By Kristy Dorsey

Former executives of FanDuel are aiming to be at the forefront of what they believe will be the next stage in the evolution of online gambling with the development of new infrastructure combining blockchain technology with sports betting.

Nigel Eccles, co-founder and former chief executive of Scotland’s FanDuel, will serve as chairman of BetDEX as it prepares to launch its infrastructure protocol in the first half of next year. The venture is supported by $21 million (£15.6m) of investment in what is said to be the UK’s largest-ever seed funding round.

Joining Mr Eccles in the role of chief executive is Varun Sudhakar, who worked in senior strategy and corporate development roles at FanDuel between 2015 and 2018. Stuart Tonner, the first-ever engineer hired by FanDuel, is taking up the role of chief technology officer at BetDEX.

The investment round was led by crypto investment firm Paradigm of San Francisco and Bahamas-based cryptocurrency exchange FTX. Other investors include Multicoin Capital, Hack VC, Lightspeed Venture Partners, Sino Global Capital, Solana Ventures and Everblue Management.

READ MORE: FanDuel bought by Paddy Power Betfair

BetDEX will make its back-end infrastructure available to third parties, including existing sports betting platforms and start-up firms, allowing them to build their own consumer-facing applications on top of it. BetDEX is built on the public blockchain platform of Solana, one of its investors in the seed funding round.

BetDEX will also build its own front-end application that will initially operate as an exchange linking up sports fans looking to bet against each other on European football results.

The company has yet to decide on a trading name for its consumer application, which will be extended into betting on tennis and cricket results. It will initially target the European and Asian markets, though Mr Sudhakar said the founders “do envision operating in the US market at some point”.

Set up in Edinburgh in 2009, FanDuel operated daily fantasy sports platforms primarily for the North American market but ran into difficulties after it was forced to fight expensive court action in several US states over the legal status of its games. It was eventually acquired in 2018 by Paddy Power Betfair, now known as Flutter.

READ MORE: FanDuel boss quits as former director of private equity backer takes reins

BetDEX will only handle wagers made in cryptocurrencies and plans to accept bets made in Tether (USDT), Solana (SOL) and Samoyedcoin (SAMO) at launch.

In 2020, the global sports betting market was valued at $203 billion (£150.6bn) and is forecast to grow to $350bn (£259.6bn) by 2024. Mr Sudhakar said he was not aware of any estimates on how much of this is wagered in cryptocurrency, but noted that 40 per cent of crypto traders are also sports betters.

Using blockchain technology, BetDEX says it can bring down costs to punters while also delivering a faster service. The risk of consumers losing their money should a betting platform go bust is eliminated by the fact that the money is held in the blockchain, rather than by a third party.

“The sports betting industry charges high prices for poor products and limits trades by its most successful users,” Mr Sudhakar said. “BetDEX is diametrically opposed to this approach.

READ MORE: FanDuel co-founder takes new venture Relish to market

“We will successfully compete against incumbents with a markedly superior product and low fees, which is now possible with the advent of blockchain technology. Winners will always be welcome on our protocol.”

Mr Eccles said blockchain is set to “revolutionise” sports betting.

“It’s exciting to be founding the business with Varun and Stuart, and to be building it in Scotland,” he added. “We are energised to have the backing and wealth of expertise that comes with having Paradigm and FTX as cornerstone investors.”

Mr Eccles and Mr Sudhakar currently split their time between New York and Scotland, while the rest of the nine-strong team works on a “remote first” basis. However the company’s official headquarters will be in Edinburgh, where it expects to recruit up to 25 designers, front-end engineers and other staff during the next 12 months.

Sam Bankman-Fried, chief executive of FTX, said: “We are thrilled to be backing a team with deep industry expertise to transform the sports betting experience. It is mind-boggling that more sports wagering does not occur on exchanges – we firmly believe in giving consumers the ability and control to set their own price and are excited to partner with BetDEX to bring this vision to fruition.”