As we have recently seen CFD brokers are currently tweaking their offerings, on both sides of the Atlantic, in an effort to attract and retain customers. Thus far the focus has largely been on price and trading terms as well as some adjustments to the product list. However, some initiatives have been a bit more creative.
One such is the establishment by Interactive Brokers of its own simulated sports betting exchange.
There has long been a debate about the crossover between traders and investors and those who like a flutter on sporting events through betting exchanges. On the face of it, there should be a synergy between the two groups but for whatever reason, that crossover doesn’t seem to materialise.
Interactive Brokers have taken a slightly different approach to this issue and rather than trying to cross-sell financial trading to sports fans and vice versa the firm soft-launched a “ fantasy” sports betting service back in July.
Under the IBKR sports betting service clients of the firm were able to bet on sporting events using fantasy dollars on the firms own sports betting exchange. Indeed the firm offered to credit existing customer accounts with a thousand of these fantasy dollars if their owners participated in the experiment, new accounts could also claim the betting credits.
Winnings from the fantasy sports betting can be used to offset commission fees on financial trading accounts thus providing tangible value for the fantasy dollars.
The US sports betting market is highly fragmented and federal laws greatly restrict the ability of punters to bet across state lines or to send money out of the US for the purposes of gambling.
As a consequence, Interactive Brokers may believe that the sports betting market in the US is ripe for development and that it’s possible to create a technological solution that will allow clients to bet without breaking US laws.
For the moment Interactive Brokers fantasy sports betting exchange remains a purely promotional tool with a limited shelf life and the experiment is due to end on Dec 31st 2020. In recent weeks Interactive Brokers has launched its free stockbroking service IBKR Lite.
However, Thomas Peterffy who set up and controls Interactive Brokers has made a multibillion-dollar fortune by spotting opportunities and moving quickly to exploit them, leveraging technology to do so where ever possible.
With the firm having earmarked as much as billion dollars to offset the cost of fantasy dollars exchanged for trading commissions during the lifetime of the promotion it sounds to us as if the experiment, if successful, could become a business in its own right in future.
That combination of financial trading and sports betting is not unheard of, for example, UK listed GVC owns Ladbrokes and margin trading outfit Intertrader, while international betting giant Playtech owns CFH clearing and Markets.com, so watch this space, we wouldn’t bet against Mr Peterffy succeeding.
Richard founded the Good Money Guide (previously Good Broker Guide) in 2015 and has been a broker for 20 years most recently at Investors Intelligence and previously a multi-asset derivatives broker at MF Global (Man Financial). Richard started his career working as a private client stockbroker at Walker Crips and Phillip Securities (now King and Shaxson) after interning on the NYMEX oil trading floor in New York and London IPE in 2001 & 2000.