The operator programs an app to gather data from APIs and feeds to create a home address and an away address for every game in a sports season. Customers send bitcoin to the addresses as bets on the outcomes they represent.
The app then gathers the data of who won the event and pays out 100% of the balance of both addresses to anyone who bet into the winning address back to the address the bets came from proportionate to their size.
This betting model is called pari-mutuel betting or the totalizer, also known as the tote.The app populates a website with all betting options and calculates the projected odds at all times. All the betting options are public addresses anyone can bet into and receive payouts from so there is no need for accounts and no need for the operator to perform customers key management and security.
I say trustless because all the above can be performed automatically by an app which can be open source so people can be sure payouts will happen as they should. The apps code will decide who gets paid out based on data feeds and no human need have access to the betting pools private keys.
All betting data would be open and publicly available for customers to see and verify in real time or after the event on the blockchain.
Legal compliance: At the moment this would be non compliant in places like the USA and India that outlaw gambling or in places like Australia and the UK that only sell licences to a few operators who are made to perform know your customer and anti-money laundering compliance. With this model it is impossible for the operator to verify user’s identity or restrict users from certain jurisdictions, which I believe no one should want to do anyway. However an operator could get a licence to offer their product globally from a jurisdiction like Costa Rica or Curacao, for more info seeBitcoin Gambling Laws