About the Farrell Sports Business Podcast
Interviews with news makers from sports business to talk leadership, entrepreneurship, industry news and their unique career paths. Hosted by Matt Farrell, President of Farrell Sports and former Golf Channel, USOPC, USA Swimming and Warner Bros.
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Episode Summary
Episode 25 of the Farrell Sports Business podcast - Host Matt Farrell talks with Tom Naramore, the Founder/CEO of D3 Sports Tech. Naramore discusses D3 Sports Tech, a FinTech company that offers a digital wallet solution for peer-to-peer sports wagering. He explains the evolution of sports betting technology, the importance of compliance and legal considerations, and the unique aspects of skills-based wagering. The conversation also delves into the role of technology in ensuring fair play and the future opportunities for D3 Sports Tech in the sports entertainment industry.
Farrell Sports Business (00:00)
Welcome to the Farrell Sports Business Podcast, where I talk to leaders of the sports industry about entrepreneurship, leadership, innovation, and the business of sports. I'm the host, Matt Farrell.
This week's topic is going in deep on something that most of us have probably done is have a bet amongst friends. So now that's a growing business called peer to peer betting or even social betting. there's a company out there that's actually regulating and pulling some of those assets together to make it legal for
me and a friend to play golf in two different states against each other, have a bet, or cornhole, or darts. And so it's really fascinating. Not only the application of it and what's in it for the consumer, but we go into the regulatory side of what it took to get something like this to happen outside of fantasy sports, outside of betting on professional sports this weekend or whatever it might be.
This week's guest, the CEO of D3 Sports Tech, Tom Naramore
Farrell Sports Business (01:25)
Tom, welcome to the podcast. Glad you could join.
Tom Naramore (01:27)
Matt, thanks for having me. I was really excited that you reached out and we got a chance to do this.
Farrell Sports Business (01:32)
Well, we played golf together a couple of years ago now, which we'll get to, we'll get to, but this is a fun topic about a really a different take on sports betting and wagering among friends. So maybe start, give us a little context. D three sports tech. What is it?
Tom Naramore (01:52)
D3 Sports Tech is a FinTech company. We have a digital wallet solution. The short word picture I like to use is we're the Venmo for social wagering. Peer to peer sports.
Farrell Sports Business (02:07)
I mean, treat me like a third grader, meaning you and I can kind of have an app and a mechanism that you and I can have a bet together.
Tom Naramore (02:15)
Exactly. We developed this software. are a B2B solution. A platform as a service is the true
nomenclature for it. Everybody's used to saying SaaS, right? Software as a service, but this is a true platform in and of itself. Three sets of APIs, a company like a simulator company, a broadcasting company, any sports or sports entertainment or professional sports company that has software that's offering a league, a contest or a competition.
And the new frontier is players that want the top level experience. Players want to be able to win cash. They want to be able to play for something and win cash. The norm out there is win a driver, win a free soda, win a discount to that, right? Everybody's bored of that. People want to win money.
When you add that layer or that feature of players wanting or that are going to win cash, there is a whole litany of compliance, legal and regulation that come into play. State laws, federal laws,
and all the financial laws as well as the software distributors otherwise known as the
Play Store on Google and the Apple Store, they have their regulations as well that you have to abide by if you're pushing out a mobile or web app through their store. So there are a lot of spinning plates that we spent years putting this solution together and it is now plug and play.
Not to go too far into the commercial, but we are approved through Visa and MasterCard and the regulators to operate and settle a wager, meaning take a payment, escrow a wager between two or more players, and then pay out those winnings to the winning players or player in over 100 countries.
Farrell Sports Business (04:31)
So again, this may be a rudimentary question, but I mean, people such as myself come in with a little bit of basis of understanding. I live in Colorado. It happens to be an online sports betting state. I'm familiar with the draft Kings and the fan duels of the world. What, what did your, but that's different than you and not you and I doing a skills wager, contest between us. You play your course in California, play mine in Colorado.
