Innovating around regulations “the new world order” amongst betting startups, says Discerning's Davis Catlin

Discerning Capital Managing Partner Davis Catlin offered a candid look at why traditional sports betting startups are becoming less attractive investment targets, and where instead he’s seeing the innovation and opportunity on the Business of Betting Podcast last week. 

Catlin, whose firm backs companies across the global gambling ecosystem via growth capital and non-dilutive loans, said the cost and complexity of launching a regulated sportsbook today has become prohibitively high. While founders once needed little more than a good product and basic infrastructure, today’s landscape demands deep regulatory compliance, banking relationships, and legal support from day one.

“You used to be able to launch a sportsbook sort of out of your garage almost,” Catlin said. “And now at this point, with all the KYC, you almost have to have a compliance person day zero.”

He added that regulated markets are among the hardest for startups to raise capital in, citing ownership restrictions and jurisdiction-specific rules as major hurdles. 

“We're making it so hard for regulated sportsbooks that I do believe that much of the innovation on the new products will be outside of general regulated gambling,” Catlin added.

It led Discerning to focus less on operators and more on the companies that can scale across formats—especially those building tools and infrastructure.

Catlin pointed to account-to-account payments platform Yaspa, which Discerning led a $12M round in last week, as an example of the type of company that can support DFS, sweepstakes, and regulated books alike. “Finding the tools providers, or the parts of the industry that can grow agnostic to category... those are the most interesting places for us.”

Ultimately, “gamblers don't just log into DraftKings and bet,” Catlin said—they engage with communities, tools, and data that create a more contextually rich sports betting experience. These are the businesses he says are most compelling for investors, nodding to OddsJam’s $160M sale in December as a proof point of the scale they can reach.

While Discerning has backed sportsbook brands like PickleBet in Australia and Midnite in the UK, Catlin believes these markets offer better entry points than the U.S. In both cases, the companies also position themselves uniquely—geared for younger users with more modern product design, offering emerging markets like esports, and branding that distinguishes them from “your grandfather’s sportsbook.” 

Beyond the cost of entry, Catlin argued that U.S. markets are prone to “price success too early,” with valuations often far exceeding fundamentals. That’s one reason Discerning continues to invest internationally, where deals can be struck at more rational multiples.

The underlying concern running through much of the conversation was that an increasingly challenging environment for startups—fueled by rising taxes, restrictive regulations, and aggressive consolidation—ultimately hurts consumers. With fewer new entrants, the market risks becoming stagnant and less competitive over time.

Catlin summed up the strategy as one of adaptation. “I think you're gonna have to be innovating around the regulations,” he said. “That's sort of the new world order.”

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