Betting exchange operator Smarkets made approximately 20 redundancies in November last year amid ongoing financial struggles.

The company – which also operates the SBK sportsbook brand – cut around one sixth of its workforce in a bid to drastically reduce costs.

Some of the affected employees went on gardening leave, while others accepted a lump sum in lieu of notice.

iGaming NEXT understands that only staff working directly on product, increasing revenue, cutting costs or raising investment were guaranteed their positions, while all remaining roles were put at risk of redundancy.

Smarkets’ head of political markets Matthew Shaddick was one of the affected employees. Shaddick confirmed his exit on LinkedIn after an 18-month stint with the company.

The November lay-offs followed a smaller round of redundancies in the summer of 2022.

Smarkets acknowledged it was a “difficult situation” for the business but did not wish to comment further when contacted by iGaming NEXT.

Why have costs increased?

The redundancies were likely driven by the increased costs of operating a regulated sports betting company in the UK.

Licensed operators have been ordered to comply with increased safer gambling measures by the Gambling Commission during recent years, which has led to higher operational costs.

The tighter oversight of customers through enhanced affordability checks and more in-depth – and arguably intrusive – KYC measures has also come with a significant cost for bookmakers, scaring off some high value customers in the process.

A January article in the Racing Post revealed that high stakes punter Joe Beevers withdrew his custom from Smarkets after the operator requested source of funds information, including questions on two transactions from his friends, of which he deemed “immaterial” information.

Many firms have either fallen into financial difficulty or withdrawn from the UK market altogether for these reasons. Mansion Group, Genesis Global and STS have all exited the UK market since the turn of the year, for example.

London-based Smarkets is still active and committed to the UK, however, with both its sportsbook and exchange brands live on the Oddschecker comparison grid.

In August 2022, Smarkets was on the wrong end of a £630,000 fine by the Gambling Commission for AML and social responsibility failings, while the launch of its SBK brand in the US via the state of Colorado has proven expensive and is yet to bear fruit.

“Revenue decreased as costs increased and that is obviously not a good trajectory,” confirmed one source while speaking to iGaming NEXT on the condition of anonymity.

What do the accounts say?

The operator was scheduled to report its financial performance for the year up to 31 December 2021 on Companies House by September 2022, but the accounts are overdue.

The firm’s most recent published accounts, made up to 31 December 2020, confirm the major investment in safer gambling:

For full-year 2020, Smarkets made a loss after taxation of £2.57m, down from a profit of £612,000 in 2019.

Smarkets did however execute a significant Series B funding round in June 2021, including the closing of a significant minority investment from private equity firm Susquehanna Growth Equity.

Flutter Entertainment-owned FanDuel is aiming to take a 12% margin across its sports betting operations, revealed the brand’s senior director of product and operations Gareth Core.

Speaking at the SBC Summit Barcelona, Core said that a lot has changed in the four years since the repeal of PASPA and the introduction of legalised online sports betting in the US.

In 2018, he said, the prevailing logic stated that betting operators could not take a margin of more than 3% – the accepted level of margin on which Nevada’s retail sportsbooks operate – as online operators would be expected to compete directly with Vegas pricing.

By 2019, however, online betting margins had rapidly increased to some 6%, and now FanDuel – which Core said was the first online betting operator in the US to turn to profit in August – has a target of 12% margin across its wagering operations.

Part of the reason, he suggested, is the lack of higher-margin iGaming options available in the US, with just a handful of states allowing operators to offer online slots and table games.

“We don’t see iGaming going much further than where it is today in 2023, or possibly even 2024. We see sports betting continuing to be the buzzword in 2023, as it is today,” Core said. 

“So unfortunately, we don’t see a lot of growth in iGaming, because of the regulations and land-based casinos and their lobbying and influence.”

Sports betting operators should therefore be prepared to set margins higher in order to secure a chance at generating profit in the coming years, he argued.

FanDuel senior director of product and operations Gareth Core: “We don’t see iGaming going much further than where it is today in 2023, or possibly even 2024. We see sports betting continuing to be the buzzword in 2023.”

Smarkets founder and CEO Jason Trost, who joined Core on a panel discussion examining the barriers to entry in US sports betting and iGaming, said his business takes a different approach.

The Smarkets exchange and counterpart sportsbook brand SBK is aiming to turn US betting into a high-volume, low-margin industry, Trost said, with a view to creating the best possible experience for bettors. This would mean processing a higher volume of transactions in order to generate revenue.

