Susquehanna bets on decentralized sports prediction market Frontrunner

Decentralized sports prediction market Frontrunner raised $4.75 million in a seed round led by Susquehanna Private Equity Investments. 

Other investors in the round include SOMA Capital, Toy Ventures, Ledger Prime and WAGMI Ventures, according to the release. 

What is a sports prediction market?

Frontrunner is a prediction market that simplifies sports betting by removing the complexity of betting odds. Instead, individuals buy and sell shares in teams and players using crypto across sports markets such as the NBA, NFL and others. 

Prediction markets are like futures markets. In the futures market, traders are betting on the future price of an underlying asset. In prediction markets, contracts pay out based on the outcome of future events.

Co-founder and CEO Neil Zhang was inspired to build Frontrunner after placing a pre-season bet on the NFL team the San Francisco 49ers to win the Superbowl. Even as the team made it into the final, he realized there was still a good chance he could end up with nothing if they lost. 

“The way that sports betting is, you're basically having this relationship where the sports betters are competing against the book directly,” said Zhang in an interview with The Block. “And in that case the book or the bookie is not incentivized to give users the best price based on liquidity, it really seems like a much more inefficient market when there's only a single source of your odds and your ability to buy or sell bets.” 

Decentralizing prediction markets

Frontrunner set itself up as a decentralized network in an effort to ensure that the house doesn't always win. It’s non-custodial with users interacting with markets built on smart contracts, Zhang said.  

“Every share essentially represents a bet between two parties, opposite sides, adding to a dollar,” Zhang said. “And the outcome of a season or a game or whatever prop were betting on, the $1 goes to the winning side and the other side is going to have nothing.” 

Bettors can trade to the very last second or take profits early, he added. The platform was built using Injective, which is a protocol within the Cosmos ecosystem. 

“The Injective protocol turned out to be perfect for us,” Zhang said. “The protocol is built specifically for companies to be able to quickly spin up decentralized exchanges of various assets."

The startup launched on testnet last quarter enabling people to test the platform without needing to spend crypto. Its mobile app is projected to be ready by the end of January, Zhang added.

Susquehanna's bet on Frontrunner

The fundraise closed in May. The proceeds have been put toward product development, team growth and securing licensing, Zhang said. 

“We believe that the open and decentralized platform Frontrunner is building will bring together sports fans and betting enthusiasts from all around the world," said Dean Carlson, head of digital asset investments at Susquehanna Private Equity Investments LLP in a statement. 

Susquehanna has its roots in sports betting having been founded by former poker players. 

“They're basically looking to get more exposure to both web3 and cryptocurrency and also to be able to get more liquidity and more capital into sports betting,” Zhang said. “And so, there's even the potential in the future for potentially having Susquehanna be a market maker or liquidity providers on our platform, which is such an exciting prospect for us in terms of really making this into a fully-fledged liquid market system.” 

Frontrunner aims to operate as a fully licensed platform, Zhang said. It’s hoping to receive an offshore gaming license in the Isle of Man in the first quarter of next year, which means it will be able to legally operate in a variety of jurisdictions including Canada, Mexico, Africa, Asia as well as parts of Europe and South America.