Episode Transcript
[00:00:12] Speaker A: Hello, everybody. My name is Robin Harrison and I'm here, as ever, with the Niles to my Frasier, Mr. Ed Birkin. Ed, how are you today?
[00:00:20] Speaker B: No, no, no, no. That is.
We're not taking that.
I mean, it is a great, great program.
Not the remake, the original.
But no way am I the Niles.
[00:00:33] Speaker A: You are absolutely the Niles.
[00:00:36] Speaker B: I would take.
I would take being his dad.
[00:00:41] Speaker A: No, you're not.
[00:00:42] Speaker B: I'd take being his dad's dog.
[00:00:45] Speaker A: You're way too fussy to be Eddie or whatever. Martin, is it? Martin?
[00:00:51] Speaker B: Yeah, yeah.
Well, Niles gets a girl in the end.
Fraser just continues to live a solo sad life.
[00:01:01] Speaker A: Well, he goes off to. He goes back to Boston, doesn't he? He does eventually, yeah, he does. And funnily enough, today's guest has actually been in Boston recently for Scotland's.
We call it, a peaceful invasion.
[00:01:17] Speaker B: That was almost smooth lobbing that it was listening to my Segways transitions.
[00:01:23] Speaker A: I've been avoiding your segues like the plague, and that's why that one worked. But, yes, very pleased to welcome Nigel Eccles onto the podcast. I mean, honestly, Nigel, you're a bit of a man who doesn't really need an introduction. You know, there's Fangil, there's Better hog, there's the ICE365 studio, obviously the pinnacle of everything you've done.
And.
And so welcome, first of all. So, obviously, Nigel, we've got a lot to talk about today, so, I mean, yeah, I mean, I don't think we need to kind of go back and go through your career, as you know, as I said. But obviously, I think what's kind of interesting is we're speaking in the wake of. Of the court ruling about, you know, about Fangio's ownership, because obviously you founded that business, so from your side, keen to kind of get an eye.
[00:02:22] Speaker B: You know, not everyone who listens to this is as knowledgeable as you. You are, Robin, about everything.
[00:02:28] Speaker C: Yeah. Do you want me to give a sort of background?
[00:02:31] Speaker A: Yeah, all right, yeah, fair enough. Yeah.
[00:02:35] Speaker C: And then. And then the kind of recent court ruling, and I think I don't even need to do it from my side, like, I think I can get sort of lay the facts and then explain the ruling. So FanDuel today sort of is the largest sports book and casino in the US.
I think they did about 7 billion in revenue last year.
They're currently owned by Flutter Flutter Entertainment, which is a. Well, was previously London listed. It's actually now US and London listed was by Market Cap, the largest sports betting operator in the world.
I had a pretty rough 12 months, but obviously one of, by volume, one of the largest.
We, myself and four co founders started FanDuel in 2009, originally as a daily fantasy sports site.
So fantasy is a really big category in the US and so we built that over 10 years. And then in 2018 the US changed their gaming laws, a law called PASPA that opened up sports betting. And so after that fanduel went straight into sports betting and casino and a state by state rollout.
So we founded the company in 2009, raised money from external investors.
What happened in 2018 was the company was largely controlled by some of these late stage investors like KKR and Shamrock, and they were looking for, they entered into a sort of a merger agreement with Flutter where Flutter would put in its U.S. assets, which called BET or TVG, and would merge those two entities. And it was what you would call a paper transaction because what we would put in is our shares in FanDuel. And, and what we were getting out was 40% of this new company, confusingly was also called FanDuel, FanDuel Group, but that was sort of the combined entity.
And the question then is, what is 40% of this new group, FanDuel group worth? And the reason that was really important was that we had, like most startups, when you raise money, you have preference shares and you have ordinary shares, common shares and preference shares take the first X money and then everyone shares in the rest.
And for fanduel at the time we had raised about half a billion dollars. And so we had a pref stack of 559 million.
And so whenever this merger happened, PASPA got repealed sort of in the middle of the sort of discussion.
And so the value of all of the companies that are in the US rocketed.
So not long afterwards, DraftKing raised at well over $1 billion.
The score, which was traded in Toronto. I think their share price went up like 6x in one day.
So you could see massive increase in value.
The only place where it didn't happen was with regards to 40% of the Spandeul Group, which they said actually the value of that 40% was 559 million. They said that was valued before Paspa and that was at value still the same after Paspa. And why was it 559 million? Well, that's the magic number that wipes out those common shareholders. And so the board was controlled by the preference shareholders who said, you know what, we've got a gold mine here. Why should we share it with these employees, founders and early investors.
And so that's what they did. And they sort of, because they controlled the board, they ran through this transaction.
FanDuel predictably went on to be very successful. And as the market kind of anticipated and went on to sort of dominate that market, as we knew it would and as the board themselves knew they would, they had already had projections that sports betting was going to be, you know, transformational for the business.
We filed suit by. And by we, I mean the founders and former employees. There's over 100 former employees in the suit, but we originally filed suit prior to the deal closing in Scotland. And then since then, we subsequently refiled in New York in 2020.
