Economics of sportsbooks and why they ban the best bettors
dopaminemarkets.com
dopaminemarkets.com
That's because if you have a few smart players who consistently win, that means you have a lot of fools who will consistently lose money on the platform - which will drive them away, and impact both betting activity and the spread you collect.
Ideally, you want a bunch of uninformed fools generating huge volume gambling against eachother, while you siphon away spread.
It's a deplorable, lose-lose industry.
the most lucrative (sports) bets are complex and highly unlikely parley bets, betters here naturally tend to all take one side
They want to offer bets on many sports, matches, and specific events that don't get a lot of bets, so they have to take the risk
The price on parlays, with the huge spread, is far more vulnerable because there is no large market for these events. Prices for large events are mostly gathered from third parties, parlays will tend to be priced in-house.
This is part of the reason why bookmakers control who can bet on what on their site. If they opened parlay line with $100k limit to anyone, they would be bankrupted by the end of the day. The purpose of these bets is to create a product that is exciting for customers and is economic for them to provide...but that requires there to be limit on how much customers can bet.
The most profitable product are the handicap markets and point spreads even though the margin for these is usually low single digits. Asian books usually only provide these markets...but the problem is that customers don't like these as much as parlays. The product is entertainment.
The retail day traders trying to play there are, of course, in a win/lose fight.
If we start decrying every industry whose business model is based on information asymmetry we are going to have a lot of uncomfortable folk on this forum
Might have more to do with exploiting addiction and ruining lives for profit.
Thank you for proving my point. The ad industry and the mobile game industry are both tech based industries that engage in those behaviors just off the top of my head.
If you utilize dark patterns to make a profit and then look down on the gambling industry for abusing addictive behaviors, you are just a hypocrite who wants to excuse their own sins
Asian books (not a geographical distinction but a business model) are not exchanges and they effectively pay sharps to bet with them. This is why betting syndicates exist, they set prices, and the business model of Asian books is to make it back on volume from having the best prices (and before legalisation, these were the biggest books in the world, they did billions every week in handle).
But the business model is different: retail-facing bookies have to win their customer base back every week so they need to spend more marketing. Asian books also do promos but they tend to be one-time (which are cheaper to run), they don't have a non-sportsbook business typically, and they don't comply with regulators.
Exchanges do not drive away sharps either. Their business model is largely about providing an environment for sharps. The only times were that hasn't been true is when a syndicate has owned an exchange (this happened with Matchbook). The exchange provides an incentive to invest for people to invest in price discovery, which happens. There is no way for the business to run without someone being incentivized to discover prices. People randomly gambling against each other isn't a business model.
Generally this happens based on how the sharks bet, not dissimilar to how market-makers affect stock prices, as a bad/loose analogy.
But if someone has a model that is so significantly better than theirs that it beats the line _and_ spread, they will make money in the long run. Haralabos Voulgaris for example is likely one of the most successful sports bettors. Very interesting guy imo
Anyone whose name sounds like a Harry Potter spell is bound to be an interesting person. I'll have to dig into him some more
the real money is in pools where only a few people bet. however that works best if you get people to bet on the unlikely thing you want to take the other side as you can win more often. Often the unlikely thing is only possible because you take a side - so the savey better is taking away your bets.
time and time again they justify predatory behaviors and then cry foul when someone figures out a way to take them. “it’s ok when i do it but we shouldn’t allow it when im on the wrong side!”
it’s wild how commonplace predatory shit has become in so many facets of society now.
Future markets don't have to pay state taxes so that 51% drag on profits goes away [1].
[1]: https://finance.yahoo.com/news/kalshi-ceo-state-law-doesnt-1...
Given Kalshi a year to figure out how to wash it through a token and then you'll be able to buy calls/puts as futures.
Nobody wins from say facebook, but at least taxing sports betting raises money for public services.
It is admittedly not that much different than any other addict looking for their next fix. Yet, if feels lot uglier when it is a billion dollar corporation on the other side optimizing for the human tragedy.
