WagerWire Pivots to Prediction Markets via Gibraltar License

The first big idea arced on the couch of the Sigma Nu house at UCLA, Travis Geiger, Zach Doctor and Guy Dotan free-forming thoughts about how interesting it would be to sell sports bets like commodities.

The second one developed in the five years they’ve been building what’s become WagerWire, nudged by the notion that the legal sports betting industry in the United States, amid what they consider numerous missteps, could be better, and maybe even surpassed by insurgent, albeit controversial, prediction markets. It helped that they viewed exchanges as a natural extension of what the WagerWire secondary market was all about: hedging.

“It’s the same light bulb moment we had on the couch,” Geiger told Gambling Insider in an extensive interview with the WagerWire founders. “It’s just that the light has gotten brighter.”

They didn’t know at the time that a light was coming on in Gibraltar, too. 

On Wednesday, Wire Industries, Inc., the parent company of WagerWire, announced that the British Overseas Territory has approved in principle a license for Wire Markets to offer a peer-to-peer prediction market. This stamp, according to a press release, positions WagerWire to “establish a regulated international foundation for prediction market operations and support future expansion into jurisdictions around the world.”

Nigel Feetham KC MP, Minister for Justice, Trade and Industry told Gambling Insider that WagerWire meets the stringent prerequisites required of any successful Gibraltar applicant:

“A company’s experience in developing products centered on liquidity, price discovery and consumer choice is increasingly relevant to the evolution of prediction markets. As with all applicants, our consideration is based on the strength of the proposal, the suitability of the applicant and the ability to satisfy Gibraltar’s regulatory standards.”

Wire Markets Joins Predictstreet as Gibraltar-Licensed Prediction Markets

Wire Markets becomes just the second prediction market license granted by Gibraltar as it embarks on Feetham’s plan to enhance the BOT’s digital economy. In March, Gibraltar licensed ADI Predictstreet, which is owned by the Abu Dhabi royal family and signed on as the official prediction market of the impending FIFA World Cup.

WagerWire hopes to launch its exchange in the fall, but has not yet announced intended markets. Partnerships are forthcoming, Doctor said. Both the ownership group and Feetham consider being licensed in Gibraltar – at the tip of the Iberian Peninsula – as validation for potential licensure in other jurisdictions. 

Wire Markets will open with sports event contracts with “deeper” offerings, Doctor shares, than what’s currently offered on some prediction markets, and expand into pop culture, weather and economic markets. It will eschew the controversial and geo-political, Geiger said, because they’re low-volume gimmicks, and Doctor interjected, “because we’re morally against it.”

Wire Markets plans to station compliance executives in Gibraltar and add an as-yet-unannounced number of new employees.

Geiger proclaimed:

We feel like we have the potential to make this one of the premier prediction markets in the world. We’re going to be one of the only ones that are truly operating within a compliant framework. Our technology is going to be reinforcing what we think will be the new rules of the road.”

A ‘Sell-it-Now’ Button for Bettors

Doctor said he and his fellow co-founders have long been cognizant of prediction markets’ functionality, but only within the last year, during the ascendency of sites bearing sports event contracts, realized the opportunity.

“It feels like a moment in time, both from the players themselves wanting this ability to trade in and out and just the culture that’s built around trading, that it’s working now,” he said.

Geiger believes that the “syntax” of secondary markets and peer-to-peer marketplaces are “essentially the same.”

WagerWire is a secondary market for sports wagers that allows bettors to sell an unresolved bet.

 “I think it meets the moment because we’re solving a lot of the problems for customers that prediction markets solve in their own way,” Geiger explained. “One of the things that people don’t like and we solved is being stuck in their [betting] position. That’s something prediction markets solve. But what’s hard for people is understanding the odds, understanding vigs, understanding all these kind of complicated math situations that arise that prediction markets solve.”

WagerWire is also developing a new tool to connect the usefulness of the platforms, Dotan said, through the hedging principle.

“It’s basically a sell-it-now button where WagerWire actually would buy that bet off the person for a price that straddles cash-out and what the fair secondary market, the true secondary market price might be,” he described. “Basically, I’m building a fully hedged solution on our end where even though we’re buying the bet, it’s a risk-neutral or potentially even a profitable proposition for us.

“We’ll go out and actually buy the other side. So if it’s going to be ‘Yankees to win the World Series,’ we’ll buy the Yankees not to win the World Series, or whoever they’re playing against. … We’ll actually use our prediction market to be that hedge, and now we’re basically able to provide this sell-now functionality to our users through our own risk-free hedge out of our prediction market.”

Sportsbooks’ ‘Aversion to Innovation’

WagerWire’s secondary market API was vetted by Gaming Labs International and built for integration within existing mobile sportsbooks. In the original brainstorm, bettors would peruse existing bets for purchase or list theirs within these commercial apps.

Fewer than hoped business-to-business customers came, partly, Geiger said, because of these other companies’ “tech challenges,” creating the impetus for the eventual Gibraltar pivot.

“One of the reasons that we’re pursuing this opportunity is precisely because the sportsbooks seem to have an aversion to innovation, unless it’s happening all around them,” Geiger observed, “and then there’s a simultaneous push, one right after the other, which is what we’re seeing with prediction markets, which is what we saw with daily fantasy products, which is what we saw with same game-parlays, micro-betting. Then it’s like all at once.”

The owners plan to introduce the WagerWire second market internationally and possibly, after Commodity Futures Trading Commission licensure, debut Wire Markets in the US through a partnership similar to the ones FanDuel (CME Group) and Fanatics (Crypto.com) have used to gain prediction market access.

“We’re going to explore how this could unlock opportunities for our U.S. model,” Geiger continued, “for instance the ability to instantly sell your sports bet into a liquidity pool.

“We are definitely maintaining the U.S.”

Gibraltar License has Global ‘Portability’ 

Initially, though, their eyes are elsewhere. Gibraltar gambling licenses, Doctor and Geiger trust, tend to be “viewed favorably” in Latin America, Africa, Asia Pacific and in some European countries.

“One of the things we really respect about Gibraltar is how protective they’ve been of their reputation,” Geiger said. “We take this opportunity super seriously because we know that it’s one that’s not going to be extended to very many companies. As a part of that, that license has a very unique portability, and we think it’s going to be our passport to operate in a myriad of places.”

The bridge from Geiger to Gibraltar and Feetham was made by an advisor who was intrigued by the founder’s presentation about the company at ICE Barcelona in January. The timeline accelerated from several years of theorizing to a rush of fundraising and scaling for a global business they never necessarily contemplated on that old couch.

“This is just one of those moments in time where you have to capture that energy and go for it,” he declared. 

“If we waited and thought about when and where exactly we should do it, and then you miss the window and then we’re not the second or the fifth or the 10th … this is a moment our backers, our advisors, our stakeholders are all fully in support [of] and excited [about] because this is the very beginning. We see this as the natural evolution and truly what we’ve been working on behind the scenes for a long time.

“So it doesn’t necessarily feel like a crazy bet to us.”