And then over that period of time, I've been sort of through the New York court system, which I'd say is very good. It's just very slow.
And so we then refiled in 2024, and we just had a judgment back.
Sorry, I'll pause there, because that's sort of the backdrop. And then we could go on to the. The judgment.
[00:07:29] Speaker A: Yeah, no, thanks. Thanks for that primer.
Now, in terms of trying to think where to kind of start, where to go with the questions, I don't want to go immediately into kind of like talking about this judgment, but I mean, throughout that process, I mean, like, what kind of. Like what material. What, like materially was lost through essentially being sucked out of the deal? Well, yeah.
[00:07:53] Speaker C: So to give you the simple math, the founders, common shareholders, and early investors involved in this suit owned about 10% of the common shares.
[00:08:04] Speaker A: Right.
[00:08:06] Speaker C: Two years after this merger that we talked about, where they said the value of that 40% was only 559 million, those same investors sold their stake for $4.2 billion.
So, you know, even there, you can see this is a company that before in 2017, was valued at 1.2 billion.
A year later, after the most transformational change in the sports betting world in the US in the last 50 years, they said it had dropped magically to 559 million. And then two years later was worth 4.2 billion.
So that was kind of sort of a timeline. And so we are suing for 10%, and you can kind of say 10% of that 4.2 billion for simple math.
[00:08:54] Speaker A: Fair enough.
[00:08:56] Speaker B: So at what stage, my background, I've been following the gambling industry for 20 years, 10 as an investment research analyst. So looking at valuations is my bread and butterflip and everything. And we know they went up and down. So, I mean, quite frankly, draftkings was never worth $70 and then collapsed down. So, you know, we know this hype, but at the time it was kind of, you know, probably actually almost worth more than it is now in terms of valuation flutter being. At what point did you realize they were screwing you and what was their justification? Because surely they couldn't have just said with a straight face that the most monumental thing that's ever happened in recent time in US Gambling of Pasca being repealed is going to have no impact on the valuation. And then you're looking at other companies where you're actually seeing the valuation change. Like there must be no offense, but there must be more to that. They can't just say, oh, sorry lads, it hasn't changed, and ignore everything else around it, you know, wouldn't you think
[00:09:55] Speaker C: that to be the case? Well, so number one, we filed before the deal closed. So, you know, actually at the time sort of, you know, they've sort of made some case that this is Monday morning quarterbacking. Like it was not. We actually filed before and we said this is a fraud. We know this is a fraud.
What is their, what's their defense on it? Their defense is essentially what I said is that 559 million was, was the value of the company and it didn't change through paspa.
That's, that's essentially say you can actually read their court papers and they said, no, no, no, it anticipated paspa.
Yeah.
[00:10:37] Speaker B: Okay, so you can.
[00:10:42] Speaker C: That is their argument and that is the argument that I.
[00:10:46] Speaker B: When did it, when did it close exactly?
[00:10:49] Speaker C: July 2018.
[00:10:52] Speaker B: 1.7 billion.
[00:10:55] Speaker A: Yeah, but PASPA was May that year. So it happens May, June, July. So two months after Paspa.
[00:11:02] Speaker C: Yeah, it had no impact on the value of 40% of what looked at the time to be a clear winner, if not the winner in online sports betting in US this. They have made that argument in court and they will repeat, you know, they remade that argument repeatedly.
[00:11:20] Speaker B: And were you still part of the operating group at the time?
[00:11:22] Speaker A: No.
[00:11:22] Speaker C: So myself, my co founders had really departed over the previous six couple of years.
I had left about six months before
[00:11:32] Speaker B: and obviously dfs, which was huge. But you know, I don't know whether you're doing an anticipation of Passburg or just generally in the competition, but you know, Both yourselves and DraftKings were making huge loss losses at the time.
[00:11:46] Speaker C: Yeah, we were.
[00:11:47] Speaker B: Did you see before you left, did you have a kind of path to profitability through DFS?
[00:11:52] Speaker C: Yeah, so we actually, yeah, like the 2015 year was, was very like incredible growth year. But you know, very loss making. In later years, 2016, 2017, we really narrowed that loss quite dramatically, you know, because we were no longer like putting the same amount of money into growth we did.
I would say we always felt that the US was an anomaly and that anomalies usually resolve themselves. Like, we knew that people love sports betting in the US and they generally were doing it legally.
We knew that if we built this platform, we had built a brand and a function that if there was an opportunity to go into sports betting, we were really well positioned. And it wasn't just us that believed it. Like our investors believed that Flutter believed it. That's why they went into this partnership.
[00:12:47] Speaker A: Okay. And obviously a few years before that there was the attempt to merger with DraftKings and I've always been kind of intrigued by that because obviously it was blocked by the Competition Commission because I think it was, you would have had something ridiculous like 98.9% of the market.
So by considering that and considering the investment coming in, were you essentially in the process of looking to sell?
[00:13:18] Speaker C: So there certainly was, yeah, there was certainly a process in early 2018. Certainly our investors were much more keen that they find we find a partnership where we had a, you know, a third party that would put money in, would give us sort of like a floor.