If people want to gamble, they are free to look for a bookie, if people want to buy heroin, they are free to look for a street pharmaceutical sales representative, but neither should be allowed to manufacture demand for their poison, or hand out free samples.
> In 2022, Washington Post reported a bettor Beau Wagner who bet $1,000 and won $50,000 on an NBA game. He tweeted a screenshot of his winning bet, and DraftKings reposted it with the caption, “BEAU KNOWS BETTING”. However, a day after his successful bet, his betting limit was severely restricted to a grand total of three dollars and sixty three cents. DraftKings used his win as an advertisement to lure new, unsophisticated bettors to the platform, but they shut down the very bettor they were advertising.
Absolute scum.
I wholeheartedly agree with you, they need to ban advertising, as they did with tobacco. The amount of commercials and adverts is nauseating, the industry is predatory, and I’m having serious thoughts about stopping because of that.
To consider it neutrally, there are people who are just really, really good at it. Think a pro athlete playing on a JV sports team, a man among boys if you will. Those people are sincerely just fucking around with online books anyways and make most of their actual plays in-person, large stakes, and it is their primary source of income.
I get why they get banned. These piddly online books aren’t “meant” for them. I don’t blame them for trying, it’s as close to free money as they can get. I also get why they get banned.
Again, the industry is scummy and predatory. Not defending it. I can see both sides of it though.
AFL (Australia) is one with very embedded sponsorship from SportsBet.
Even the voting group for the Norm Smith medal (best on ground in the Grand Final) has someone from SportsBet on it.
They've managed to get by before sports betting was legalized.
Would you agree that as a guiding principle for good government no one should be forced to associate with anyone they don't want to or disallowed from associating with anyone they do want to? That's the fundamental right that's in conflict with the idea of not being allowed to ban successful bettors. In the US we've decided that the insidiousness of class-based discrimination merits an exception to that idea, but overall free association rules the day. You as a business or a consumer are free to do business or not with anyone you want to or don't, and that's how it should be afaic.
For an individual? Sure. For a business? Morally/ ethically, no. If you have a business model predicated on only being profitable when you pick and choose your customers, then that business model is unsustainable and shouldn't exist. It's complete crap that I get banned from a casino or betting app simply because I know how to profitably bet on things.
If it's not profitable to serve someone like me, then don't serve the product at all. It's like an all you can eat buffet, you shouldn't be allowed to ban someone from there simply because they eat too much. Set time limits, or whatever else you need to do, but don't market it as "all you can eat".
Traditional businesses don't have this problem, Apple makes the same amount of money regardless of who they sell an iPhone to, it's predatory businesses that have this issue.
>if they can't ban good bettors they'll either swap the odds to juice bad bettors even more or go out of business.
Good, do that then.
>The idea that government can force you to do business with people you don't want to do business with is broad and dangerous.
Governments have been doing stuff like this for a long time. Look at how the legal profession works.
You haven't made any argument.
And lots of industries ban unprofitable customers. All-you-can-eat restaurants will ban customers who eat/take absurd amounts of food, which is unprofitable. Landlords don't rent to prospective tenants who have a history of not paying rent, which is unprofitable. Every major retailer will ban you if you return too many items too often, which is unprofitable.
So why would betting be any different? Banning highly unprofitable customers is normal business practice across many industries.
There's a reason we call it the free market rather than the forced market. Businesses aren't forced to transact with individuals (unless they are discriminating against specific protected classes like race or gender).
However aside from this, the data is over abundantly clear. Legalized betting significantly hurts the financial health of the places where it’s allowed; because of the rollout in the US, there’s so much data we can derive a definitive causative effect that bankruptcies are up and savings go down in places that legalize it. You can have a liberal view of “that’s their problem” but from a societal perspective this is a net societal harm that has no to minimal beneficial impact.
Why? What makes betting different from every other business in this regard? Why the exception? On what principle?
