Betting has absolutely exploded in popularity over the past few years. And one model of betting has become entrenched: bookmaking.
The latest data shows that over half of Americans have bet on something in the past year. These days, you can’t turn on a sports game without seeing ads for apps like FanDuel or DraftKings.
Betting apps like DraftKings now officially sponsor the Red Sox, including in-stadium sponsorships (like this billboard over the “Green Monster” at Fenway Park).
But while most of America’s most popular betting apps use the book model, it’s not the only approach out there.
With a P2P model and the platform’s unique social-focused format, a company called Kutt has significant advantages over competitors:
Fairer odds for bettors,
The ability to bet on almost anything (not just sports!),
Better regulatory treatment allowing Kutt to operate in 40 states, including Texas and California (which have no legal sportsbooks),
And features like user profiles & group chats that drive adoption and enable Kutt to benefit from network effects.
These advantages have already resulted in over 15,000 signups and $30m in bet volume – as well as $520k+ in revenue in 2024.
I’ll show you why you should consider participating in Kutt’s growth with an investment in their community round. This is a chance to invest in a VC-backed company with significant traction that’s already been involved in multiple acquisition discussions.
To learn more about Kutt without giving permission to email, click here.
Let's go 👇
Brian Flaherty purchased his first mutual fund at 15. After graduating from UVA with a degree in Economics, he began advising institutions and high-net-worth investors as a strategist at a wealth management firm. This issue is sponsored by our friends at Kutt, with research & due diligence performed by the Alts team. As always we think you'll find it very informative and fair.
How bookmaking went mainstream
As far back as ancient Egypt and Rome, officials passed laws to try to curb gambling, a tradition that has continued to the modern day.
Despite official efforts to limit gambling, ancient Romans used to place wagers on gladiators in the arena – slightly more macabre than betting on college football. Image: Pollice Verso by Jean-Leon Gerome
In the past few years, however, that’s started to change dramatically. Back in 2018, the US Supreme Court issued a ruling that effectively legalized sports betting nationwide.
After that, it was off to the races. Taking the sports market as any indication, betting has officially gone from a back-room hobby to a Main Street activity.
In 2023, there were about $33 in formal sports bets for every US citizen. Data: American Gaming Association
Along the way, a very specific model of betting has dominated the market: bookmaking.
The bookmaking model
If you want to bet on the outcome of a sporting event, the most popular way to do so is through a bookmaker.
By ‘running a book,’ bookmakers facilitate bets between many gamblers by taking the opposite side of each wager. But they don’t do this for free.
Bookmakers have a built-in edge on all the bets they offer (called the vig). This vig ensures that the book is profitable regardless of how the underlying events play out.
The bookmaker is roughly analogous to the ‘house’ in casino games like roulette – and in the long run, the house always wins. Image: Ralf Roletschek
The book model is by far the most dominant form of event betting on the market today. Leading companies like FanDuel, DraftKings, and BetMGM all offer ‘sportsbook’ services.
But while it may be popular, bookmaking isn’t the only betting model. In fact, competing models like peer-to-peer betting can come with significant advantages.
What is P2P betting?
Peer-to-peer (P2P) betting is exactly what it sounds like. Rather than working through a middleman, bettors place wagers directly between themselves.
Cutting out the book from the betting process comes with several benefits:
Avoid the vig. While most platforms still charge small fees, P2P betting allows you to avoid paying the vig. This results in fairer odds and much lower fees for bettors.
More customization. With a traditional book, you can only place whatever standardized bets the bookmaker offers. A P2P bet, though, can have customized terms on whatever event the two parties agree on.
Social benefits. With books, you’re essentially trading in an anonymous market. With P2P bets, however, it’s possible to know who’s taking the opposite side of the bet (if the platform allows it). And it’s fun to bet against friends and family!
This last one is a key reason that Kutt has leaned into being a social-focused platform.
Unlike many P2P competitors, Kutt allows you to see exactly who you’re betting against. And as it turns out, these social benefits are a huge driver of P2P betting in practice.
Social betting drives P2P popularity
Because P2P betting involves a direct agreement between two counterparties, it can be a highly social experience. Social betting, which involves making direct wagers against people you know, is a surprisingly large market.
Despite the monumental growth of online sportsbooks in the past few years, the informal market appears to remain even bigger. Back in 2022, a Pew survey in the US showed that 2.5x more bettors placed a wager socially (friends, family, private betting pool, etc.) than through a betting app or casino.