What was that like to try to A, educate the market from an approval standpoint or B, educate the market from a consumer standpoint of this is how this is gonna work.
Tom Naramore (05:13)
Right.
So first and foremost, 25 years software guy, had my software company for a couple of decades, worked in the IT.com world from the mid 90s up through the bubble in mergers and acquisitions. And your specific question around compliance education, gaming and gambling education is where all this gray hair came from and starting in 2018.
I had no idea what I was getting into when I decided to build a mobile app back then just for golfers, for my buddies. We wanted to have a cashless system to settle our side wagers as we played golf throughout the year. There's a whole backstory to that that we can get into at some point if you want. But when I started to build the mobile software,
And that was the goal to have a mobile app. I went out and I tried to license a wallet like this for use in the system. And the first thing that I learned was DraftKings FanDuel at the time and in the space of fantasy sports, online gambling wasn't really big back then, but fantasy was starting to tick up like crazy.
And we'll go into the differences of those here in a second. I started to get educated on the different styles of wagering, if you will, or the different definitions from the legal and compliance world. The DOJ,
Supreme Court and then the states and who when you say the word gambling, what does that mean to those entities? You add the layer of doing it online, changes the playing field a bit. So my education started with all of that when I was looking to license a wallet for myself. I didn't want to build one. I wanted to license one, but I asked the four top providers at the time.
the two questions at the end of the interview. Can you give me a white label user experience? What does that mean? That means if I license this wallet supplier's wallet, if they can't give me a white label, I have to have their logo. They are a named entity within my ecosystem or my solution. My user is going to experience their brand.
I want wanted to get away with I wanted to keep my own branding the second one that I asked them and by the way though these two questions Across the board were no's The second one which was the biggest one I needed was I wanted a single sign-on user experience What does that mean? That means the end user? Downloads my d3 golf app, right?
creates a profile, can log in, now has access to the system and says, yeah, I wanna throw 20 bucks into my wallet so I can bet my golf buddies with my own money and have a cashless user experience, right? But single sign on means when you hit the wallet button, if I would have licensed through one of these other four, skill, scrills, some of the others.
they would have had to create a profile. It would have been taken to their system, create another profile, which is all on top of the ID check that.
is very famous and notorious, I should say, within the market. FanDuel, DraftKings, Caesars, right? If you're wagering online, and I'm specifically using that term because it covers everything from horse racing to online sportsbook to fantasy to what we do, which is a peer-to-peer skills wager. I'll get into that definition if you want a minute, but...
Farrell Sports Business (09:18)
Yeah, definitely.
Tom Naramore (09:18)
Neither, none of these companies could give me a white label or a single sign on. Why did I want that single sign on? Because of that ID check. That's a little bit, it's an extra step than your experience on Amazon, right?
Amazon, you want to buy something on Amazon, you load your credit card, you fill out what your credit card is and bang, you go, right? Yes, they do a little tiny check behind, but you don't have to put your social security number in, you don't have to put your birth date, you don't have to go through that ID check to be approved to make sure that you can play. Little quick side note, by the way, when I decided to build my own, which is what happened, I went to my engineering team, which I've had for the same team distribution.
around the world use the same 60 engineers for 15 years. They said, well, hey, why don't we just build our own? like I said before, the joke is where the gray hair came from. Like, all right, how hard can it be? Well, when we started to dig into these compliance things and figuring out what we had to build, luckily, I have worked with and built and managed lots of software for the law enforcement industry.
from fed to state to local, be it local beat cops all the way up to the DOJ. So my first call was to a couple of contacts I had at the DOJ here in California. I said, hey, I'm thinking about building this app and it's gonna send wagering money back and forth between players. Are you gonna come knock on my door and take me to jail?
we will if you do this, this and this, we won't if you do that, that and that, right? So it my first education of what the guardrails were, which then led to other interviews and other solutions that I've used proprietary in our system to then go get the holy grail in the industry, which is what's called a certification of controls. So I'm gonna take a breath and pause right there.
