, and and and the Memorial, the golf tournament. The reason that we don't limit better is kind of two reasons. One is it's in our ethos not to do that. So, we didn't really build the system to allow for it. There's really nothing in our system that we way we built it that would like screen an order before it gets to the exchange. And that's how the stock market works. If you Adam wanted to go buy 100 shares of Apple right now and you went on TDM trade and you submitted the order, there's nothing that any potential counterparty can do to you or to know who you are or where you are or your intent to either buy or sell until a transaction occurs.

(44:19) And so there's no protection for those market makers or any other participant in the ecosystem against which you order chains app. In a sportsbook world, it's totally opposite. MGM drafting scandal, they know who you are the second you log on. They know what markets you're browsing and then when you submit an order, it's already predetermined whether they're really going to take a true bet from you or they're going to limit how much you can bet or in some cases they can take your bet. They could put it in limbo for upwards of a minute and then change the odds of decide not to give you the bet. And that's all based on the fact that they have your betting history. They know what sports you got to bet on. They know whether you're profitable or not in certain sports at certain times. And so there's huge edge they have on you in determining whether they want to accept or bet or not. And technologically sport trade is built just like a stock exchange. It has no ability to do that whatsoever. Takes an order. Can the user afford this order? Are they using the platform responsibly? I.e. set responsible gaming settings on platform on our platform such as individual bet size limit, spend limit, time limit, deposit limit. If you're in the state of New Jersey, if you have adhered to all our sponsor gaming limits and you have the balance to submit the order, there is nothing stopping it. And so fundamentally that is the that is the why behind sports trades inability to screen or limit or severely alter the experience for any one customer on the platform versus any other custom on our platforms.

(45:52) >> Yeah. And again I think it's this is something we could probably talk about in a future podcast. That's a competitive advantage that you have. people who are most likely or sharp betterers who would make a lot of trades are actually revenue generating for sport trade in ways they're obviously not for sports clubs which is a sign competitive advantage. So, we are we're towards the end of time and the last question on your LinkedIn page it says we're hiring. We like to ask all of our guests, you know, what are a lot of our like I mentioned a lot of our audience is looking to get into the sports industry or just starting in the sports industry. What are you looking for when you're looking to hire folks for sport trade? What are some of the qualities, features, characteristics you're thinking about, particularly given that you're a growing business?

(46:31) >> Yeah. So, the first thing I would say is that if you happen to stumble across my LinkedIn profile, just send me a DM. I will respond. we'll set up time and we can chat about whatever. I always like doing that. In terms of the type of folks we're looking for, right now we're hiring for ambassadors. We find that one of the most effective forms of customer acquisition is when we can be with the customer and really show them how how magical and amazing the platform is. And in terms of the traits of people that we look for across organization, we look for intellectually curious people, kind people.

(47:09) And you don't have to have any experience in trading or betting. I didn't when I started. So if I didn't, it would be really hard for me to enforce that on anyone else in the company. And people that really want and enjoy the challenge of creating something new. If if that is a skill set or an interest that anyone has, then it can be perfectly applied into almost every role that we have at Sport Trade. So that's the kind of the type of person we look for. Right now we are hiring for ambassadors and it's a great way to to be introduced to the business to understand the customer which is the most important you know stakeholder in the entire ecosystem to us. Everything flows from the customer and then from there we've had people move into CX roles, marketing roles, product roles, design roles and I'm sure over time that wouldn't preclude technical roles like a developer or an engineer.

(48:04) Well, Alex is a great place to leave it. I think there's some definitely some more meat on the bone and we would like to have you back particularly as as we anticipate sport trade growing given all the things that you talked about. But thank you for your time today. Thanks for being on the revenue above revenue bubble replacement podcast and really appreciate your insights particularly on a on a novel space. >> Awesome. Thanks so much for having me and I I really love the name revenue replacement. It brings me back to that money ball sort of thing of I I love that name. So thank you so much for having me.

(48:33) >> Thanks for thanks for joining.