I think DraftKings investors were much more keen that they sort of go for it and it's, you know, dependent on the outcome of the market. From a financial perspective, it's still unclear which was the right strategy. Like our investors did incredibly well. Like even, even if they hadn't perpetrated the fraud, they probably would have made something like nine times their money back.
So it was an incredible return for them. And this was on an investment of something like 450 million.
With DraftKings to date, they've raised billions and spent even more paper on acquisitions. And so I've never actually compared the return to investors for them. I actually think they're probably similar. But with DraftKings it depends when you invest it.
[00:14:34] Speaker B: So just talk us through for the people who don't explicitly understand all the preference shares and commerce etc.
So you've got the investors who took the 559 million and then sold it for, what do you say, 4.2 billion. If they'd have gone back to Flutter or the merger at the time and gone, hang on, you know, may pass for happens. We think this is worth sake argument a bit. Yeah, you know, okay, so they would have got the 559 million. You guys would have got 441 million.
Then what would have happened for the sale? Do you still. Would you.
[00:15:12] Speaker C: Yeah, let me just sort of correct there, the events. So they didn't actually have to do anything with Flutter.
They didn't have to go back to Flutter and say, we need to renegotiate this. Because what was negotiated with flutter was a 6040 split. That's all Flutter cared about. And in fact, Flutter got an indemnification from our board because they saw what our board was doing and said, okay, we're going to let you do this, but you have to indemnify us from what you're doing. So that was the only negotiation with Flutter. Flutter said, look, you can. It's called run the waterfall. You can value your 40% however you want.
And so it was our board that made the decision unilaterally, that said, okay, we're going to value it at 559. And what would have happened is they really had two options. One of the things they could have done is they could have said, we're just going to preserve our capital structure. So we're not going to. We're just. Because we're just giving paper out, we're going to preserve. And this happens all the time. And then when we ultimately sell, we'll disperse the money. Alternatively, what they could have done is said, we're going to actually properly value it. We're going to use a third party, someone who's disinterested, to actually put a value on this asset. And then they would have decided what the split was based on the value in July 2018. So those are the two options open to them that they would have done and that they should have done. But instead what they decided to do was, no, let's wipe out the common shareholders, let's not value this because it means that ultimately we would make less money. That's what they decided to do.
[00:16:54] Speaker B: So effectively they. Let's say that 40% was worth the 4 billion. It's just that they wouldn't have had 100% of that. They would have had to share you guys.
[00:17:02] Speaker C: Yeah, yeah. So basically the question is, how do you split the 40% of FanDuel Group between the two classes of shares? That's what you're trying to figure out. You actually are not at that point. You're using the number to try and figure out the split, but no one's actually getting any money.
No one got any money until two years later.
[00:17:21] Speaker B: But what's quite ridiculous in this, I mean, another thing that seems quite ridiculous to me. Is that so Fluttered? Agreed. Their assets are worth 60% of a combined entity.
[00:17:32] Speaker C: Right.
[00:17:33] Speaker B: And yours are worth 40%. Suddenly, the values of yours has skyrocketed because, let's be honest, TVG not worth any more. You know, no, TVG would have.
[00:17:42] Speaker C: Tvg, similarly, as a US Gaming asset, would have shot up in value as well.
[00:17:46] Speaker B: Not the same extent.
[00:17:47] Speaker A: No. I mean, and like, you think about the database, you know, and the kind of the customer base that Fangil had as opposed to tv.
[00:17:56] Speaker C: Well, I think there's a lot of. Also, like, the expertise that Flutter brings into it because you have to remember that, you know, fanduel, like, we had a brand and we had a customer base, but we didn't have any expertise in sports betting.
And so the merger made sense at a 60, 40 prior to Paspa, but actually post Paspa, it made more sense because suddenly we had a partner that had all of this expertise and the promise of a platform, our ability to bring in a platform.
If you actually, if we look at an alternative one is to look at DraftKings. DraftKings later on, then had to merge or had to acquire SB Tech to bring in some of that expertise. So, no, the fandom side of the house did rocket in value at the same time because they did have a lot of that expertise.
[00:18:48] Speaker B: Okay. I mean, I still think 50. 50 would have been a fair adjustment at that point, which would have given more across to your side, but I think you'd be a bit generous to Flutter on that. Yeah.
[00:18:58] Speaker C: Like, you could have, like, you know, could. Could they have sort of, like, stopped the boss and said, hey, we're. We're going to renego it?
I think, you know, at the time it me, like, you have to, like, you know, you have to sort of open back up. Like, New Jersey was coming online. So it was sort of like. I think there was a feeling on the FanDuel side is like, look, we're, you know, the. The combined asset has rocketed in value. Let's. Let's get this closed. The other thing, to be clear with the board, is they knew if they reopened this, they would have to share the value of the common shareholders. So they were like, let's get this closed as quickly as possible.
[00:19:42] Speaker B: Okay, go on, Robin. I know you're dying to get on to the next bit.
[00:19:46] Speaker A: Yeah, I want to talk about the ruling.
So then fast forward into last week. Yes, last week. So the ruling comes out. So do you want to talk us through what the court has said?