In the current scenario in the US – where extremely high regulatory costs and tax rates, together with burdensome licensing and compliance requirements make market entry increasingly difficult for small businesses – the ultimate loser will be the customer, Trost argued.

The situation creates a market with limited competition and less room for innovation, he said, leaving customers with a limited selection of operators to choose from.

Still, Trost believes Smarkets will be able to carve out market share by offering better odds than its competitors. Even for casual and recreational bettors, he said, pricing will eventually become an increasingly important consideration for customers.

“I think over time, things will progress,” said Trost. “You know, that’s true in all industries – everything’s getting cheaper and cheaper, and consumers are expecting everything to get cheaper over time. 

“And I think if there’s a sportsbook out there that offers way better prices, and that’s fun, and there’s another one that offers way worse prices, that’s also fun, I think people will choose the one with better odds.”

Ultimately, panellists concluded that a variety of business models have the potential to find success in the US. But with FanDuel closest to a profitable operation, higher sports betting margins could be here to stay.

Smarkets has been struck with a £630,000 fine after an investigation by the UK Gambling Commission discovered a series of anti-money laundering and social responsibility failures.

London-based Smarkets accepted the six-figure sum for the failings, which saw customers allowed to gamble without adequate source of funds checks and failing to identify and interact with customers who were at risk of experiencing harm.

The operator has also received a formal warning and will undergo an audit to ensure it is effectively implementing its AML and social responsibility policies, procedures and controls.

Smarkets CEO Jason Trost: “We have worked cooperatively with the Commission throughout the process and taken significant measures to implement their recommendations, investing substantially in our compliance function.”

Examples of the failings by Smarkets include one customer being allowed to deposit £395,000 in a four-month period, without appropriate source of funds checks being carried out by the SBK operator.

Another example saw an individual transfer significant levels of funds between accounts without scrutiny or source of funds checks occurring.

“We fully accept the UKGC’s findings following investigation of some of our former procedures,” Smarkets CEO and founder Jason Trost said.

“We have worked cooperatively with the Commission throughout the process and taken significant measures to implement their recommendations, investing substantially in our compliance function.

“We take our responsibility to have appropriate compliance policies in place extremely seriously. We will continue to work closely with the UKGC and other relevant stakeholders, and will take proactive steps in order to ensure further improvement to our procedures on an ongoing basis,” he added.

UKGC deputy CEO Sarah Gardner: “This case was identified through compliance checks and once again highlights how we will take action against gambling operators who fail their customers.”

Upon handing down the fine, the UKGC highlighted that Smarkets cooperated with the Commission throughout the investigation and that the compliance assessment also found no evidence of criminal spend.

Sarah Gardner, deputy CEO of the UKGC, commented: “This case was identified through compliance checks and once again highlights how we will take action against gambling operators who fail their customers.

“Our investigation into Smarkets unearthed a variety of failures where customers were put at risk of gambling harm.

“It was obvious that poor systems and processes were in place which contributed to these breaches, driven by the company’s failure to effectively implement its policies and controls,” she added.

The £630,000 fine is the latest in a string of enforcement cases led by the regulator against UK licensees this year.

Earlier this month, online operator LeoVegas was hit with a fine of £1.32m for similar social responsibility and AML failings.

Smarkets has launched a new UK ad campaign for its SBK sportsbook with the following tagline: “The ad we weren’t allowed to make. But we made it anyway.”

The ad is part of SBK’s broader Rewriting The Sportsbook brand campaign, which will be activated throughout August and September to capitalise on the start of the 2022/23 Premier League season.

Starring Smarkets CEO Jason Trost and former Manchester United and England footballer Gary Pallister, the ad was never approved by UK NGO Clearcast, which pre-approves most British television advertising for broadcast.

According to Smarkets, the organisation said showing the ad would “bring advertising into disrepute”. The full video is available on YouTube and on the SBK homepage.

SBK: “We have never had casino products on SBK or Smarkets as we strongly believe in providing a gimmick-free platform with the best odds.”

In addition, commuters at key locations across London, including Waterloo and Euston train stations, will see a heavily edited version of the ad and can scan a QR code to view the full 80-second clip.

The ad takes aim at SBK’s competitors as Trost says: “Sports are amazing. But sports betting? Not so much.” 

