Online gambling is now fully baked into the American economy, from sports betting to prediction markets to, arguably, zero-dollar trades on brokerage platforms. But it wasn’t too long ago that you would have to travel to Las Vegas or Atlantic City to lose money on questionable wagers. So what changed?
A good argument could be made that daily fantasy sports paved the way for online gambling to go mainstream (and legal), with the twin rise of FanDuel and DraftKings in the early 2010s creating the explosive market. But while today their success may seem predestined, FanDuel cofounder Nigel Eccles told me that it was a battle to get a foothold—and to convince the often skittish venture capital sector to get on board.
Today, Eccles is diving into an even riskier market—online casinos, where users can wager money on arcade-style games from the comfort of their web browsers. His startup, BetHog, is announcing a $6 million round of seed funding led by 6th Man Ventures, a crypto-focused venture fund. It will not be available in the U.S., at least for now.
The humble start, at least compared to the multibillion-dollar behemoth that FanDuel became, mirrors the difficult path that Eccles faced with daily fantasy sports. When raising money for FanDuel, he faced hundreds of turndowns from VCs, with many declining to invest because of specific provisions in their LP agreements that forbade them from investing in gambling companies. But even beyond that, before FanDuel, there was no example of a successful online sports betting company in the U.S. “I don’t want to speak badly of VCs, but they struggle when there’s not a case study,” Eccles told me.
And to be fair, FanDuel faced existential threats that justified VCs’ caution, including lawsuits and bans from several states, as well as the Federal Trade Commission’s move to block a proposed merger between DraftKings and FanDuel in 2017. But Eccles’s bet paid off, with a 2018 Supreme Court decision allowing states to legalize sports gambling, and FanDuel becoming as ubiquitous in sports as Buffalo Wild Wings commercials.
For Eccles, online casinos are the next frontier. The consumer market has certainly warmed up to risk in the years since he founded FanDuel—whether it be with crypto meme coins or the presidential betting markets now available on every smartphone. But online casinos seem to be even a step further, where games are reduced to the bare mechanic of making and losing money, albeit with a cartoonish wrapper. Still, even without the U.S., they represent a massive, untapped market, with the only major company, the Australian Stake.com, raking in around $2.6 billion in revenue in 2022.
Serge Kassardjian, the cofounder and general partner of 6th Man Ventures, argued that online gambling has become social, with communities forming around anything from Dogecoin to Polymarket on platforms like Discord and Telegram. “It’s almost the financialization of the way people interact with each other,” he told me.
As a crypto VC, 6th Man Ventures has more freedom to invest in companies built around speculation. But they’re far from the only ones, now that traditional firms like Sequoia back crypto companies and betting markets.
Both Eccles and Kassardjian said they’re cognizant of the risks of addiction to consumers, but said that appropriate behavior can be controlled through guardrails. “The gambling space is going to exist,” Kassardjian said. “It’s existed for a very, very long time.”
Now, it’s just a tap away.
Leo Schwartz
Twitter: @leomschwartz
Email: [email protected]
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This story was originally featured on Fortune.com