Stakes raises $5.3M for NFTs for sports wagering fans

Stakes said it raised $5.3 million for non-fungible tokens (NFTs) aimed at sports wagering fans.

New York-based Stakes wants to make sports wagering more social by offering a new web 3 experience for fans using NFTs as rewards.

The money came from Digital Currency Group, FBG Capital, CMS Holdings, LD Capital, Cadenza Ventures, Matrixport Ventures, and Sterling Select Group. The company also announced the appointment of Sam Li, former Vice President at the National Basketball Association (NBA) as a strategic investor and advisor.

Stakes graduated from InterActiveCopr (IAC)’s incubator in January. It will use the funding to help expand Stakes’ team as the company continues to rapidly grow its user base.

“Digital sports betting increasingly feels like math homework – devoid of the emotion, energy and sense of community that motivates fans, especially this new generation of sports lovers,” said Kevin Wang, CEO of Stakes, in a statement. “Stakes re-imagines sports betting for the 21st century by using NFTs as rewards. We combine social media, gaming and crypto to tap into what sports fans are truly after: friendly competition, showing off knowledge and earning bragging rights. NFTs are a unique way to achieve this.”

Wang added, “We are delighted to partner with an innovative group of investors who have a finger on the pulse of web3 and the future of culture. Our mission is to bring people together through sports and community with an engaging, digital experience that is so much more than a spreadsheet of numbers.”

Currently in open beta in the Apple App Store, Stakes’ platform is free to users and creatively captures the fun and excitement of sports betting without players risking anything of monetary value. Any player can wager for free in a competition among friends and influencers in a social feed.

I asked if the business was similar to other sports betting companies like Draftkings.

“Stakes does not compete with any traditional sportsbook doing regulated real-money betting. There are already plenty of options for people to bet with cash or crypto, legal and otherwise,” Wang said in an email. “We want to appeal to sports fans that will never become hardcore or even casual bettors because the very nature of sports betting alienates a large segment of sports fans. Stakes is a web3 social wagering platform used to create a public sports fan reputation, with NFTs that represent your status. Anyone can create their predictions and others can wager with video game virtual currency to agree or disagree with you. Stakes is always free to play and is not considered gambling.”

He added, “We are very different from real-world sports betting, prediction markets, fantasy sports, free to play prediction games and social media platforms. We have elements of each, but we believe we are creating a new category of sports wagering platform that is web 3 native.”

Stakes has eight people. Wang said the idea for Stakes was conceived at the end of 2018 when he was looking into the Supreme Court’s repeal of PASPA, which effectively paved the way for state-licensed sports betting in the US. He started to talk to friends about how exciting a development this was, but the responses he got surprised him.

“Most of my friends, despite being huge sports fans, seemed uninterested in traditional sports betting, whether it was legal or not,” he said. “They didn’t want to gamble away their money and many of them didn’t even understand the technical jargon of money lines, parlays or teasers used in traditional sports betting parlance. They were never going to become hardcore sports bettors.”

However, somewhat counterintuitively, almost all of them were active in fantasy leagues with friends, or regularly participated in office pools for March Madness or Super Bowl Squares. Even when those involved cash buy-ins, it seemed like the money was incidental. It’s all about the social camaraderie, the bragging rights, Wang said.

Almost all of his friends were also in group chats making sports predictions, friendly casual wagers and bragging to each other when their sports predictions came true. This is supported by a report Twitter put out in 2019 that included why Twitter users participate in fantasy sports, the top two reasons were Sense of Community and Proving Knowledge, Wang said.

In last place? To make money. So even when fantasy leagues are played for money, it’s the least important reason why they are played.

“It confirmed what I knew since I was a young kid, that sports is inherently a communal experience. It’s common for a sports fan to be a fan of their favorite sport or team for life, in many cases, it’s even passed down from generation to generation like a family heirloom,” Wang said. “This was certainly the case for me growing up with my stoic Taiwanese immigrant father. He rarely showed affection, but when it came to sports, it was like a switch flipped. I got to see the full range of his emotions after every Knicks heartbreak and every Michael Chang win. Sports is how we bonded. For Stakes, I wanted to create a new kind of wagering platform that didn’t rely on traditional real-money betting, but something that focused on the bragging rights and community-driven aspects of being a sports fan.”

Winners collect non-fungible tokens (NFTs) to memorialize their winning calls on the blockchain. Stakes has already minted over 8,000 “proof-of-flex” NFTs to over 2,500 users as a reward for sports predictions. During the 2022 NFL season, Stakes saw active users grow 5x and engagement increase 28%.

“The intersection of crypto and sports is only just beginning. Stakes is defining a web 3 way to engage with sports through a new category of NFTs with sentimental value that captures fandom to inspire the next generation of sports fans,” said Rumi Morales, director of investments at the Digital Currency Group, in a statement. “We’ve known Kevin and the team at Stakes for a long time and are impressed by their vision and ability to execute.”

Wang said he has been around the crypto/blockchain world for a while, as his first job in New York was at SecondMarket, founded by Barry Silbert. When NFT and web 3 projects started maturing in 2021, Wang realized that it was a perfect technology for Stakes. Younger generation of sports fans have different consumption behaviors and values compared to older generations. 40% of Millennials and Gen Z own crypto and 14% own an NFT.

Stakes NFTs are earned for free by correctly making predictions on the Stakes platform. They become digital bragging rights cemented forever on the blockchain. They essentially become your public reputation as a sports fan, Wang said. How do you objectively prove who is the most knowledgeable Yankees fan? Or the biggest LeBron James fan? If you have an immutable public track record of the accuracy of your predictions, there is a more empirical way to measure, he said.

“My friends are always going on about how they’d be a better GM than whoever is running their favorite team, or how they’re smarter than Stephen A. Smith,” Wang said. “Now they can prove it and have NFTs as digital markers of status. These NFTs will unlock additional rare NFTs that can be bought, some of which may come with real-life perks like access to games, meet and greet athletes or sports personalities.” 

He added, “We believe these NFTs will become new primitives for a sports metaverse that developers can build on top of. The Lakers can do a virtual meet and greet in DecentralLand and invite only those that have Stakes NFTs that prove they are a real fan. Teams can auction off tickets and ensure they are going to true fans, and not scalpers. A group of Knicks fans can decide to start a fan club and buy a luxury suite for a season at MSG and they can use Stakes NFTs to determine who is eligible. Other NFT projects might tie their NFTs to the Stakes NFTs you hold. Ultimately we think having a public sports fan status will unlock a ton of new possibilities for sports fan communities that we can’t even imagine right now.”