Sports Betting Arbitrage (and more)

I was going to post this at a later date, but the Billy Walters appearance on 60 Minutes last night, complete with its references and analogies to stock trading, made me reconsider.  As I explain in Gaming the Game, big-time sports bettors often rely on far more than solid handicapping to succeed.  Often times, this means they obtain inside information (a subtopic I find as fascinating as anything else I have discovered during the research for the new book), and on many other occasions arbitraging is involved.  Though I am an avid sports fan who knows plenty of bettors, I had never heard of sports betting arbitrage before this project.  A common definition of arbitrage is "The purchase of securities on one market for immediate resale on another market in order to profit from a price discrepancy."  Another site similarly explains, "An arbitrage opportunity is the opportunity to buy an asset at a low price then immediately selling it on a different market for a higher price."

Importantly, consequential sports bettors apply these principles to their craft with equal alacrity.  One particular pro gambler highlighted in GTG made an incredible living just by arbitraging, particularly before the advent of the internet (which made real-time odds from multiple sportsbooks widely available, thus negating the benefit certain pro gamblers had who maintained a network of sportsbooks and bookies constantly providing real-time odds changes over the phone).*  As one web site explains re: arbitrage in sports betting, "An arbitrage is available when pricing discrepancies between betting sites allow [bettors] to place bets that will yield a guaranteed risk-free profit." Though there are several forms arbitrage can take, the most common among the pro gamblers I interviewed is often referred to simply as "One Good, Two Markets" and is summed up as follows:

One Good, Two Markets Arbitrage in Sports Gambling

Arbitrage of the "One good, Two markets" variety is quite common in the world of sports gambling. Arbitrage on the sports market exists because different betting agencies often post different odds on the outcome of a game. Suppose the White Sox are playing the Red Sox. Bookmaker Billy is giving even money on the game, so a $100 bet placed on either team will earn you $100 if the team you picked wins. Sportsman Steve has the White Sox at +200, which means if you place a $100 bet with Steve on the White Sox to win, you will get $200 if they win, and $100 if they lose. You can guarantee yourself a profit if you make the following bets:

1. Place a $300 bet on the Red Sox with Billy at even odds.
2. Place a $200 bet on the White Sox with Steve at +200.

In baseball there are no ties. So either the Red Sox will win, or the White Sox will win.

Profit if the Red Sox Win 

If the Red Sox win, Billy pays you $300. However since the White Sox lost, you lost your bet with Steve and must pay him $200. Your profit is $100, as that's the difference between what Billy pays you and what you must pay Steve. 

Profit if the White Sox Win

Since the bet you made with Steve on the White Sox was at +200, Steve pays you $400 for your $200 bet. Since the Red Sox lost, you must pay Billy $300. Again your profit is $100, represented by the difference of what Steve pays you and what you must pay Billy. 

There are a number of gamblers who try to exploit differences in odds from bookmaker to bookmaker. It's not quite as profitable as it seems, as the odds do not generally differ as much as they do in this example, plus you have to pay the bookmaker in order to place the bet as that's how they make their money. 

*The pro gambler I am referencing also employed a host of other non-handicapping approaches to sports betting.  Among the numerous resources available in books, articles, etc., the best free and credible source I have located to date that explains the sorts of methods used by pro gamblers like the one I am discussing is here.  Pay particular attention to the section "Betting Blind = Big Money" and its subsections "Find 'Positive Subsets'" and "Learn what a 'point is worth'."  Also see "Beware the Sharp Book" and "Scalps and Middles". 

Brief comments on the Billy Walters 60 Minutes appearance

I don't think the 60 Minutes piece that aired last night broke any ground for those who have remotely followed the remarkable career of Billy Walters.  However, it was probably noteworthy for the majority of viewers who likely know little if anything about white-collar pro gamblers - those who have nothing to do with organized crime and who treat sports betting as a legitimate profession.  This small and exclusive crowd (of which Walters is by far the most consequential) employs sound business practices, including (as referenced last night) recruiting the best workforce possible, which usually means some combination of statisticians, handicappers, and a trusted coterie of movers and runners who must jump at a moment's notice to place (often large) bets at the desired number (betting line/point spread).  These are precisely the types of individuals I have spent two-plus years researching, including a focus on pro gambler/mover Jimmy Battista, who worked with/for several of the world's heavy hitters.  [Re: white-collar pro gamblers, also see, for example, my post re: Joseph "Joe Vito" Mastronardo.]

Other items that rang true in re: the sociology of big-time betting in the 60 Minutes piece were: the use of Don Best (this was the interactive site Billy Walters was viewing during the segment to track dozens of betting line moves in real time), which is a necessity for anyone who wishes to bet seriously; and the manipulation of betting lines by pro gamblers to obtain a more favorite line/point spread.  Regarding this latter point, this is precisely why it is risky to try and copy the bets of sharp bettors like Walters.  That is, even if one was somehow privy to his bets, it is impossible to know if this is the "right" side, or if this is a "head fake" or "phony bet" to get the sucker money to follow and eventually force sportsbooks to change the line to a number Walters or another sharp plans on betting heavily on the other side.  I have embedded an online version of the segment below, but don't know how long this will be available (my apologies for the slightly irregular manner in which this runs in a blog):

The World's Most Consequential Sports Bettor

In the course of researching the big-time sports betting world, I soon discovered there was unanimous agreement among the dozens of people I interviewed (bookies, runners, movers, sportsbook managers, and pro gamblers) as to who the world's most significant and influential sports bettor is and has been for some time - Billy Walters.  It has been widely reported that Walters is the "Rick Matthews" featured in Michael Konik's The Smart Money (which I have noted before, and which I reference in Gaming the Game).  Anyone interested in the history and sociology of the highest level of sports betting would be wise to start with a look at the man heralded as the head of The Computer Group.

Notwithstanding my quite serious concerns about the ability of 60 Minutes to uphold its reputation for biting and incisive reporting, I am eager to see their look (however superficial) at Walters tomorrow night (Sunday, January 16, 2011).

Robert E. Brennan released from prison/duped investors still seeking funds

Robert Brennan is back in the news this week, following the successful completion of his prison sentence.  According to the AP, Brennan spent months in a Newark halfway house following his time in FCI at Fort Dix.  [Note: NJ.com ran the same AP article here, which may be of use if Philly.com deactivates the Inquirer link as is its custom within a few weeks of an article's publication.]

Importantly, the coverage also offers an update on some of the outstanding financial judgments against Brennan.  I have always found this area of securities fraud enforcement fascinating - and equally frustrating - in large part because offenders very rarely compensate their victims in any meaningful way (either because the ill-gotten money has been squandered and/or successfully hidden, and/or because victims are fighting with government agencies who want their own judgments paid, and/or because lawyers fighting on behalf of duped investors are entitled to their own piece of the judgment pie).  In the specific rulings against Brennan, the AP article offers the following updates:

*Regarding a $55 million judgment against Brennan in a class-action suit brought by investors, less than half of that figure has been recovered. 

*Regarding a $75 million judgment against him in a Securities and Exchange Commission case, the SEC has collected $29 million. 

*Regarding a $45 million judgment against him in a New Jersey Bureau of Securities case, the state has been paid approximately $5 million. [Another article regarding this case notes that 27,000 investors/victims are eligible to file for a portion of the $5 million.]