recent Bloomberg story<\/a> claimed that a large chunk of Gen Z investors see sports betting as a viable strategy to make money.<\/p>\nGood luck with that. But those kinds of dreamers aren\u2019t the customers FutureSports is looking for. Dummies bet parlays. FutureSports is targeting \u201csophisticated retail investors,\u201d the kind of people who know their way around derivatives, instead of just point spreads. But it\u2019s all connected.<\/p>\n
\u201cThe growth of prediction markets demonstrates genuine demand for exposure linked to sporting events, and we read that as evidence of investor interest,\u201d Taylforth said in a recent interview with Structured Retail Products.<\/p>\n
Financial indexes and futures trading are a little more complex than sports betting or prediction markets. But since this is The Athletic and not Structured Retail Products, how would a retail investor take part?<\/p>\n
\u201cA consumer can jump on and open a brokerage account,\u201d Taylforth said, naming companies like early investor Robinhood, Plus500, Webull or NinjaTrader. \u201cThey have to understand how to trade derivatives. That\u2019s a prerequisite because they\u2019re complicated financial instruments, so you\u2019ve got to have trading history here. But yeah, you can go long or short a team as you see fit.\u201d<\/p>\n
Every team starts the season with a base index value of 7,500. After years of backtesting, FutureSports created a valuation table that will cause the value of the asset to fluctuate based on individual and team statistical performances. Different statistics are weighted based on scarcity, positively and negatively. In terms of in-season trading, customers can buy or sell contracts that expire monthly or quarterly. CME will offer standard (10 times the value of the FSPI index) and micro-sized (1\/10th the size) contracts and round-the-clock trading.<\/p>\n
In the NHL, for example, according to a FutureSports document, there are (after pre-launch backtesting) 48 constituents that go into the mix: 24 in-game (10 positive and 14 negative), nine end-of-game, six monthly, eight end-of-season and one postseason.<\/p>\n
\u201cFor example, a hat trick in hockey is not necessarily super scarce; it might be one a month, a couple of months, something like that,\u201d Dinsdale said. \u201cBut it is scarce enough to attract a fairly high points value.\u201d<\/p>\n
At the end of the season, winning the Stanley Cup is worth 750 points, and finishing last in the conference is minus-250.<\/p>\n
\u201cOur indexes are over 90 percent correlated with other performance measures, win-loss being one,\u201d Taylforth said. \u201cSo it\u2019ll pass the sniff test. You\u2019re not going to see a team win the championship or a team go on a deep playoff run and their indexes traded negatively throughout the year.\u201d<\/p>\n
In the offseason, you can trade futures for each index.<\/p>\n
\u201cSo if there were trade deals, injuries, maybe new investment commitments, either to the upside or downside for management, and those were done prior (to the season), you could still use futures to manage some of that exposure,\u201d McCourt said. \u201cYou need not be in season.\u201d<\/p>\n
What does Bowen Byram bring to the Blackhawks?<\/p>\n
Mark Lazerus and Scott Powers<\/p>\n
Dealing with the leagues<\/p>\n
The deal with the NHL involves access to intellectual property and statistics, but the league has no role beyond providing access to official numbers.<\/p>\n
FutureSports is expected to launch a college football index, where it will work out a deal for access to statistics and avoid using any IP, such as logos or nicknames.<\/p>\n
The company is working on deals with the other major sports leagues in the U.S. Three of the company\u2019s early strategic partners are affiliated with baseball teams: Elysian Ventures (Los Angeles Dodgers), Marquee Ventures (Chicago Cubs) and the John and Linda Henry Family Foundation (Boston Red Sox, Fenway Sports Group). CME is the jersey patch sponsor for the Chicago White Sox.<\/p>\n
\u201cWe went out specifically in this (funding) round to tie in strategic partners like CME Ventures and CME Group, as well as the Cubs, the Dodgers and John Henry, which is effectively (the) Red Sox,\u201d Dinsdale said. \u201cThree of the most powerful clubs in the MLB. So, that\u2019s strategic for us to get our deal done.\u201d<\/p>\n
The key to this idea is that institutional traders and companies invested in sports will use the FSPI to hedge risk. One example would be a major sponsor for a disappointing team like, say, the Chicago Bulls. Motorola is the team\u2019s jersey sponsor.<\/p>\n
\u201cThey would talk to their institutional broker, let\u2019s say Goldman Sachs, Morgan Stanley, JP Morgan, for example, and they\u2019d say, \u2018This is our exposure this season,\u2019\u201d Dinsdale said. \u201c\u2018We\u2019ve given the Bulls $20 million to be a jersey sponsor. We\u2019re concerned that the performance won\u2019t be there, and less people are going to see that, (and) we\u2019re going to get a lower return on it.\u2019\u201d<\/p>\n
