US brokerage TD Ameritrade exploring ways to enter sports betting business

Nebraska-based brokerage firm TD Ameritrade is planning to leverage its experience in retail trading into business opportunities in the sports betting business.

According to statements from Chief Information Officer Vijay Sankaran to Business Insider, TD Ameritrade has already conducted experiments with focus groups, testing the appetite around customers valuing well-known players — like Kansas City quarterback and reigning NFL MVP Patrick Mahomes — and trading them among each other.

"We do feel like there are interesting analogs in applying market constructs to fantasy-sports-type things," he said. 

The exploration is in its early phases, with no products in the works. Still, the company, which oversees some $1.3 trillion in assets across 12 million client accounts, is actively working to better understand things like fantasy sports, with the possibility of making an entrance. 

The group was "very engaged," Sankaran said, motivating the brokerage to look deeper into where it could fit into what analysts expect will grow to be a multibillion-dollar market. "It gives us some data to say, 'Hey, this may be a space that we can play in,'" he said of the focus groups. "Next, we'll run larger-scale experiments to see if there's enough of a target addressable population."

TD Ameritrade has dabbled in this space before. It provided ESPN fantasy players earlier this year with a digital tool to better assess their teams' performances. 

The thinking Sankaran describes signals the firm's need to survey other businesses as its move to drop online-trading commissions eats into revenue. 

Sankaran was clear that TD Ameritrade has no immediate plans to move into bookmaking — or the act of brokering bets between users — as the state-by-state approvals make it too difficult to navigate at this time. 

However, sportsbooks aren't the only businesses set to prosper from the legalization of sports gambling. A wide variety of companies have moved swiftly to try and cash in on what, according to one consultant, could grow to be a market valued at about $19 billion annually.

Sports-rights owners are one group positioned to benefit, as experts expect sports betting to increase how much media networks will need to fork over to televise games in the coming years. Media companies are also hoping to attract gamblers, which, in turn, could bring on new advertisers. 

TD Ameritrade isn't the only brokerage that views sports gambling as a potential growth opportunity. Interactive Brokers announced in July the launch of a simulated-sports-betting exchange. "We expect this promotion to attract customers who may be new to the Interactive Brokers platform, and who are more familiar with spectator sports than they are with the financial markets," Thomas Peterffy, the chairman of Interactive Brokers, said in a statement announcing the news. 

Sankaran said the fact a competitor like Interactive Brokers has made a push into the world of simulated sports gambling strengthens the brokerage's theory it would be an area worth pursuing. "Clearly they've validated that there's some potential interest in that space," he said.