Why Investors Are Gambling On Betable Even Though It's Illegal In The U.S.

The U.K. startup says it's figured out a secure way for any developer to make social gambling a reality.

This morning a U.K. startup called Betable announced that it has figured out how to attach real money to social games in a secure way. It won't be coming to the U.S. anytime soon--online gambling has been illegal here since 2006--but Betable has nonetheless attracted a lot of stateside buzz. Here's why the company is garnering so much attention.

  • Betable has gaming licenses from the United Kingdom Gambling Commission that authorize it to handle gambling and betting services for players, as long as those players are in locations where online gambling is legal. So if you're a gamer in France and you give the okay for a Betable-enabled game to use real money, all of that game's activities are handled on Betable's servers in the U.K.--where it's legal--from there on. They even released a diagram explaining how it works.
  • There are a host of anti-fraud and verification checks in place to prevent gamers in countries where online gambling is illegal from cashing in. That technology can detect when someone tries to disguise their computer's IP address or their location. (The risk of gambling addiction will have to be handled by your own technology.)
  • The company is releasing an API so that social game developers can add gambling to any game. Not only will players be able to earn cash, but developers can potentially reap huge profits in the process. Betable's model could solve the biggest problem currently facing Zynga and other social game developers: They need millions of gamers in order to make a decent amount of money.
  • According to Betable's own internal research--which makes it awfully suspect--the free social games model generates a paltry $1 a month per user with a $2 lifetime value. In the same month, a real-money gamer generates $300 and has a lifetime value of $1,800. That's because casino-style games don't depend nearly as much on volume--even just a handful of users can generate a hefty amount of money if they're each playing hours of slots or poker. By bridging the passion of social gamers and the spending habits of casino gamers, Betable could potentially vault social game developers from the $7 billion social games industry into the much more lucrative $32 billion online gambling industry.
  • Betable has attracted an impressive roster of heavy-hitting U.S. investors--including Greylock, True Ventures, Path founder Dave Morin, and StockTwits founder Howard Lindzon.

There may be hope yet for American social game developers who want a piece of the action: Betable is holding its first hackathon on July 27 in San Francisco.

[Image: Flickr user Fiddle Oak]

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