Farrell Sports Business (11:23)
Well, there's a few directions. No, no, no. Let's, I want to kind of break down a few things. I mean, cause at the, at the end of the day, that's, and I mean this in a good way, that's kind of how the, how the watch is made. But if I go to my course on Saturday, I probably have my regular Nassau game. have my skins game or whatever. And for the most part.
Tom Naramore (11:24)
because I gave you just a huge amount of information there about so sorry about that but
Yeah.
Farrell Sports Business (11:52)
a cash-based bet. When it comes to an app, the first thing people are going to ask is it legal? And that's a huge hurdle in my mind that you got over in at least 45 states where you can kind of give some people a little peace of mind.
Tom Naramore (12:14)
Yeah, for sure. this conversation is a whole bag of worms, happy to jump into, but let me play the devil's advocate, which I wind up having this conversation almost on a daily basis, right? Many of the golf, and we're just talking about the golf industry, right?
Farrell Sports Business (12:28)
Yeah.
Tom Naramore (12:34)
We're working with cornhole leagues. We're working with dart leagues. We're working with all kinds of other industries and sports. The new word is sportainment now, right? And now I've got a meeting next week, the second meeting. There is a brand new streaming broadcaster that's growing like mad out of Texas in the professional sports world that I met last year and they're now stood up. we're, like we're going to be forming another partner
with this streaming service who has license now streaming for many many sports pro sports teams. So I'm trying to let your listeners kind of get a word picture of who are our customers and where does this actually where will this actually work. anyway opportunity that's coming at us. So
Your question, you're going to remind me again because I went off on so here's the here's the yeah
Farrell Sports Business (13:35)
Well, it's the legal side, and I want to come back to your definition of peer-to-peer skills.
Tom Naramore (13:41)
Right, but what I was gonna say was the whole Venmo issue, right? I talk to people every day. They're like, well, we just Venmo back and forth, right? We settle our wages through Venmo. Please, please, please, please go read the EULA or the user contract for Venmo. They do not allow it. They will shut you off.
ban you for life, is what's happened to me, ban you for life. You can't use PayPal or Venmo forever more if they catch you doing it. Now, I've heard some rumors how this started. I'm not going to go there, but,
being a user that this happened to and also qualifying some other stories, Venmo is shutting off. I'm just gonna use the word many. You can put how many zeros you want per day, but it is unbelievable how many that they are shutting off per day for settling wagers. In my case, I got caught up in a sweep.
It wasn't any sort of transaction or anything but at one point they were taking swaths of their customer base and then you would go in through an appeals process that took 24 to 48 hours and they're like what do you do for a living? So I run D3 golf and D3 sports tech and they're like gone. Like what are you talking about? What I have nothing to do with it. don't know you're out. They didn't want anything to do with it. So
For everybody out there that is utilizing Venmo to settle any sort of bet wager contest Anything be very very very careful Most people just lie. They said now we just we you know, here's groceries or whatever All I say is good luck to you There's lots of things on the back end of the software that can be done to find you anyway the feds
as well as Venmo, Venmo doesn't want to be caught up in their banking relationships, getting caught selling a wager unknowingly as well, completely damaging to them. So there's the industry, right? So yeah, that's where all of this was born out of. And the US is behind sort of the cashless living.
Farrell Sports Business (16:02)
Well, let's.
Tom Naramore (16:12)
economy if you will it's getting there but I mean if you go abroad overseas to Asia Southeast Asia Japan it's it's non-existent people use their devices for everything Alipay WeChat all of it it's all integrated so anyway
Farrell Sports Business (16:32)
So can you, I do want to go back to what you mentioned. Can you, because it's somewhat of a, maybe a consumer definition as well as a little bit of a legal definition of skills-based wagering, as opposed to fantasy, as opposed to whether I think the Broncos are going to win by seven this week or what.
