Derby Jackpot is off to the races with real-money social gaming

Social games can be addictive enough when only virtual goods and currency are on the line, but Derby Jackpot is upping the ante with an online game that lets players bet real money on live horse races.

Founded by a team of brothers, Tom, Walter and Bill Hessert, as well as CTO Eric Gay, after a trip to Preakness Stakes last year, the game launched in private beta in September. This week, the New York-based startup announced a partnership with payments company Dwolla and gave the New York tech world a chance to check it out at a special event.

“It’s the first social horse-betting game that makes it easy to bet, watch and win online,” said Walter Hessert, Derby Jackpot’s chief product officer.

Real money social gaming heats up

In the U.S., online horse betting is legal even though other kinds of online gambling are not.  But many anticipate that more legalized online betting is on the horizon. Last month, social gaming giant Zynga (s ZNGA) said it had closed a deal to offer real-money poker and other casino-type games in the U.K but, stateside, it has reportedly invested in state and federal lobbying efforts related to gambling.

Derby Jackpot’s founders said they believe that online horse-betting alone offers a big opportunity, but by being early to real-money social gaming the company could be well-positioned to grow with the market.

“Without a doubt there will be more regulated ways of gambling online,” Walter Hessert said. “There’s a lot of opportunity in real-money gaming online and we’re sure to take advantage of some of those opportunities.”

Signing up is straightforward but includes sharing the last four digits of your social security number to confirm players are over 18. Once players connect their account to a credit card (which requires a $10 minimum) or Dwolla account (no minimum required), they can start betting on live races across the country.  Races take place 364 days a year but only between noon and midnight, with increasing frequency later during the workweek and weekend.

From the site, users can see when the next live race starts, select their horses (and see their odds of winning) and then actually watch a live video feed of the race. As they place bets and watch the race, they can see friends’ actions and chat with others online. If they win, they’re informed right away and when winners want to cash out, they can easily indicate the amount they want to withdraw to receive a check in the mail.

More Zynga Poker than Angry Birds

The bets on Derby Jackpot are pretty small – from $2 to $5 per bet – but seem to be enough to keep people engaged. The company said that among their beta testers, when players deposit $10, they play for two hours and win $30 on average. Some big winners have won up to about $1,000 on a single race (players can place multiple bets on one race).  Derby Jackpot takes a cut of every dollar spent by its players.

The founders said they’re targeting people who are more into Zynga Poker than Angry Birds, hoping to bridge the gap between hardcore horse-betting and casual social gaming. But even as someone who isn’t into any kind of casino game, I have to admit that I quickly got hooked.  Derby Jackpot and Dwolla credited the account of each event attendee with $10 and, as soon as I saw my winnings mount (small though they were), I found myself clicking back to place the next bet.

The company declined to share how much money it’s raised from investors, saying only that its seven-person team is “well-funded.” But, interestingly, one of its advisors is economist and Freakonomics co-auther Steven Levitt, who was Bill Hessert’s professor at the University of Chicago. Prior to launching the startup, the pair had researched the art and science of picking horses. Derby Jackpot said it expects to open the site publicly in early 2013.