Episode 563: Genius Sports CEO Mark Locke on Prediction Markets and the Data Behind the Game

Mark Locke (0:00)

Using sports technology to collect data, and then using that data in lots of different commercial ways, whether that's with sports betting companies, whether it's now in the advertising space, but fundamentally, the underlying business hasn't really changed.

SPEAKER_2 (0:17)

Mark, thanks for joining us. Happy to have you here.

Mark Locke (0:19)

Thanks ever so much for doing this. It's great.

SPEAKER_2 (0:21)

So Mark, in early September, you penned an article titled Americans are going to keep wagering in it. You made the case that today's prediction market structure certainly won't survive unchanged, even though the demand underneath it. Well, zooming out from the legal and regulatory noise, how has that long view shaped the way you view and you think about what's durable versus what's just a popular trend at the moment?

Mark Locke (0:44)

Yeah, it's super interesting time, but it's almost like we've seen it before. In America, you had the repeal of PASMO and the evolution of the online betting space. We just see this as another stage of evolution of betting.

What I think Prediction Markets has done in a very persuasive way is prove the demand that exists for wagering in America.

You've seen, I think it's 70% of the wagering that has increased by Prediction Markets has come from Texas and from California. And what we're really seeing is we're seeing that regulatory arbitrage that exists at the moment, allowing that desire for people to engage in sports wagering to come through. So when we look at the space and we look at the way that the regulatory framework exists, we think that that's the thing that's gonna flex. We've seen it in other countries. We think that the evolution of that space will come from things like the introduction of taxation. You know, look at North Carolina, they've introduced a prediction tax. You look at what's happened in California, the tribes, I think, two weeks ago, you know, came forward and said, let's legalize online sports betting. What that is evidence of, in my opinion, is that evolution of the regulatory framework, which is really the thing that is going to come out of the prediction market uncertainty at the moment, because ultimately the wages are going to be the thing that's durable.

SPEAKER_2 (2:30)

Sure. And, you know, as I was reading the article, I found Genius Sports to be in a really interesting position. You're supplying data and services to, you know, Fandual and DraftKings, Caoshi and PolyMarket, companies that are obviously competing for the same clients, companies that are competitors to one another. How do you think about staying valuable and staying trusted when you are working with those who are direct competitors from one another?

Mark Locke (2:56)

Sure. So we've always been in Switzerland, you know, we've always sat in a space where the data is just a factual representation of what happened. And that's, you know, absolutely necessary for lots of different things. And I think one of the most obvious things to think about is how you settle a game, when you, how you actually, what the result is, what actually happened in the game. You've got to have a record that everybody agrees on. And really the people who own that record ultimately are the leagues. And what we do is we work with the leagues, we collect data and then we distribute that data. So I think when we look at our client base, and that might be the sports books, it might be the prediction markets, it might be the market makers, you know, it might be, you know, the people who are sort of involved in, in all of the US wagering space, well, internationally as well. What we're really doing is we're providing factual data sets to them in a way that we've always done, frankly, that allows those wages to be fair, the integrity of the game to be protected, and ultimately it benefit the consumers.

SPEAKER_2 (3:53)

And in terms of benefiting the consumer, the article also sort of draws a distinction between pricing, which can come from essentially almost anywhere, and settlement, which obviously requires more trust and more transparency, as more money and attention obviously pour into these markets, how do you, or how does the gap between pricing and settlement really separate those who are trusted versus those who don't have the same reputation and the same standing as a Genius Sports?

Mark Locke (4:22)

Yeah, I think what ends up happening is the regulator, and they've said it as well, they've made a case for official data being the thing that's settled against. The states have already done it on OSB in certain cases, but ultimately, the regulator wanting that official record for settlement purposes is going to become a big driver for it. In the end, the prediction markets, they are going to want to work with the leagues, with the sports in order for them to have a proper regulated environment that everyone's comfortable with. Because having people like the NBA or the NFL supportive of your product and your market is going to be a super important part of how durable they are, and how quickly that evolution happens. So really, we sort of see all roads leading to one settlement outcome, which is done hand in hand with the leagues, that's approved by whatever regulatory form takes precedent in the future.