Tom Naramore (16:46)
Yeah.
Right. So the easiest tier to walk down through is let's start with what everybody knows is gambling, right? Let's start with a brick and mortar. You go to a legal casino in Vegas or Atlantic City or, or, you know, wherever, and you go into that, that brick and mortar building and there are games of chance, right? That you play, you use your own money, but you were playing against the house. Okay.
Well, you can now do that online. There are gaming gambling operators that have gambling licenses, legal gambling licenses to offer games of chance online, right? What is a game of chance? my God, you tell me, right? That definition is for the regulators.
have several litmus tests and and you know rolling dice pulling a lever playing cards they have this test to say no that's a game of chance no that's a game of skill right so here comes so then sports betting was born out of that right
A bookie is making odds and you're betting on sports and betting on players and and prop bets and all of this stuff that's that's in that legal gambling realm and then some fantasy operators came about back in the day and You started to build your teams and then your fantasy team was playing against other fantasy teams and they started doing that for money, right?
And so regulators came in, was a bunch of lobbying that that happened back in the day. And the gavel dropped that to that that that fantasy sports was a legal skills game. Even though the player. In certain instances is playing against.
the house. We could spend two days talking about how all that works, but let's just leave it there. Fantasy sports has some attributes to it that group it all together that make it a skills game, or at least the definition, legal definition is out there for that, right?
It's also location based. Fantasy online fantasy isn't available everywhere. There are some that'll say that it's 33 states. There's some that'll say it's, you know, this many states, there's difference of opinion there. But anyway, the interesting thing about fantasy is you're betting on somebody else what's known as a third party bet, right? What
then peer to peer came out. Peer to peer is what happens on the golf course. I take my money, you take your money, and we bet on ourselves. I'm gonna bet that I'm gonna have a lower score than you. I'm gonna bet that my golf ball, by me physically hitting it, is gonna be closer to the pin than you. We use our own money to do that. And the laws state,
As long as the software operator that's keeping track and doing the scoring and all of that isn't taking a cut or what's called a rake, right? You are legal to supply those scoring systems online. If you want to get into the FinTech side of it, you are allowed to, but you can only charge an operator
fee to the winner of up to 15%. So those are some of the legal ceilings, right? But let's quickly go back. Horse racing, online gambling, its own animal, right? No pun intended. Fantasy sports, still a third party bet, you're betting on someone else or a team or some group of people, right? Peer to peer is...
Largely based on betting on on yourself and your outcome right? And then there are some flavors of that as well so
Farrell Sports Business (21:30)
Well, some of the marketing positioning, like I've just seen in some of your materials, you use the phrase, this ain't no fantasy, you're in the game, which plays right to that of like, I'm controlling my own destiny in this bet.
Tom Naramore (21:38)
Mm-hmm.
Farrell Sports Business (21:49)
I'm not sure if I mentioned this or not, but I lost my bet to you, which I'm clearly, clearly over that. I think that's definitely unique.
Tom Naramore (22:01)
I got lucky that day.
Farrell Sports Business (22:05)
But let me ask you that. So, and, I'm sure this is probably a, a potential deep dive as well, but with golf, game traditionally known for honesty and honor, you still had to build in some technology that, well, let me take a quick step back. I have my handicap. I can play, I can place a bet with you. can place, play my course in on Saturday in Colorado. You can play yours in the Sacramento area and settle that bet.
but there's still some honor system to that that, you know, I wrote down a four and instead of my five, but what did you kind of have to build in and account for within golf to make it still work?
Tom Naramore (22:52)
Yeah, so now we're going to the roots of where D3 SportsTech was born out of. So as I mentioned in the beginning, I got into this business building an app for my buddies to settle wagers on a golf course and we built a mobile app that is still out there, it's still live and it's called D3 Golf. D3 Golf, the mobile app is not the focus of...