If you want to extract oil, you shouldn’t be able to escape the cost of climate change. Similarly, you shouldn’t get extra protection and subsidies from government to enable your business model and subsidies should be countered strongly with tariffs to ensure those subsidies aren’t skewing the global economy.
If you do sales of addictive products like alcohol, tobacco, or gambling you shouldn’t be able to offload the harm of that onto “personal responsibility”. Same goes with mobile phones and social media internationally trying to be addictive now that we understand this “attention grabbing” incentive really well.
And you can tell that gambling isn’t being an honest player because of the lip service these companies pay by claiming they ban people with legitimate gambling problems but the actual evidence is they don’t and instead actually treat these people like whales and keeping them engaged and only banning the people who aren’t costing them money.
But betting specifically is worse than alcohol in terms of destructiveness because the vast majority of people who engage with the product have a problem. At least the vast majority of people engage with alcohol without serious issues like that. And in terms of value creation, it s a cheap low value form of addictive entertainment at best, a step above slot machines. In the common case it’s harmful and the worst destructive.
PS: if you read what I wrote, I didn’t say that sports betting is the exception. Gambling like blackjack and banning card counters was similar.
Fine, but none of that has anything to do with why you think betting/gambling firms shouldn't be able to exclude highly unprofitable customers while basically every other industry can. That's the exception you seem to be calling for.
And as a sibling noted, yes I think making that specific industry unprofitable is precisely how to resolve the problem of SCOTUS reversing a 26 year ban on the issue.
And OK, if you want to ban gambling then argue for that. Don't argue for removing the freedom to choose who you do business with as a means to that. Talk about throwing out the baby with the bathwater.
The defenders of predatory industries that threw huge money on A/B tests about how take advantage of people blaming everyone else are getting tired out.
> All-you-can-eat restaurants will ban customers who eat/take absurd amounts of food, which is unprofitable.
I like this example. It is simply not wanting to make a deal with the person. It seems pretty close to the betting situation.
> Landlords don't rent to prospective tenants who have a history of not paying rent, which is unprofitable.
This is different because the renter is specifically reneging on their side of the contract. It isn’t a matter of not wanting to do business with them because the deal has bad terms, but because the landlord has good reason to suspect they’ll actually be ripped off instead.
> Every major retailer will ban you if you return too many items too often, which is unprofitable.
This… I dunno. Making too many returns is not necessarily illegitimate or anything (somebody could just get unlucky and end up with a lot of bad products). But, it is a bad vibe, it feels like maybe the person is running some kind of scam or fraud that you just haven’t worked out the details of.
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Another example we could add: if you have a some pickup or beer-league sports and for some reason a professional player shows up, and starts playing really competitively and flattening all the other players, you might ask them to not come back, simply to maintain a reasonable competitive landscape for everybody.
I suspect most people aren't interested in gambling this way though. Banning winners allows you to turn our gambling into something much closer to this alternate form, while keeping all the marketing benefits of a game people actually want to play. That certainly feels deceptive in ways that a transactional purchase is not.
Worse, it’s actively trying to exploit their customers through deception.
Does exactly this.
Odds are just set by supply and demand and you pay a small fee per bet.
Start a betting pool with a group of friends. Use an exchange (not sports book) internal to the group, so no external money needed. No commission.
It’s no fun realizing you and your friends have taken opposite bets and are just handing money to the house. Keep that money in your social group and make some friendly bets without worrying about the entire group being taken to the cleaners. The group leaves the Super Bowl party, horse races, etc with just as much money as went in (minus tickets, food/drink, etc).
Spend a few years soaking it up, then lower rates again. But Trump.
Such a pattern is pretty commonly deployed by power brokers. It's basic statistics.
That’s good for everyone right?
(Yes, I know, you can still lose all your money in stocks.)
Having the house set the rates creates a risk for the house it does not need to take. It seems like an outdated model to run a business like this.