FutureSports and CME also see hedging possibilities for individuals.<\/p>\n
\u201cOne example we use is season ticket holders,\u201d Dinsdale said. \u201cIf you\u2019re out there and you\u2019re buying Cubs season tickets and they\u2019re having a good run right now, perhaps performance starts to drop off a bit and you aren\u2019t going to get face value for your ticket prices anymore.\u201d<\/p>\n
Added McCourt: \u201cThere\u2019s individual proprietors or business owners, so think restaurants, vendors, parking lot operators, commercial real estate, all of these have natural exposure to the performance of that team. And they don\u2019t at present have the ability to hedge in any of that or participate in additional upside, other than how they may be able to monetize their individual offering as it relates to that team or venue.\u201d<\/p>\n
This all might sound a little complicated, but when FutureSports presented this idea to McCourt and CME Ventures, the venture capital arm of CME, it caught on quickly.<\/p>\n
\u201cIf you look at the CME Group\u2019s history, I mean, this is what we do,\u201d McCourt said. \u201cWhen I saw this opportunity come across my desk, it did not take me very long to be like, \u2018This makes sense, and I am in.\u2019\u201d<\/p>\n
If all goes according to their plan, professional athlete indexes come next. But they\u2019d only list the biggest athletes, not the players at the end of the bench. Prop bet manipulation has been a major story in the NBA, but the way the indexes are set up nullifies that risk.<\/p>\n
\u201cWe will move to athletes at some stage \u2014 not within the collegiate space; professional space only,\u201d Taylforth said. \u201cAnd once the leagues and CME are both comfortable, then we will look to at least only top athletes. Our rule of thumb here is to follow the money. So we\u2019re looking for people to have utility to be able to hedge, say, sponsorship or endorsement deals. So we\u2019ll lead with teams, but we envision getting to athletes at some stage.\u201d<\/p>\n
Rules and regulations<\/p>\n
If you\u2019re immediately thinking about how team employees could game the system, regulations are in place. An NHL spokesperson told the Chicago Sun-Times<\/a> that players, coaches and staff won\u2019t be allowed to trade.<\/p>\n\u201cThere will be prohibited lists in the same way that there are sanctions lists, and every broker needs to check before they onboard a customer,\u201d Taylforth said.<\/p>\n
Once FutureSports gets deals done with the leagues, brokers can start experimenting with different products with the indexes for ETFs (exchange-traded funds) and OTCs (over-the-counter trading).<\/p>\n
\u201cWe\u2019ve heard some fairly creative and exotic ideas around ETF products,\u201d Taylforth said.<\/p>\n
For instance, if they had deals with the leagues right now, you could do a Chicago ETF with the city\u2019s teams. The Bears, Cubs and White Sox are playoff contenders, and the Blackhawks and Bulls are in rebuild stages.<\/p>\n
So you could go long on Chicago sports.<\/p>\n
\u201cWe\u2019re hoping that that kind of vernacular comes in,\u201d said Taylforth, who, like Dinsdale, moved his family to Chicago to launch the business. \u201cLike, \u2018I\u2019m long on Chicago.\u2019 That would be pretty cool.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"Illegal sports betting was mainstreamed into fantasy sports, which gave way to legalized state sports betting, which paved…\n","protected":false},"author":2,"featured_media":646201,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5115],"tags":[521,37,13109,96,6620,723,6622,5263,5,4,273],"class_list":["post-646200","post","type-post","status-publish","format-standard","has-post-thumbnail","category-chicago-blackhawks","tag-blackhawks","tag-chicago","tag-chicago-bears","tag-chicago-blackhawks","tag-chicago-bulls","tag-chicago-cubs","tag-chicago-white-sox","tag-chicagoblackhawks","tag-hockey","tag-nhl","tag-sports-business"],"share_on_mastodon":{"url":"https:\/\/channels.im\/@nhl\/117127316987332596","error":""},"_links":{"self":[{"href":"https:\/\/www.rawchili.com\/nhl\/wp-json\/wp\/v2\/posts\/646200","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.rawchili.com\/nhl\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.rawchili.com\/nhl\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.rawchili.com\/nhl\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.rawchili.com\/nhl\/wp-json\/wp\/v2\/comments?post=646200"}],"version-history":[{"count":0,"href":"https:\/\/www.rawchili.com\/nhl\/wp-json\/wp\/v2\/posts\/646200\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.rawchili.com\/nhl\/wp-json\/wp\/v2\/media\/646201"}],"wp:attachment":[{"href":"https:\/\/www.rawchili.com\/nhl\/wp-json\/wp\/v2\/media?parent=646200"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.rawchili.com\/nhl\/wp-json\/wp\/v2\/categories?post=646200"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.rawchili.com\/nhl\/wp-json\/wp\/v2\/tags?post=646200"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}