Featuring comment on operators’ earnings and customer service (“just look how much these *beeps* are making from you. And this is how they treat the winners?”), as well as criticisms of “terrible odds and useless casino games,” the ad aims to demonstrate the benefits of using the SBK sportsbook.

SBK uses odds taken from Smarkets’ flagship exchange product, which the operator said has no built-in sportsbook margin and therefore offers better value than alternative bookies.

Unlike many operators in the UK market, SBK also eschews the integration of casino games into its sports-focused brand.

Smarkets CEO Jason Trost: “That’s what this campaign is all about: how our odds are better than the rest who make easy money on casino and huge sportsbook margins. We’re not afraid to call them out.”

A spokesperson for the business told iGaming NEXT: “One thing we’re keen to highlight is the reliance of other bookies on cross-selling casino games, which provide easy, guaranteed revenue and discourage product and price innovation elsewhere. 

“We have never had casino products on SBK or Smarkets as we strongly believe in providing a gimmick-free platform with the best odds.”

In the ad itself, Smarkets founder Trost boasts while on horseback: “We’ve built a product that gives you the best odds, that doesn’t just beef up our profits.”

In a statement, he added: “The industry’s old guard has been giving unnecessarily bad odds to customers for so long. We launched SBK to provide our world-best pricing to the mainstream market in the familiar feel of a sportsbook. 

“That’s what this campaign is all about: how our odds are better than the rest who make easy money on casino products and huge sportsbook margins, and we’re not afraid to call them out. I had a blast filming the ad. I hope people enjoy watching it as much as I did making it.”

The ad campaign was created together with a roster of agency support, including former Paddy Power head of mischief Ken Robertson, and his agency team at The Tenth Man. The campaign was executed by brand agency The Specialist Works.

The agencies have longstanding experience of advertising to UK customers, a demographic which is of key importance to both Smarkets and SBK.

“There is so much room for us to grow in the UK market as no-one else has a focus on price and product quite like we do,” the brand told iGaming NEXT

“We think this ad will speak to many disgruntled punters who are tired of the big brands and looking for something new.”

Sports data provider Sportradar and sportsbook operator Smarkets have both strengthened their US-facing senior management teams.

Nasdaq-listed Sportradar has recruited Eric Conrad as its new MD of strategic partnerships and content for North America.

In this newly created role, Conrad will build upon the foundation established by Sportradar’s US Sports Content and Partnerships (SCP) team, which will now report to him.

Over the last few years, the SCP team has secured partnerships with the NHL, NBA and MLB.

Conrad will work closely with Sportradar’s media and betting partners to maximise commercial returns and pursue new, long-term partnerships. He will report into CCO Eduard Blonk.

Conrad arrives at Sportradar from Univision Communications, where he spent more than a decade in various New York-based exec roles, culminating in the position of EVP of sports programming and acquisitions.

Prior to that, he worked for organisations including ESPN, MLB and the NBA.

Meanwhile, London-based exchange specialist Smarkets has raided Nike for a new US general manager in Sheldon Hanai.

Smarkets CEO Jason Trost: “We have looked far and wide for the right candidate for what is an absolutely crucial role as we expand our footprint in the States. Sheldon was the outstanding choice.”

Hanai – who has served as an investor and adviser to Smarkets since 2009 – spent nearly six years with Nike, rising to senior director level as head of global innovation finance.

He started his career with the US defence department, before working at Google and BP, and then making the switch to the American sportswear giant.

Smarkets currently operates its SBK sportsbook app in Colorado, with launches in Indiana and Iowa scheduled for later this year.

Hanai said: “I’m delighted to be joining Smarkets, a company that I have followed since the very beginning of its journey and seen blossom into one of the world’s leading sports betting companies.

“I can’t wait to get stuck into realising SBK’s potential in the US, where our industry-leading odds can make a huge impact,” he added.

Hanai will become the first Smarkets employee to work from a new East Coast office location, which is still to be revealed.

He will start work on 13 June, reporting directly into Smarkets CEO Jason Trost, who last week became the new host of the Business of Betting podcast.

Trost said: “I’m super excited about Sheldon joining us to head up our push into the US. We have looked far and wide for the right candidate for what is an absolutely crucial role as we expand our footprint in the States.

“Sheldon was the outstanding choice and I couldn’t be more pleased that he’s joining us,” he added.