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Rockstar Games Co-Founder Bets on Player-to-Player Wagering

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·3 min read
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(Bloomberg) -- A co-founder of Rockstar Games has launched a new venture that lets video-game players compete for money as they challenge each other in popular titles -- an area that has been slow to take off.

Gary J. Foreman’s Stakester, based in New York and London, announced a $2 million seed round Thursday led by RTP Global, which previously invested in the likes of Yandex NV and RingCentral Inc.

Launched in May, Stakester’s mobile apps have attracted some 15,000 players of games such as FIFA 21, Call of Duty: Modern Warfare and NBA 2K21, many of them men from ages 25 to 35 and located in the U.S. An average user participates in five to 10 matches a month, wagering around $10 in each, according to the company. The proceeds, as well as additional prizes, go to the winner, while Stakester takes a 10% cut.

“I think this is the perfect time for this opportunity to grow,” said Foreman, Stakester’s co-founder and chief technology officer. “Now there is a lot more understanding of the desire of the players to compete.” Foreman left Rockstar, known for its Grand Theft Auto franchise and now part of Take-Two Interactive Software Inc., in 2006.

Wagering Wait

A surge of video-game wagering has long been thought to be just around the corner.

“It was supposed to be huge and never amounted to anything,” said David Cole, chief executive officer of digital-entertainment researcher DFC Intelligence. “There is definitely money being wagered, but it is not as much as was initially expected.”

Stakester is betting that the surging popularity of esports, in which fans watch professional gamers compete, will change all that. The hope is that as more people watch esports and wager on them, many may wish to make bets when they play with friends.

Globally, the total esports audience will grow by about 12% to 495 million people this year, according to researcher Newzoo. The Covid-19 pandemic paused many live events but has led to faster growth in streaming.

Consumers in many jurisdictions can already bet on professional and fantasy esports matches, and are flocking to competitors like Players’ Lounge and CheckMate Gaming to play for money against one another.

Legality of wagering varies by jurisdictions, and largely depends on the age of the players involved (they generally need to be 18 or older). Stakester is rolling out a system that will verify users’ identities by scanning a passport or a driver’s license before allowing withdrawals.

Expansion Plans

The startup already operates in the U.S., Singapore and the U.K., and is planning to expand into Australia and Germany shortly, said Tom Fairey, Stakester’s CEO. He came up with the idea after a competitor who challenged him to a jujitsu match in real life failed to pay up the amount wagered.

Referrals are a big reason why Stakester is growing by more than 2,000 users a month. If you refer someone to the app, you get a cut of their fees for six months.

“We are seeing fairly straight-line growth, and we had a bit of a spike recently,” Fairey said. The company also enables wagering in chess, golf, table tennis and other sports.

Stakester may expand into other categories later, said Alexander Pavlov, managing director at RTP Global.

“It’s easy to imagine that this platform could be used for pretty much everything that you and I may wish to bet against,” Pavlov said. “This could extend far, far beyond the initial esports market. I do believe that this could be a massive market.”

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