[00:20:00] Speaker C: Right, so the sort of major defense from the defendants in this case, the defendants are the former board, minus one member who didn't vote for the deal.
It's that former board, KKR Shamrock, and then some of the entities that were set up around the deal.
And their primary defense was that they didn't. The board did not owe a fiduciary duty to the shareholders. Right.
And everyone looks at that, surely that
[00:20:38] Speaker B: is the board's number one.
That is their number one thing is shareholders.
[00:20:44] Speaker C: So in the UK, so in New York, 100%, yes. In Delaware, 100%, yes. In the UK, the board's primary duty is to owe a duty to the company and by extension, the shareholders. But it is not as clear as it is in the US that you owe a fiduciary duty directly to shareholders.
So their primary defense is because Vanda limited was a UK company, they did not owe us a direct fiduciary duty.
And we fought about that in court from 2020 to 2024. So about four years, this sort of discussion of you care, even actually Scottish law, ultimately we won on that. And we won and that they said, no, you owe duty to the company and in certain circumstances, like this one, where you have a conflicted board to shareholders. And so. But that was sort of the biggest, the big fight for the first four years after that, we then refiled and we already done a lot of discovery. So during that period, we were in discovery, so we had got a lot of emails and text messages.
In 2024, we then refiled with the court, and it's confusingly known as the New York Supreme Court. New York Supreme Court is sort of the lowest court. It's not like the federal system. Supreme Court's a top court, but it's sort of. It's a commercial division. They handle multibillion dollar suits. But it's Supreme Court. It's not that. It's not the top one. It's sort of the bottom in the structure.
So we refiled with the Supreme Court and we filed 10 claims, including breach of fiduciary duty, which is the core one.
What does that mean? Is that they, you know, they had a duty to us as shareholders, they breached it. They lined their own pockets.
We had charges of fraud because they made statements to us that were untrue and that caused us harm.
We had charges of bribery in that they gave incentives to board members to get them to vote for the deal.
And we had charges of, let me see, conspiracy. So they, as entities together, conspired in order to complete this deal to basically effectively steal the shares from the common shareholders. So those were the sort of. There's 10 claims in there.
And that's what went in front of the court two years ago.
That was briefed. And then we had a hearing last August, so about 12 months ago. And we had the ruling two weeks ago.
[00:23:30] Speaker A: And it was eight of the 10.
[00:23:33] Speaker C: Correct.
The court side is not. This is a motion to dismiss on their side.
So it's not. It's certainly not the end of the journey. And in a motion to dismiss, what the court has to say. The court is deciding whether we have legal grounds for these claims, not whether these claims are true, because that comes later on, but whether. And they have to infer that the facts support us.
[00:24:01] Speaker B: Right.
[00:24:02] Speaker C: The court says we are deciding whether if these facts are true, we have claims. And what the court found for eight of the 10, including all of the main ones of breach of fiduciary duty, fraud, bribery and conspiracy, they find that we have a legal path to win those.
And so basically found in our favor. And so they knocked out two sort of our smaller ones around breach of contract.
And another one, I actually forget that one. So of eight of the ten, we're moving forward.
[00:24:36] Speaker A: And when I read through the document, am I right in thinking that it is proceeding under Scots Law and U.S. law?
[00:24:46] Speaker C: Yes. So yes, it is. So again, sort of this was something that the first four years of the case we spent a lot of time fighting over of whether it should be under Scottish law or New York law.
It is under Scottish law. For there's a sort of, what they call it a doctrine of internal affairs. So the internal affairs of the company should be governed by the law of where you're incorporated. And first that was Scotland. So for things like fiduciary duty, that's under Scott's law, but for some other claims, they will be under New York law. So sort of events that happened out with the internal affairs of the company, those would be under New York law,
[00:25:22] Speaker B: where they pay a lot more out. Yeah,
[00:25:26] Speaker C: not necessarily.
It's, you know, again, it sort of depends. There's kind of the.
The damages, like what the damage is, but then there are other factors that kind of can result in what the final number is, but it's not. No, I don't think that that's necessarily the case. There's. Under New York law, they do have punitive damages, which, you know, as it sounds, can be quite punitive.
[00:25:52] Speaker A: Okay.
[00:25:53] Speaker B: And how long a piece of string. I know, but, you know, time frame are you expecting?
[00:26:01] Speaker C: So basically timeline. We're in discovery at the moment.
We expect that that discovery will be completed by early next year.
It is likely that the other side will file something called a motion summary judgment. Motion summary judgment is basically says to the court, look, now we have all of the evidence.
This shouldn't go to trial because, you know, the evidence doesn't support our claims.
That typically will take, you know, probably 18 months. And then once you're through that stage, then you're. Then the court will set a date. And so, you know, I think we're probably looking at late 2028. So it's about two, two and a half years to court, which feels fast now after, you know, another eight years.
[00:26:50] Speaker A: We've been that ten years on.
[00:26:53] Speaker C: Ten years on, yeah. Not, not unknown in New York. It is a very, very slow court system.
