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Turning a hobby into a business is harder than it sounds. Just ask Jeff Yass, the billionaire co-founder of trading firm Susquehanna International Group. As a young man, Yass was such a successful gambler that he was banned from some racetracks. Decades on, he is trying to create a sports betting business inside his giant investment firm, but so far the venture has been much less reliable.
The return to Yass’s sporting roots is one of the few expansion plans that the secretive trading firm has publicly discussed. Susquehanna has spent almost a decade building up a transatlantic team of statistics nerds and sports buffs to trade on sports and political events, via betting exchanges such as Betfair.
Betting exchanges work much like stock and options exchanges, with punters betting against each other rather than a traditional bookmaker. Susquehanna figured, therefore, that it could do the same thing it does on financial exchanges: using algorithms and complex risk analysis to make huge volumes of short-term bets.
However, corporate filings show winnings at SIG Sports Analytics — Susquehanna’s Irish gambling subsidiary — have been extremely volatile. A bumper year in 2020, yielding $60mn in winnings on $1.5mn of trading expenses, has not been replicated since. Net trading losses in 2021 and 2024 more than offset the profit in between, with little significant change in trading expenses. The company, for its part, doesn’t comment on performance.
This kind of volatility is the opposite of what market makers traditionally seek. Virtu Financial, one of the only listed trading firms, suffered only one daily loss in five years in the run-up to its 2015 initial public offering. The record was so remarkable that it exacerbated concerns about bad behaviour, but the reality is more mundane: as long as market makers win slightly more often than they lose, the sheer volume of trades should lead to reliable profits.
Susquehanna’s bumpy ride provides a useful reminder that there are few easy wins. That bears repeating given the rapid growth of so-called prediction markets including Kalshi and Polymarket, which offer binary contracts on everything from election results to Spotify streams.
Trading volumes on such platforms multiplied 130-fold over the past two years, encouraging several proprietary trading firms to go on a hiring spree. But SIG’s sports experience shows having an edge in one market — in this case its success in options, equities and the like — doesn’t automatically translate into another.
It may take serious staying power, and enough funds to keep taking risks, to reach the point of consistent profits. On that score, Yass is well-placed — as analysts at Alphacution point out, Susquehanna can easily afford to keep investing through any teething pains, and it doesn’t have any external investors to appease.
Still, he and any would-be rivals eyeing the sports market should remember the advice he recently gave a teenage YouTuber in a rare interview: “If you can’t make money, you may want to consider being quiet.”