For their part, Kutt estimates that the social betting market in the US (including all types of wagers) is about 3x the size of the $120B formal sports betting market. The team also commissioned a survey that backs up these findings, showing that more bettors place wagers with their friends than through sportsbooks and that over half have dedicated betting group chats.
Despite the potential advantages of P2P betting, however, there are also some notable downsides of this model:
Finding counterparties. Yes, you can bet on anything you want in a P2P market – but how do you find counterparties who want to take the other side of your bet? Remember, there’s no centralized book here.
Collecting bets. If you’re betting through an organized, reputable bookmaker, it’s unlikely that they’ll skip out on paying your winnings. But who among us hasn’t had a friend flake out on money they owed us?
Lack of privacy. Knowing your counterparty can reduce information asymmetry – but if you have a reputation for being a sharp bettor, you may not actually want your counterparty to know who they’re trading against.
Ultimately, however, none of these issues are fundamental to the P2P model. They can all be overcome with the right market structure.
It’s exactly this structure that Kutt is trying to create, leveraging the benefits of P2P betting to improve upon the book model – all while taking a unique social-first approach to drive adoption and growth.
What is Kutt?
Kutt is a betting platform aiming to capture the massive (but still mostly informal) social betting market.
Unlike traditional betting apps, Kutt has a P2P model, meaning they don’t run a book. Instead, they earn revenue by charging a flat 3% transaction fee on bets.
That’s about 1.7 points less than a standard vig, resulting in fairer odds for bettors. Kutt also has tons of community features, including user profiles, leaderboards, and group chats, capturing the social nature of betting amongst family and friends.
These features have already drawn in over 15,000 users and $30m in bet volume so far. And Kutt is gaining significant traction, with metrics consistently up 20-30% MoM.
The company was launched by CEO Sim Harmon, who has 18+ years of betting experience and significant skin in the game – he invested his life savings to get Kutt off the ground.
Previously, Sim spent 4 years at UBS and another 5 as the lead salesperson at a fintech startup in NYC.
He’s joined by CTO James Tice, who has over 16 years of software development experience and previously co-founded a sports betting app called FunBet. The team is rounded out by a handful of advisors including Fortune 500 compliance professionals, betting industry executives, and even SEC regulators.
I spoke with Sim recently, and he said that while Kutt often gets lumped in with sportsbooks, the company really sits in its own vertical. The platform exists at the intersection of betting apps, social networks, and P2P payment apps like Venmo.
Image: Kutt
One of the biggest things setting Kutt apart is customization. Unlike standardized platforms like Kalshi and FanDuel, users can set custom odds to bet on pretty much anything they want.
To learn more about Kutt without giving permission to email, click here.
Kutt: Bet on (almost) anything
One of Kutt’s most compelling advantages is that users can bet on anything (well, anything legal, that is).
This goes far beyond sports, including:
Pop culture & media events,
Politics & finance,
And even in-person events – like how long the ceremony at your friend’s wedding will last.
In short, if an event has a verifiable outcome, you can bet it on through Kutt – that’s the power of customization in a P2P market.
Plus, bettors can set whatever odds they deem fair. Unlike other platforms, users aren’t locked into the odds a bookmaker wants to set.
Importantly, Kutt doesn’t kick off good bettors. Sportsbooks have an ugly habit of limiting the amount that sharp bettors can wager, but since Kutt isn’t taking the other side of bets, they have no incentive to do so.
Today, sports are the biggest category on Kutt. But the addressable market here is significantly larger than what’s available to either sportsbooks or prediction markets.
How does the process work?
The process of betting on Kutt is specifically designed to address the challenges of P2P betting.
There are two kinds of bets on Kutt:
Public bets, which are visible to everyone,
And private bets, which are shared directly with other users.
If you want to maximize the visibility of your bet to increase the chances of finding someone to take the other side, you can post it publicly. But if you want to make a bet directly with a friend, you can do that too.
Crucially, all bets on Kutt are pre-funded. This means that nobody has to play bill collector – Kutt custodies the funds and disburses the winnings as soon as the event is over.
Some examples of the Kutt app in action.
While many people start off making public bets, Kutt noted that private bets are actually growing much quicker. Many users form private groups after finding bettors with common interests (ESPN LA, one of the biggest sports radio shows in the nation, even has their own private betting group.
