If you filled out your NCAA tournament bracket based on your love of the underdog, your affinity for furry mascots, or loyalty to your alma mater, then you’re probably the dumb money in your office pool—engaged, in the parlance of casual gamblers, in the act of “donating” your entry fee to a co-worker who has a better grasp of how March Madness works. So why donate to Bob in Accounting when you can donate to a better cause?
That’s one way to think about CharityBets, a year-and-a-half-old company that started taking online “wagers” on college basketball last week. It works like this: You bet $20 that your beloved Duke Blue Devils will defeat Michigan State when the two teams meet this week. If Duke wins, your $20 goes to the university. If Duke loses, Michigan State gets the money. CharityBets wins either way: The company takes a 10 percent transaction fee, which includes credit-card processing.
“We’re bringing entertainment value to supporting your school,” says CharityBets co-founder Marc Hodulich. “You can call it cause marketing, or something like that, but it’s really about delivering entertainment for your donation dollar.”
This year’s NCAA tournament isn’t the first time CharityBets has tested its concept. Hodulich and co-founder Dave Maloney are also behind an annual fundraiser called the Decathlon, which has aimed to crown the best athlete on Wall Street since 2008. Knowing financiers’ appetite for risk, the pair thought they could raise more money for charity if they added gambling to the competition. Instead of simply asking participants to raise money based on how many pull-ups they completed, they matched bankers from rival institutions and started taking bets: If a Goldman Sachs (GS) exec outscores his counterpart from JPMorgan (JPM), he gets to pick which charity receives the winnings.
Betting action was slow during the first two rounds of the NCAA tournament. Hodulich says that the second-round matchup between Kansas and North Carolina drew about $500 worth of bets, the most of any game. The opportunity is large, though. About 50 million Americans fill out an NCAA tournament bracket every year. Cause marketing—broadly defined as the collaboration between nonprofit organizations and for-profit businesses—is a billion-dollar industry. And March Madness is just the beginning: The company is working on an odds-setting system to take wagers on everything from golf tournaments to college football games.
Still, if Hodulich and Maloney are going to make CharityBets work, they’ll have to figure out how to persuade people to make bets—and fork over processing fees—while forgoing winnings. That sounds like a bit of a long shot. If there’s no hope of winning big, why not simply write a check to the charity of your choice? Hodulich is counting on sports fanatics. “People are really competitive about their schools,” he says.