A West Hollywood-based startup that wants to disrupt the sports betting industry in Nevada with peer-to-peer sports wagering and bettors’ use of cryptocurrency is on track to be the newest casino owner and sportsbook operator in the state.
The Nevada Gaming Control Board unanimously recommended the Gaming Commission approve ZenSports to operate Big Wheel Casino in Lovelock, 90 miles northwest of Reno. In addition, it would operate, but not own, the sportsbook at Baldini’s Sports Casino in Sparks near Reno.
The Nevada Gaming Commission will meet Aug. 19 to consider the licensing recommendation. None of the considerations under approval, however, allow peer-to-peer wagering or digital currency, which are currently not permitted in the state.
ZenSports plans to buy the Big Wheel Casino from Strategic Gaming Management, which also owns Baldini’s. The Big Wheel sale is expected to close once the state signs off on ZenSports’ mobile app. The Big Wheel Casino, which serves truck drivers and miners in the northern Nevada city of 2,000 people, has 48 slot machines, but doesn’t operate a sportsbook. Baldini’s currently has a sportsbook.
“This industry has had a lot of large incumbents for a long time,” ZenSports CEO and founder Mark Thomas said in an interview after Wednesday’s hearing. “I think it’s ripe for disruption and I think a startup like us is a perfect company to come along and do that and make some waves.”
This would be the first step in the growth of ZenSports in the U.S. after launching in Europe in 2019. In June, the company ceased its international operations in 10 countries (Romania, Finland, Norway, Sweden, Denmark, Estonia, Japan, Moldova, Slovakia, and Slovenia) to focus solely on the American market.
“We have plans to go into a lot of casinos and take over their sportsbooks,” Thomas said of their Nevada aspirations. “We believe the appetite of casino owners is in our favor, because they want something fresh, a better look and feel, and better customer service. We believe we can come in and take over a lot of locations in Nevada, including in Las Vegas.”
Thomas said they’ve already talked with casino operators and that will accelerate once they’re licensed and receive tech certification for their app. The company’s goal is to expand in Nevada in 2022 and Thomas said they already have plans to raise “millions and millions” of dollars.
“We know competitors have very deep pockets and in order to compete with them, we need the same thing,” Thomas said. “We have no shortage of investor interest.”
But ZenSports wants to do more than just operate a traditional sportsbook; it intends to differentiate itself to attract operators and customers. The goal is to seek approval sometime in 2022 for peer-to-peer betting and allowing customers to deposit funds from cryptocurrency accounts.
“That would really differentiate us at some point in the future,” Thomas said.
Peer-to-peer betting, also known as a sports betting exchange, is a concept used in Europe that hasn’t been embraced yet in the U.S.
Thomas said sports bettors want a choice. They may want to bet against the house when they see a bet they like, but other times, they want peer-to-peer for the same reason. “Millennials and Gen Z want control over their money and betting experience,” Thomas said.
In peer-to-peer, the betting house charges a lower fee — 2% to 3% versus 5% to 7% at traditional sports betting operations, Thomas said.
Some analysts have suggested peer-to-peer betting won’t work in the U.S., because there won’t be a big enough pool until the federal Wire Act is reinterpreted to allow sports betting to cross state lines. Thomas said he believes Nevada is a big enough market to stand on its own and regulators will back it.
“A handful of states are let’s do peer-to-peer right now. In other states (like Nevada), we need to go through that process,” Thomas said. “We’re very comfortable that we will eventually get that approved in Nevada and many other states as they see the comfortability of how we’re still the licensed operator of peer-to-peer and resolving all bets.”
In July, Prophet, a New Jersey-based sports betting exchange, announced an agreement with Caesars Entertainment to launch its peer-to-peer sports betting exchange in New Jersey for the 2021 NFL and college football seasons. It plans to launch in Indiana in 2022 before rolling out to other states.
Thomas said he’s even more bullish about introducing cryptocurrency to sports betting. “I think it’s an even bigger differentiator than peer-to-peer. But when you include peer-to-peer, I believe it expands the market size.”
That, however, will take a change in state laws across the country, plus federal acceptance, due to concerns over money laundering with digital currencies in casino gaming.
“You really have to make sure you’re providing full transparency,” Thomas said. “It can work as long as you can associate a (digital) wallet address with a consumer’s account. That way you can track, and there’s transparency for that wallet address. You get all of the benefits of traditional financial institutions without any of the negatives. I think they will be good about it.”
Thomas said the use of cryptocurrency is much easier for patrons than cashless options, which can run into problems when some banks turn down transactions, or if they do process them, the fees they charge are too high.
“With cryptocurrency, there’s no middleman saying yes or no to the transaction,” Thomas said. “The fees are near zero, settlement times are instant, and there’s no charge back. I believe gaming is the first best-use case of cryptocurrency, once we get regulators comfortable with how it works.”
As for future expansion, Thomas said they put sportsbook applications in Tennessee and Virginia on hold until they’re licensed in Nevada. ZenSports announced earlier this year that it has also signed a partnership deal with Boulter Developments to eventually expand into Colorado.
