The Future of Real-Money Gaming is Mobile…and Onchain
With contributions from Investor Kavan Canekeratne.
The gambling market is enormous. At more than $600B in revenue and growing at least 8% per year, gambling is one of the oldest common pastimes. It is a distinctly global phenomenon, and the unquestionable direction of gambling (chance-based) and real-money gaming (skill-based) is that activity is moving away from terrestrial venues like a casino, to online applications and experiences. Sports-based real-money gaming (RMG) has led to increased fan engagement and has increased the number of people willing to wager. We believe we will see more and more skill-based wagering across all sorts of gaming experiences. RMG is also projected to reach $63B by 2033 at a 14% compound annual growth rate (CAGR) making it one of the fastest growing sub-sectors in the gambling market.
Despite the success of terrestrial and online gambling and RMG, the one flaw in the model is that it requires trust. In the physical world, almost all states and jurisdictions create gambling licensing bodies to insure fairness to the players. In some jurisdictions, the same intent has reached online gambling sites. But in many locations, it is still the wild west. Online wagering and RMG requires users to trust the provider. Users must trust that the odds are fair, and that the provider has the capital to cover the games and payouts. In addition, online wagering is dependent on traditional payment networks to allow customers to use credit/debit cards and traditional banking infrastructure to buy-in. These traditional financial providers have been uneven in their permissions to allow end users to buy-in to online wagering, and given the challenges of the space, the mere potential for high chargebacks and fraud have led to many RMG platforms being cut off from payment networks and banks.
Online wagering also has challenges administering trusted KYC practices, meaning it can be hard and expensive to verify the identity of your players and the flow of funds.
Blockchain technology was invented to remove the need for trust in any transaction. Online wagering, like all financial markets, can benefit from the move to web3. Stablecoin-based payment systems allow for inexpensive and transparent movement of funds into wagering and RMG games, and most importantly, ease the process of withdrawing game winnings. It is also possible for providers to use cryptographically secure identity solutions for KYC/AML. And, of course, all money movements are transparent and trackable, since they are all onchain.
In addition, crypto casinos and RMG providers can choose to put their odds and game dynamics onchain, allowing everything to be provably fair, obviating the need for trust. Providers could also detail their wallets and treasuries to demonstrate liquidity to cover games and winnings.
We have been watching this space closely for several years. While there are providers around the world who have existed with bad intentions and track records, a new crop of experienced and legitimate entrepreneurs have been building onchain gambling and RMG platforms. Today we are announcing our seed investment in ZOOT, a real-money gaming platform bringing video game sensibilities to mobile entertainment.
Founded by gaming industry veteran Sean Ryan, who helped build and lead Facebook’s multi-billion dollar games business, ZOOT is building a mobile-first platform that pioneers a new approach to real-money gaming, combining the engagement of video games with the efficiency of blockchain-based payments. Sean brings decades of experience from leadership roles including CEO of digital music service Listen.com and co-founder of social casino games company OpenWager, which was successfully acquired by VGW in 2017.
Sean and I first met each other during the 1.0 days of digital music (when I co-founded MyPlay and he was running Listen.com), and I have been impressed with him ever since. I watched him ascend through various startups and then we worked together at TwoFish and LiveGamer. When OpenWager was spun out of Meez, he developed first-hand experience with the mobile casino game market. At Facebook he spent a decade overseeing gaming, becoming deeply familiar with the gaming habits of hundreds of millions of users and understanding which gaming models work best. He was early to web3 with AQUA and has stayed interested in finding the successful gaming models that will benefit most from crypto. Few people understand mobile, video games, crypto and RMG better than Sean, and we are thrilled to partner with him and his team in this space.
Unlike traditional online gaming platforms that rely on complex payment processing systems, ZOOT will leverage stablecoins to enable seamless transactions. Players can deposit and withdraw instantly, with all transactions verifiable onchain for complete transparency. ZOOT is bringing exciting game loops and graphics from the traditional gaming world into the RMG format which we believe is a much needed upgrade. The platform’s flagship games, including a popular beer pong adaptation of the classic Plinko game, demonstrate how traditional chance-based mechanics can be reimagined through a video game lens.
The future of real-money gaming is onchain.
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David Pakman is a Managing Partner and Head of Venture Investments at CoinFund, focused on leading the firm’s venture investing activities. David developed an early interest in mining Bitcoin before he began building Ethereum mining rigs in 2017.
David is widely recognized for his track record and thought leadership in crypto, consumer, and enterprise technology investing. During his 13 years at Venrock he led the Series A round and sits on the board of Dapper Labs, led the Series A and B rounds of Dollar Shave Club (sold to Unilever for $1B), and led early-stage investments in robotics, AI, consumer and carbon removal tech companies. He personally invested in Coinbase prior to their IPO and was named the 55th top venture capitalist in the world by CB Insights.
Prior to CoinFund, David was a partner at venture capital firm Venrock, co-founder of Myplay, CEO of eMusic and the co-founder of Apple’s Music Group. David is a graduate and a former member of the Board of Overseers at the University of Pennsylvania’s School of Engineering and Applied Science with a degree in Computer Science Engineering.
