Stake.com: the Australian gambling minnow that made it big in crypto

One morning last year, Australia’s youngest billionaire Ed Craven woke up to the news that one of his celebrity partners, rap star Drake, had won $38 million in Bitcoin gambling on his cryptocurrency gaming site Stake.com.

“It was a tough morning,” Craven recalled. But by and large, his business has been on a winning streak since the start of the pandemic thanks to wealthy gamblers from around the world drawn to the anonymity of crypto gambling.

Launched in 2017 by Craven and his American co-founder Bijan Tehrani, Stake.com has grown almost unnoticed to become the world’s seventh-largest gambling group by revenue, surpassing established brands such as DraftKings and 888, according to estimates compiled by consulting firm Regulus Partners for Financial Times.

In 2020, it generated gross gaming revenue, a key value for the industry, of just $105 million. Last year, the figure was almost $2.6 billion, according to company accounts seen by the Financial Times.

“There were so many great players. I’d be sitting there with the team and one of them would be like: This woman in Singapore just put her hand down for a million dollars against this guy in Russia who’s done the same thing,” said one former employee who worked at the company in the first days.

Craven, who is 27, met Tehrani, 28, more than a decade ago while playing online fantasy game RuneScape.

They experimented with gambling in this virtual world, inviting other players to bet digital gold coins, before being banned for doing so. Their first online betting site was created in 2013. The crash of early crypto investing, when Bitcoin was priced below $20, has funded their business venture ever since, the couple said.

Following the example of the crypto gambling site SatoshiDice, in 2013 Craven and Tehrani created Primedice, a simple online dice game that allowed players to bet in crypto. This worked well, and in 2017 they launched a full-fledged gambling platform offering casino games and sports betting under the name Stake.com.

Craven told the Financial Times that lavish marketing spending was important for its growth and to overcome the “difficult stigma” of being a platform that mixes crypto and gambling.

“It helped reassure customers that . . . these guys are not going to run off with my $50,” Craven said. These doubts can be resolved by creating “[a]brand that can be trusted that is . . . pretty hard to do when you’re up against some very big competitors. . . which are very established, he added.

“By spending a lot on advertising, you create an implied warranty for your product,” said Khalil Philander, an assistant professor at Washington State University who researches crypto-gambling.

High-profile sponsorship deals with the likes of Premier League club Everton and Alfa Romeo’s F1 team, plus celebrity endorsements have also helped it pull ahead of bigger rivals. Drake was a big-money early adopter and last year signed a $100 million-a-year endorsement deal with the company, according to two people familiar with the details.

Craven also hosts a two-hour live stream each week where he answers customer questions directly. A large portion of the company’s 370 employees are focused on catering for VIP and “super” VIP gamblers, a core part of the business that remains directly under Craven’s supervision.

He acknowledges that the business has changed a lot since its inception. “I think that what Stake is today versus what it was when it was created is a very different landscape,” he said.

On several occasions in the early days, he hired private security protection because he was concerned about his safety, according to two former employees. “There was a lot of crazy going on,” said one of the former employees.

A former business partner from the time, Christopher Freeman, a childhood friend of Tehrani’s, is suing him and Craven for $400 million, alleging the pair stole his ideas and bullied him out of business. Craven and Tehrani have filed a motion to dismiss the case.

Ahead of the launch of Stake.com, the founders also took advice from Canadian lawyer Dan Friedberg, who would later become chief compliance and regulatory officer for collapsed crypto exchange FTX.

A class-action lawsuit filed in federal court in Florida accuses Friedberg and other FTX employees of helping founder Sam Bankman-Fried cover up $8 billion in customer losses. Friedberg is now cooperating with US prosecutors, but has not been charged with the FTX scandal.

Prior to his involvement with Stake.com, Friedberg also advised executives at Ultimate Bet, which was fined by Canadian regulators in 2008 after employees were caught using software to spy on customers’ cards and bet against them. Friedberg was not charged with any wrongdoing.

Craven said Friedberg largely worked with Primedice, but added that “many [the work to set up Stake.com] was run over” Friedberg, who “took on the position of trying to analyze . . . what the legal landscape looked like, and he tried to give us the best possible advice on what was legal and what wasn’t.’

A representative for Tehrani later contacted the FT to say that Friedberg had only given the two founders “passing advice” about Primedice and that they had “only ever had a few conversations” with the lawyer.

Friedberg declined to comment.

Unlike most of the major gambling groups, which do not accept crypto, many of Stake.com’s 600,000 regular users and 6 million registered accounts are located in “grey” markets such as Brazil, Japan and other countries in Southeast Asia where the rules on online gambling on foreign sites is undefined.

It has a pending non-crypto gambling license application in Australia and another nearing approval in the Canadian state of Ontario. It also has small non-crypto online gambling operations in the US and UK and has recently purchased traditional gambling licenses in Mexico and Paraguay.

Stake.com is headquartered in Melbourne and is currently registered as a 50/50 partnership between EasyGo Solutions, an entity owned by Craven, and Tehrani. It has yet to file full accounts, but Craven said the company was “working extremely closely” with the Australian Taxation Office to resolve this.

Despite being headquartered in Australia, Stake.com is licensed in Curaçao, a Caribbean island that attracts operators with its light gambling regulations. “They go about things in a different way,” Craven said.

Freeman’s lawsuit against Stake.com cites evidence that the company encourages gamblers in the United States, where access to the site is blocked to comply with strict gambling regulations, to use virtual private networks to circumvent the ban.

Craven said: “Obviously it would be naive to assume that we have absolutely zero customers in the US, but I can confidently say that we do not have a presence there of any significance [and] we are actively working to remove any customers from the US.”

Nigel Eccles, founder of gambling company FanDuel, which has launched its own crypto betting site BetDex, said: “In the gaming space it has become a proven model, you start in the gray market and grow to a huge size and then you find a way to become more regulated.”

Ingo Fiedler, co-founder of the Blockchain Research Lab, said much of Stake.com’s success can be attributed to the fact that crypto and gambling are natural friends, both attracting customers who are willing to take risks.

“The crypto day trader who uses crypto for speculation . . . is a cluster that is quite remarkably similar to the typical gambler, he said. The muted crypto market after last year’s spectacular crash may also push more traders towards gambling platforms,” ​​he added.

Eccles attributes Stake.com’s success to its aggressive marketing and being the “first truly global, crypto-only” gambling site. Drake, he added, “is the essence of the brand: a young, male sports enthusiast with a very high tolerance for risk”.