Derby Games offers real-money gambling app for horse racing fans on iOS (updated)

Update: TVG Betfair notes that it launched its iOS horse racing betting app earlier, hitting the App Store in June 2014.

Derby Games is launching its Derby Jackpot mobile app, bringing real-money gambling on horse races to iOS in the U.S.

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The app is the first horse-racing real-money gambling game approved by Apple for consumers across most of the U.S. It’s part of Derby Games’ ambition to create the largest community of real-money gambling consumers in the states.

Derby Jackpot will let players watch, bet on, and win or lose money in horse races across the U.S. Its developer thinks people will like it because of the huge growth in social casino games and fantasy-sports titles on mobile devices.

“We’ve taken the horse-racing experience and made it appealing to the broad social gamer and casual gambler,” said Walter Hessert, Derby Games’ co-founder and chief product officer, in an interview with GamesBeat. “To date, over 75 percent of our players never bet on horse racing before.”

Hessert, along with his brothers Bill and Tom, founded New York-based Derby Games in 2011. They started building a platform for Derby Games as part of a plan to take horse-racing wagering to a broader audience, starting with a Web-based app that debuted in 2013. Bill Hessert studied horse racing with Steven Levitt, the author of the Freakonomics series of best-selling economics books. After online poker became illegal (without express state approval) in 2011, the Hessert brothers realized that they had a huge opportunity as horse racing was the only form of nationwide legalized online gambling.

Apple started allowing real-money gambling apps in 2013, provided that the apps have the necessary licensing and permissions in places where they are used. The apps have to be restricted to those locations, and they must be available for free on the App Store. Apps that use in-app purchases to buy credit or currency for use in real-money gambling will be rejected.

Derby Games raised a $6.5 million round of funding earlier this year, and it has 17 employees. Investors in the latest round included Bullpen Capital, and a couple of angels: Martin Lautman, partner at Musketeer Capital; and Bill Pescatello, partner at Lightbank. Existing investors also participated, including Andlinger & Company and Reddit founder Alexis Ohanian.

With Derby Jackpot, you pick a horse, select an amount to bet, tap “place bet,” confirm it, and then watch a real race. You’ll be able to bet in horse races such as the upcoming Triple Crown series taking place May through June. The app turns gambling into a social experience where you can bet against friends. The interfaces of the games make you feel like you’re playing cards or a slot machine.

“We’re targeting players who want to play a fun, social game with real money,” Walter Hessert said. “The outcome is determined by a horse race. We have an active chat room and a close community.”

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Bets start at 10 cents, for possible winnings of $10,000 or more. Derby Games is a pari-mutuel Advanced Deposit Wagering (ADW) service, which means it can provide legal, secure, and user-friendly online account wagering. The wagering is powered by Xpressbet, through Xpressbet’s licensed Multi-Jurisdictional Account Wagering Hub in the state of Oregon.

Hessert said that his team built the geo-location feature — which confirms where a betting player is — internally, and that allows his company to show regulators how it is complying with laws for online casino gambling apps (legal in Delaware and New Jersey) and horse-racing betting laws (which allow adults to play legally in 37 states).

“That was critical for the compliance with laws,” Hessert said.

While online casino games are no longer prohibited by federal law, states have to approve them one by one. But online betting on horse races has been legal as part of the Federal Wire Act.

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Hessert said that a much more mature gambling market exists overseas, especially in Europe.

“We think that these platform owners are becoming comfortable with the real-money gambling market in the U.S.,” said Hessert. “We think that’s going to happen here.”

Google hasn’t allowed real-money gambling apps yet. In a recent conversation with the Google Play team, they told me that any policy on the real-money gambling market is under review. The company’s rivals include Betfair in the U.S. Churchill Downs started Luckity.com, a real-money online gambling site on the Web, in 2012, but it closed the service last year. More recently, Churchill Downs bought social casino game maker Big Fish Games for up to $885 million.

“It’s a limited market because you have to make agreements with the race tracks to bet into their pools,” Hessert said.

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