[00:27:02] Speaker B: So I think on that, unless you've got any pressing questions. Ten years on, moving on. Slightly, but slightly related. So you, when you set up Fangjul, you were kind of, how do I put this?
I'll stop. But some people may say you're kind of pushing the. The legal boundaries with loopholes etc. And you know, some people banned it, some people regulated it. And some people could say that that's what prediction markets are doing.
Would just say they're completely bullshit. But you know, what's one, what's your view on prediction markets in kind of general, in terms of doing. And then I've got a follow up to that.
[00:27:41] Speaker C: Yeah, well, let me actually touch on that characterization. I actually think that that's quite a British view of the legal system in the us. The legal and regulatory system in the US doesn't work like in the uk.
In the UK you've got a gaming commission. If you came up with a new product, you go to the gaming Commission and the gaming commission goes, yeah, that's fine. Or no, we don't like that. The US doesn't really work like that. The way the US works is we have a whole body of sometimes conflicting laws. We have state laws, we have federal laws. And what happens is entrepreneurs go and look at those laws and says, you know what we can do X Like we did with fanduel, we said, you know, fantasy sports seems to be clearly legal. And there's nothing in the definition that says that it has to last like six months.
In fact, there's nothing that says that. All it says is that it has to be based on statistical results based on multiple games. Great. We can build a really fun product around that and then what happens is the entrepreneurs build that and then no one cares. Like, literally no one cares until you get to a real skill. And then suddenly lots of people care and then lots of people scream and say, this is illegal, this is a loophole, or this is clearly illegal. And then lots of people sue each other and then things get resolved. This happened for DFS, it happened for DFS 2.0, like prize picks. It's happening for sweepstakes, and now it's happening for prediction markets. So it is very, very predictable and it probably will happen for trading card vending machines and skill games. And really any category you think of, this is how it works in the us.
Prediction markets is just one of the most recent instances of that.
[00:29:33] Speaker A: I was just going to say, do you feel like what we're seeing a lot with prediction markets is.
Well, I mean, even Trump's auto queue operator is being investigated for insider trading. We're seeing a lot of potentially like, you know, death markets, weather markets, you know, things that are kind of a bit close to the. I mean, is it. Are you saying that these kind of instances are just kind of like, priced in to the process of kind of moving into a regulated market? It's a case of kind of almost like pushing the boundaries to see where the edge is. Yeah.
[00:30:08] Speaker C: Like. So when I describe it, I'm sort of describing it. I'm not saying.
I'm saying there's pros and cons to that thing, that method of entrepreneurship. I actually think I really quite like it because it means that people can sort of push the boundaries and sort of say, look, you know, the laws say this, let's be able to do this. Whereas it does feel. I look at innovation in the UK gaming sector the last 25 years, like, how many startups in the last 25 years have really broken through in the UK, like midnight, you know, it's just. There's very few. It's really hard to. Because you can't put together like a ton of lawyers to go into the Gaming Commission and the Gaming Commission, it's much easier for them to just say no.
Whereas in the US we've just seen so much innovation. I think part of it is there's no gatekeeper to say you can't do this.
And it doesn't happen until you get to scale.
Okay? So that's the positive. The downside is we see a lot of stuff in the US where like, you look at it and go, well, this can't be right in a moral sense, like death markets or insider trading.
And so there's tons of sort of negativity.
The question then is, what do I think of prediction markets? So, personally, huge fan of prediction markets. Like I was at work at Betfair sort of early 2000s, I helped relaunch BetDac and we also launched a betting exchange called BetDax in 2021.
And even more crazily, FanDuel originally was a prediction market. So massive fan of the category. I think that it's a.
I think.
And I also always felt that Betfair massively underperformed its opportunity. It's never going to dominate the market, but I think it should be a really big part of the betting mix.
So I've always been a really big fan of it.
I think what's happened in the US has sort of been fascinating where basically they backdoored in through the cftc.
I don't think Congress ever really intended sports betting to be a federally regulated market by the cftc. I don't think the CFTC really does any regulation of it.
I think they've gone sort of completely laissez faire.
And the result is the market's become really interesting.
The growth has been phenomenal. I think it's. As a consumer, I think it's fantastic. As a trader, I think it's brilliant. The level of competition in the market's fantastic.
But the challenge I see is, I don't think it's the CEA which created the ability for the CFTC to basically magic wand these things as derivatives.
I don't believe that it supports it. I don't think Congress ever intended the CFTC to be a regulator of sports betting that overstepped states. So, as a consumer and as somebody who follows the industry, I love it. But I do see a big challenge ahead of them, which is sort of a legal challenge, and I think everyone sees that coming.
[00:33:25] Speaker A: And then what's your view on crypto? Because where does crypto set into this?
A kind of mix. Because obviously most recently you've been working on Bet Hog, which obviously is now shutting down at the end of this month.
[00:33:42] Speaker C: Yeah. So crypto, I'm still.
Crypto definitely comes in waves. Right. Like we had 2017, 2021, and then we had a bit of a bull market last year. It feels like today we're in a little bit of a lull again.