Farrell Sports Business (23:00)
Yeah.
Tom Naramore (23:19)
D3 SportsTech. The D3 Golf mobile app was a direct-to-consumer mobile app and we took the software and what we learned in those three and half years of operating that mobile app, which is the spirit of your question, which I'll answer here in a second, but we pivoted the company in 2023.
Farrell Sports Business (23:35)
Yeah.
Tom Naramore (23:39)
to a B2B. Our wallet is so unique that we are now licensing that wallet out to golf simulator companies, tournament companies in different sports that I mentioned before, right? So we are a B2B company. The spirit of your question though is some of the lessons learned and what we did in the industry with our app in the development of what we termed remote play. We were the first ones to do it. I worked with the USGA to get the
Algorithms, correct? Because the first question that always comes up is well, how do you keep people from cheating? Right? Well first and foremost, how do you keep your buddies from cheating you? Well, I'm with them, right? okay. So if you're not with that buddy, would he cheat?
That's the question I always ask and I get different answers, right? Those 50 guys, all good. That dude over there, no way. I have to ride in his cart, right? So however.
Farrell Sports Business (24:35)
You'd hope not.
Well, well then the market can somewhat self-correct. If like, if I think you're fishy, Tom, let's have a beer later, but I'm not betting with you anymore. There's a little bit of self-correction, self-policing, right?
Tom Naramore (24:54)
Yeah, and
Correct. But what we did with the app specifically, and again, from a software guy looking and working with online poker systems back in the day as well from a developer's standpoint and anti-cheating mechanisms put in there. One of the things that we did was we developed a, it's not a handicap, but it is a handicap like
number right and the poker systems do this by the way but they do it on the back end they don't show it to the players but the operators use it and they they score players because they watch them do what they're doing and they give people a trust threshold by the way anyway what we did is I worked with the USGA and I said look
You currently on green with green grass golfers you there are amateur tournaments where the players in that tournament be them male female or be them different ages in that same tournament. They use different t-boxes, right? Yeah. And the math that you use to calculate the course handicap that day is this math sequence, this algorithm, right? Yes. Okay.
What if I put a relation to par calculation at the end of that?
And she said, what do you mean? And I said, well, I've got software that I've built and I want to play my uncle. I'm in California and he's in Georgia and he's on his golf course and I'm on my golf course and we want to be able to play a month apart. And I wanted the indexing to work correctly. And she said, yeah, that'll totally work.
And she started to ask me some questions. yeah. And she said, well, tell me about the spirit of your app. I said, well, this is all about side wagers, right? It's not about tracking your index. We don't care about tracking your last 557 irons and giving you trajectory and all. This is all about having fun and playing for something with your buddies, right? And she said, my God. Now again, this was back in 2018, a lot in the...
The world has changed since then with the USGA and software and we can get into that if we need to. She said, look, I know you're not gonna have the exact handicaps that we do, but it's gonna be similar. But she said, every single player in your system is gonna be playing for money? I said, yep. And she said, I'm gonna be curious at.
what that scoring index is, that, what not the handicap, but what that, that software, she goes, I'm very interested in that because if all of your players have money on the line, there's no way to sandbag.
because cheaters cheat the USGA by raising their score. Cheaters cheat our system by lowering the score. And if you did that, we're tracking every round. So your player profile would actually go down. So you're cheating against yourself. And so that was the barrier that we put in. Interestingly enough, one more thing on remote play.
Still to this day, I believe we are the only app that does it. Loop Golf, Leaderboard, The Grint, 18 Birdies, all of those. I mean, there's a ton of other ones. I don't believe they have remote play. You have to be on the same course. I could be wrong about that, but I believe we were the only ones that did it. Certainly we're the only ones that did it for money and still that app works. So if people want to use it, they certainly can. It's free to use. Go for it.
