The house is folding. Math is the new dealer.
DraftKings is bleeding. The quants are winning. Harvard math whizzes Jacob Fortinsky and Kelechi Ukah just raised $75 million to prove the traditional sportsbook model is a relic. Their venture, Novig, is no longer a scrappy startup. It is a $500 million threat to the established gambling order. While legacy operators fight for scraps in a saturated market, Novig is pivoting toward the Commodity Futures Trading Commission (CFTC) to redefine sports betting as a financial asset class.
The Harvard Poker Connection
Fortinsky and Ukah did not start with a business plan. They started with a problem. At Harvard, they watched math-heavy sports models get strangled. When a bettor wins too much, the house does not get better. It gets defensive. Sportsbooks use sophisticated risk management software to flag ‘sharp’ accounts. Once flagged, these bettors are ‘limited’—often to wagers of pennies—or banned entirely. It is a system designed to harvest ‘squares’ and exile the intelligent.
The data is damning. A recent UK Gambling Commission report revealed that while only 2% of traditional sportsbook users are lifetime winners, nearly 48% of restricted accounts are profitable. The house does not want a fair fight. It wants a guaranteed margin. Novig’s peer-to-peer model eliminates the ‘vig’ (the house’s cut) and replaces the bookie with an order book. Users trade against each other. Market forces, not an algorithm designed to protect the house, set the odds.
Market Divergence: Traditional Hold vs. Exchange Liquidity (Feb 2026)
The Death of the ‘Vig’
Traditional sportsbooks are currently facing a brutal reality check. DraftKings (DKNG) shares plummeted 17% last week after a disappointing 2026 forecast. The company is struggling with rising customer acquisition costs and a potential wave of state-level tax hikes. Michigan and Arizona are already signaling aggressive moves to increase levies on gaming revenue. In contrast, Novig is seeking federal oversight as a Designated Contract Market (DCM). If approved, they could operate in all 50 states under a financial regulatory framework, effectively bypassing the state-by-state sportsbook gauntlet.
The shift is technical. Novig treats a bet as a contract. In a standard book, you are buying a product from a retailer. In an exchange, you are trading a derivative. This distinction is the wedge that could break the $100 billion US gambling market. When users are treated as traders, the profitability metrics shift. On Novig, approximately 23% of users are profitable. On FanDuel or DraftKings, that number hovers near 2%.
Financializing the Field
Institutional money is noticing. Pantera Capital led Novig’s Series B because they see sports as the next great asset class. High-frequency trading firms like Susquehanna (SIG) are already building out ‘Nellie Analytics’ to exploit pricing inefficiencies in live sports markets. They are not looking for a ‘gamble’. They are looking for alpha. The convergence of sports and finance is no longer a theoretical exercise. It is a multi-billion dollar infrastructure project.
| Metric | Traditional Sportsbook | Novig Exchange |
|---|---|---|
| Average Hold (Vig) | 7% – 10% | 0% (Commission-Free) |
| User Profitability Rate | ~2% | ~23% |
| Regulatory Body | State Gaming Commissions | CFTC (Pending) |
| Winner Treatment | Limited or Banned | Liquidity Provider |
The technical mechanism of the exchange relies on a central limit order book (CLOB). This allows for instant execution and price transparency that is impossible in a ‘house’ model. In a traditional book, the odds are skewed by the house’s need to balance their liabilities. In an exchange, the odds are a pure reflection of market sentiment. This transparency is why prediction markets like Kalshi and Polymarket are seeing weekly volumes exceed $6 billion. Sports is simply the most liquid and frequent event type available for this model.
The era of the ‘exploitative middleman’ is reaching its terminal phase. As the CFTC considers Novig’s application for DCM status, the line between a Wall Street trader and a sports bettor is effectively vanishing. The next milestone to watch is the March 15 regulatory hearing on event-based contracts. If the federal government grants sports contracts the same status as oil futures, the traditional sportsbook will be forced to evolve or go extinct. Watch the volume on the Novig order book during the upcoming NCAA tournament. It will be the first true test of whether retail liquidity can match institutional sophistication.