Today, all custom market bets need to be approved by Kutt to ensure they have a reasonable chance of getting filled, meaning super esoteric bets are out. The team says that this will soon be in the power of the user, however, allowing for a wider range of available bets.
What are Kutt’s competitive advantages?
Before we get into Kutt’s financials, it’s worth pointing out a few of the company’s competitive advantages that aren’t obvious upfront.
1) Kutt offers legal sports betting in CA, TX, and FL
As a P2P platform, Kutt isn’t subject to the exact same regulations as book-based platforms.
In fact, Kutt has a legal opinion from outside counsel that they facilitate a game of skill, not a game of chance (a big reason why is that bettors on Kutt set their own odds).
As a result, Kutt is able to offer legal sports betting in 40 states, including California, Florida, and Texas. These states comprise a quarter of the US population but have essentially no legal and accessible sports betting options:
Traditional sports betting is illegal in both California and Texas, which have nearly 70 million citizens combined. While some people in these states use unregulated offshore betting platforms, that’s neither a safe nor efficient solution.
In Florida, Hard Rock Bet has a legal monopoly on sports betting, meaning the state is ripe for competition.
Sorry, Statista – sports betting isn’t actually illegal in these states. Only the book model of sports betting is!
Kutt’s P2P model means that they need to achieve a critical mass of users to offer the same value proposition as the big sportsbooks. But once they achieve that, Kutt can compete in huge markets like CA and TX with almost no competition.
This isn’t a settled matter, however. The law here is murky, and Kutt could have to defend their legal opinion in court one day.
2) Kutt can earn interest on user funds
Earlier, I mentioned that all bets on Kutt need to be pre-funded. This is done to eliminate counterparty risk, but it also opens up an intriguing additional revenue avenue.
Once Kutt’s pre-funded deposits grow large enough and they can effectively predict withdrawal rates, they can hold a portion of these deposits in short-term Treasury bills (the universal ‘risk-free’ investment) to generate interest.
My back-of-the-envelope calculations show that this could bump revenue-per-user by about 15-20% compared to a fee-only strategy. That’s a big advantage over the book model.
(And yes, in a post-FTX world, we confirmed with Kutt that user deposits are held separately from business funds – they’re in entirely different bank accounts).
In layman’s terms, Kutt patented a real-money betting platform between two identifiable counterparties that includes a matching system and partial-filling of opposing bets.
If any competitor tries to build an identical system, Kutt can pursue them legally and prevent them from going to market.
To learn more about Kutt without giving permission to email, click here.
Investing in Kutt
Kutt is far beyond the MVP stage. They’re gaining significant user traction and have already put up some impressive figures:
FY24 Revenue: $520K+
Users: 15,000 (150%+ YoY)
Total Bet Volume: $30MM+ (240%+ YoY)
User Deposits: $1MM+
Revenue/CAC: 2.9x
Kutt’s growth so far has been financed with institutional money – they’ve raised over $1.4m from VCs and angel investors. Now, they’re raising a community round to accelerate their growth, and are forecasting profitability sometime in 2025.
Kutt anticipates using 45% of proceeds on marketing, and another 45% to hire software developers to continue building their tech stack. Another slice will be spent on data, service providers, and capital-raising fees.
Here are the terms of the raise:
Investment type: Reg CF, SAFE (Simple Agreement for Future Equity)
Valuation cap: $9.5MM (You’re betting that the company will be worth more than this)
Kutt also has some cool bonus perks for large investors, including the chance to meet the team out in Las Vegas for a big sporting event.
Finally, Kutt shared with us that the platform has actually already been involved in several acquisition discussions – although the terms haven’t been quite right yet. But as Kutt grows, it wouldn’t be surprising to see a larger competitor try and swoop them up.
Due diligence was performed by Brian Flaherty. Editing was done by Stefan von Imhof.
Neither the author, nor the ALTS 1 Fund, nor Altea has any holdings in Kutt.
This issue contains no affiliate links
This issue is a sponsored deep dive, meaning Alts has been paid to write an independent analysis of Kutt. Kutt has agreed to offer an unconstrained look at its business, offerings, and operations. Kutt is also a sponsor of Alts, but our research is neutral and unbiased. This should not be considered financial, legal, tax, or investment advice, but rather an independent analysis to help readers make their own investment decisions. All opinions expressed here are ours, and ours alone. We hope you find it informative and fair.