I would never write crypto off today. The things we're seeing in this sort of bear market in crypto payments is still incredible with. With crypto, like your ability to take payments anywhere and that's what we find about our ability to take payments anywhere in the world almost instantly at almost zero cost.
If you speak to any gaming operator, payments will be one of their biggest issues.
And so that is one area where crypto, I think is really strong.
I think a lot of the hope in 2021 of like decentralized protocols just hasn't really panned out. And I think we are.
So I think there's a lot of people in crypto sort of rethinking some of the other use cases.
I will say that products like Hyperliquid, which is like a decentralized trading platform, I think that's been really successful.
But I think there's been a bit of a reassessment within crypto at the moment where like, is this just really good payments or is there a lot more here? And I think we're trying to. I think the industry is still trying to figure out what the lot more is because a lot of the things that we thought in 2021, even through to maybe last year, just haven't really delivered.
[00:35:14] Speaker A: Okay, I mean, would you say Bethog falls into that?
[00:35:19] Speaker C: Well, so Bedhog, we started just a year and a half ago, and what happened there was we were always very kind of product focused. We were like, look, we want to be really successful in the crypto casino space through building a better product. And we felt that we did.
One of the things that we really discovered is that we love building product, right? And that was kind of like we just love building more product.
We thought that B2C is much more of a marketing driven business than it is product.
Whereas with FanDuel, product was very core. It sort of went totally hand in hand. Whereas a crypto casino, it's sort of like, I'd say it's 80% marketing and 20% product, or maybe 90% marketing and 10% product.
And so Bedhog was doing okay, but all of our focus was going on to building this AI dealer product. And so we basically, three months ago, launched B2B, went B2B with Sentient Studios. And then as we started working on it, we realized that all of our team was working on that. And that's where we wanted to put all our time and investment. And so that's why we decided to shop Bethog. Bethog was doing okay, but it wasn't what we were excited about. And just we didn't think that we could get where we wanted to without a lot more investment.
And so we decided to focus on
[00:36:34] Speaker A: Sentient because you're Obviously launching kind of quite a few games through that. I mean, are they just being shuttered?
[00:36:41] Speaker C: Because obviously some of them rolled into Sentient now. So.
[00:36:45] Speaker A: Right, okay.
[00:36:46] Speaker C: Our two core games today are AI Blackjack and then AI Baccarat. We're working on a third game which is AI powered roulette. And then we do have those other games as well, which we're thinking about how we would roll those into our B2B offering.
[00:37:05] Speaker B: But is it fair just to.
Let's come across as rude, but bluntly, you know, you had, you've had slots, then you had the RNG tables. So you just sat there.
Then you had live. And everyone talks about live being the driver. Quite frankly, slots is still the biggest and of course most, most markets actually taking slightly taking share.
Yeah.
So really it's just going well. Live's expensive and people like it. We're just going back to RNG tables, which we've had for years, and just sticking an AI person just eating out. I mean, maybe a little bit more to that, but that's, it's kind of taking over Live. Yeah. With. Without.
[00:37:41] Speaker C: Well, yeah, I think there is.
[00:37:43] Speaker B: Yeah.
[00:37:43] Speaker C: No, it's an interesting point. Like, look, slots is.
Slot machine is probably one of the greatest gaming inventions in the last 50 years. Like it's, it's probably older than that now, actually 70 years.
You see so many gaming products start out with noble intent and they end up as a slot machine because slot machines are just so effective.
What I would say is there is a group of people that love live dealer and they actively, they step away from slots and they, they play live dealer.
[00:38:14] Speaker B: Oh, I find slots boring as hell, by the way. I do not understand how they're popular in real life. Online. I think the most boring things in the world.
[00:38:22] Speaker C: Yeah. But no, I, I kind of get slots, but I do have to like get into the like. Okay, I get why the. You know, but it's very My dog's jumping in here.
You know, I get, I get the appeal of slots. I think it's a much more,
[00:38:40] Speaker A: it's
[00:38:41] Speaker C: a more of a immersive, chill out type of game.
Like, I think a lot of people when they play the slots, they play to like unwind as opposed to like when I play. Like, I play to heighten excitement. Slots, I think is a much more of a like a I want to chill. But so we do see slots, obviously a huge category and it's one of the dominant categories, live dealer. We do find there's a cohort of people who actively pursue that what we find with AI Dealer is it actually. And then obviously we've got originals.
What we find with AI Dealer is it actually fits somewhat more of AI originals in terms of reach.
Originals tend to be the most mass market product and what we find with AI Dealer is unlikely live. So live can take several minutes to find a table.
Also can be a little unnerving for players. Like they don't are like, oh, you know, I feel under pressure, which they don't get with like originals. What we find with AI Dealer is that it's much more like originals in that it's not unnerving. They can just pause, they can walk away, you know. And so that we are finding and we see that in the player pattern, you know, with, with our live games we find people come in and they just play long sessions with, with our AI dealer we do get that, but we'll also get people coming in and playing a few hands and, and dipping out again.
We also get people will play lower value hands and they'll do things that they, I don't think they would do on the live tables.