Farrell Sports Business (29:04)
So maybe shameless plug time, Tom, and not asking for anything confidential, but now D3 SportsTech, the pivot that you made, what are use cases? What type of company would knock on your door?
Tom Naramore (29:20)
Yeah, so I unfortunately, our first companies are gonna go live Q1 2025, possibly the end of this quarter, but we will see what their development, where they are with that. And interestingly enough, it's not our software that's the hard part, that's the easy part.
The industry is really interesting right now, at least in the golf world, the golf sim world and other software providers. Everybody's rebuilding, they're refactoring into Unity or some other game platform because this trend of gamification, players wanting to play for something, not just practice, right, is the new frontier, right? So use case, Golf Simulator Company.
Farrell Sports Business (29:59)
Yeah.
Tom Naramore (30:06)
Closest to pin competitions, three hole competition, stroke play or any of the side games. Long drive, right? leagues in South Korea is mind boggling. The size of it.
Farrell Sports Business (30:16)
crazy.
Tom Naramore (30:20)
It's in the millions of players. It's wild, right? Players over there join simulator clubs, not a golf club, right? Or as a secondary, but it's usually that's their golf club. Different ecosystem over there. However, it's coming here, right?
So golf simulators, any sport team that you can think about.
One of the things that we're working with with our professional sports teams, they're very interested in additionally monetizing or increasing loyalty of not only the people that are the butts in the seats in the stadium, but also watching the broadcast. How do you do that? You do that through a mobile app, right? Name me a professional team that does not have its own mobile app, right?
They're all doing e-commerce. Loyalty is the frontier for them. And we have a solution that then binds all of that commerce together. Right? And what a better way to do that than with play. So think about sitting at halftime or between quarters at an NBA game and bloop on your
you insert the NBA team mobile app that you're sitting watching the game, a three question trivia contest comes up. Spend a buck to win a thousand. Answer these three questions. Get the three questions right. Be put into the second pool. Between the third and fourth quarter, we're going to have the finals.
Now the next one is five questions and you got to answer it within 30 seconds or whatever. You know, there's all different ways to, but there's trivia companies and solutions that are doing this, right? Who wouldn't want to spend 50 cents to win a thousand bucks or whatever, right? So that's the style or type of use case that's out there, that we've developed.
Farrell Sports Business (32:21)
That's awesome. Okay, where can people find more info?
Tom Naramore (32:25)
d3sportstech.com. You can find me, Tom Naramore on LinkedIn. Do a search for me on Google. I'll come up N-A-R-A-M-O-R-E. You can see my name. Give me a shout. Partners.
at d3sportstech.com is our partner division if you're interested to learn more we can run people through demos and all that good stuff so website phone number if you want to give us a call 833-926-2238 that'll ring directly into the office and they'll patch it through to me
Farrell Sports Business (33:03)
I love it. Somebody might actually pick up a phone and make a phone call in this, in this day and age. I, I, I love it. Novel concept. Tom, you're awesome. Full of energy. I'll get back out to Sacramento and, seek my revenge soon. Thanks for joining.
Tom Naramore (33:08)
You
I think it's my turn to to Colorado.
Farrell Sports Business (33:22)
Summer and fall in Colorado, that's the place to be. You're in. Tom, thank you.
Tom Naramore (33:25)
Wow, absolutely. All right, man. Good. Hey, appreciate you. Thanks so much.
Farrell Sports Business (33:30)
Tom is always a kick and just full of so much information and just really takes, takes the idea of sports betting amongst friends and really brings a business to it. And it's fun. So if you like this, please give it a review. If you're watching on YouTube, subscribe. I also publish some shorts, on YouTube, throughout the week and check back on the archive of some of the past episodes, which I think you might like.
Most recent is talking about corporate VIP hospitality and ticketing. And we even dive into some advice for job seekers on a couple of different recent episodes. And we work across all sports. The past topics have been pickleball, baseball, the Olympics. So thanks for listening and tuning into the Farrell Sports Business Podcast.
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