[00:40:13] Speaker B: So if you're not allowed to say like we're going to take share from everywhere. You know, if I look at three buckets of. Are you growing, Is your product growing the market?
Yeah. Is it replacing, you know, people who would use RNG tables? Yeah, replacing live. I know you probably say, well do all three of that. But to me it seems as though the main thing's probably you're trying to kill the live. You know, just say you don't, you don't. It's almost as good as live or in some way better. And you don't have all these massive costs, I think.
[00:40:41] Speaker C: So I think in the short term we probably are growing the market.
There's definitely a group of people that are intrigued by lie, but they find it a little forbidding. In fact, we found a feature, users actually created a feature in our product which was they would play in blackjack and it would be like a 16 against a 10. They don't really know what to do. And what they do is they would ask our dealers and our dealers have been trained in basic strategies. So they would tell them what to do.
You would never do that with a real live dealer. Right.
And I have no idea what they would tell you.
[00:41:15] Speaker B: I do that in Vegas. And they'll say, oh, you do that in Vegas.
[00:41:18] Speaker C: Right?
[00:41:18] Speaker B: What the book says. And they say you don't know if you win. But this is what the book says.
[00:41:23] Speaker C: Yes. And so In Vegas they'll tell you, but I don't know, if you went on an evolution dealer, would they tell you that's it?
[00:41:29] Speaker B: I mean, I don't know.
[00:41:30] Speaker C: I got it. Yeah. Won the test. So. So we find that I think in the short term we are growing that market of that sort of latent demand, but I think longer term, 100% we take share. There's no doubt in my mind. I also just feel not to criticize anyone, but the live dealer product is 80 to 90% of the time dramatically worse than what I think the experience should be. As a player. I go in and I kind of think that Vegas experience, I think of that really fun dealer, that even though you lost, you kind of had a good experience.
When I play on online live dealer, 90% of the time I don't get anything even close to that.
And that to me, I think creates an opportunity because I actually think we can deliver that with AI powered dealers. We can deliver somebody who is engaged, who has good audio quality, that is fun and is responsive to what I say. And that's not the experience I get with Online live today 90% of the time. And I think that's our opportunity.
[00:42:37] Speaker A: So it's interesting because obviously when the subject of AI dealers comes up, you know, like the big live dealer incumbents are obviously very against it for a number of.
[00:42:47] Speaker C: They want it banned is the one thing I heard recently.
[00:42:50] Speaker A: I mean, that seems a bit wild, but.
But do you feel there's, do you feel there's any truth to that and that there is a degree of AI fatigue in society? I mean, anyone who goes on LinkedIn will notice a hellscape of ChatGPT posts and then chat GPT responses.
But is there potentially an element of truth in that that people are starting to kind of turn away and looking for, I suppose, an authentic experience which is less about the kind of like the sheen behind it, more about the human interaction?
[00:43:31] Speaker C: I think there's a couple of things to that. I think there absolutely is some sort of fatigue around AI slop. But the important part of that phrase is not AI, it's slop. It's bad content. Like people hate bad content wherever it comes from. AI is just very good at creating lots of it very cheaply. And that's why. And we see this, but.
And then you'll know yourselves, people are using AI every day, frequently, multiple times a day. Even people that hate AI and want to shut down data centers had admitted recently they use AI to help them to figure out how to protest against the data center.
[00:44:08] Speaker B: And so Nigel, we have it the other way around. We had the minister who is in charge of AI and technology who admitted that she didn't use AI. And we also have a chancellor who on a mumsnet thing was asked, you know, what AI program do you use? Because one of the main things in the UK is to increase efficiency, increase productivity, to grow the economy.
Again, admitted that she doesn't use AI at all. So at a government level, we don't know, that's just not used.
[00:44:37] Speaker C: I feel the UK government is not the best test case for this one.
But yeah, I've been impressed with the AI technology at its ability to hit like grassroots of people, that there's kind of certain technologies you see that are kind of pushed top down and there's ones like AI, which like people are just naturally. And then Google just builds it into search. Like it's. I think some people use AI and they don't even know they're using AI. It's like I googled it and it gave me a response. Well, that's AI, so apart from government ministers obviously in the uk, but maybe
[00:45:13] Speaker B: they're using it that way and they just didn't.
[00:45:14] Speaker C: They don't even know.
It's quite terrifying. So I think everyone hits slop, right? I do think that there's certain environments where authentic really matters. So I look at a lot of AI applications. One example is my wife works in the therapy industry and I've looked at some of the AI therapy apps. I think that's really hard because I think people want to have an authentic relationship with a therapist that an AI, even if it's really well trained, just cannot reach.
So I think that's true. I think there's parts of the market where that's true.
Live dealer is not one of those categories. I just like you go onto one of those tables. How often did you have an authentic social relationship with an online live dealer?
Like, you know, you look at the chat logs, you go, every time I go on a table, I look at many people are chatting. Zero. Right.
Maybe once or twice or maybe one of the really big tables and how social they experience. How engaged is the dealer in that?
Like almost never.
So I do think that, I think this is one category where like the social aspect is massively overrated. I also think that a very good AI powered dealer can create social interaction between the table, if that's the purpose.
Most of the live dealers that I ever play with, they're not doing that. Like they're just like, you know, totally vanilla, it's mechanical.
So we, in my view, what we've done with online live dealer is turned people into robots and we can't then get annoyed if robots are better at doing it than the human robots that we've created. Like, that's kind of, I think, where that market is today.
[00:46:57] Speaker B: I suppose the only other bit though for me is my understanding is there's certain people particularly prevalent in Asia, for example, where live dealers very big, who do it not necessarily for the social interaction, but because they just don't trust rng.
[00:47:11] Speaker A: Yeah, it's very much a trust thing.
[00:47:14] Speaker C: I think there's. Trust is probably one of the biggest factors and I'd say two things for that.
Number one, if you were playing in a like an Asian casino 10 years ago, you know, something, something dot X stroke, you know, you probably would have trust issues. Justifiably. Right.
That is less so to drag you look at Pragmatic, where's their top market? It's Asia. Right. So I think that's changed. And then number two is there's other ways to resolve trust. Like you can resolve it through provably Fair, which is, you know, stake has done that with originals. Like all of the crypto casinos have done that originals. You can also do it through brand. Like, why do I trust Hacksaw? Like, I have no idea what RNG Hacksaw uses, but it doesn't stop it from being incredibly successful or any of these slot titles. So I do think there is an argument around trust, but I think there's other ways to fix it.
[00:48:07] Speaker A: And I'd say one last thing on
[00:48:10] Speaker C: trust, which I think is interesting, we actually, we've seen that in our testing with our product, which is as our product got higher fidelity and higher quality, people trusted it more. Right. This in a way you could say this doesn't make any sense. Why would you trust it? Just because the product quality is higher.
In a way it kind of does make sense, which is the product looks kind of sloppy, then I could be getting scammed. But if it's clearly people invested millions of dollars into it, they're more likely to be legitimate and they spend time and refining it. So humans are kind of interesting, right? I tell you, building for humans is really interesting, but that's. Trust doesn't just come from.
I'd say, honestly, if I go into some of our live dealer competitors, not an evolution, but one of these schlocky tier 3 ones, I have trust issues. I'm like, I see the cards, but I Don't know, like this doesn't feel like. This feels like backroom kind of stuff.
[00:49:07] Speaker A: Yeah. So we are definitely coming up on time. But one of the things I always think is quite interesting when people talk about AI is generally like broadly speaking in public it's talked about, you know, an efficiency driver. It can do things quicker, all this kind of stuff but it feels like when it's being used properly it's not quicker, it's not, you know, cheaper. Yeah, does, but it does potentially create a better product. Is that fair? Is that kind of that tally with what you think?
[00:49:43] Speaker C: I'd say our experience, the developers and then design is. It is an efficiency driver but it's not like the 5, 10x that some people sort of click claim. It's sort of like an incremental efficiency gain.
It's very good at certain things. So prototyping, unbelievable. And there you can see a 10x increase and increase. But if you want to have a production grade product it's more incremental improvement, maybe a 20% improvement productivity gain.
One of the things I would say is interesting now is we are hitting the point. So AI Dealer is an example of a product that couldn't exist without AI.
Whereas a lot of the AI up until quite recently were products that you could have had before.
They were just, you know, you can build them a little faster. Right. And so I think we're now at an interesting point. Now we will see more products that are. That could only be done with AI as opposed to ones that you could do. So for example, you know, you remember like a lot of the sort of AI videos like those could be done before. It's just a lot cheaper to do now.
What we're really excited about are products like AI Dealer where you can ask the dealer like it's a 16 against 10, what should I do? I can only do that with AI. I think we're going to see more and more products like that. I think that's really exciting.
[00:51:05] Speaker A: Don't you buddy? Start barking.
[00:51:07] Speaker B: Nigel, I think this has been fascinating. I have to go and. But Robin can carry on. But I would actually happily continue talking to you for at least half an hour. Particularly my views on prediction markets and what I think Franjul and DraftKings are doing by just pretty much, I think being saved as companies by Passpa and then just going oh well we're just going to ignore it when it suits us is completely out of order.
[00:51:29] Speaker A: Yeah.
[00:51:29] Speaker B: And there's so much I want to do so I'd love a follow up at some point and it's been a super interesting guest and so I'm having to drop off genuinely all the best with the, the new one. I think it's. It'll be interesting to see that because yeah, Live Dealer, I always thought is the investor from the investor side and everything else. It's always talked up more than its performance, quite frankly.
Let's see how yours goes.
[00:51:56] Speaker C: It's great. Thank you.
[00:51:57] Speaker A: Well, that is. Well, I mean, we're definitely up in time then. I think that's the first time that Ed has actually ever said that he would like to spend more time with the guest, even if he did limit it to at least half an hour.
Yeah.
But no, Nigel, as you know, as Ed says, thank you so much for joining us and really appreciate it and everyone, thank you for listening. It's been a. Hell, it's been a bumper episode. I mean, usually when we do them this long it's just me and Ed talking. So this one's actually got some good stuff in it. So thank you very much for listening and we'll see you in the next one.
