Betting exchanges vs. sportsbooks - great story by Slate.com

[The Buzz]

When Buzzy first heard of betting exchanges, he was confused. Despite repeated attempts by CityGuard to explain the phenomenon, he just didn't get it. Sure, he understood the concept, but didn't know why they existed ... didn't sportsbooks serve the same purpose?

Slate.com has a great story about betting exchanges, and now Buzzy gets it. The story starts by outlining what happened in the recent tennis betting scandal, and goes on from there.

http://www.slate.com/id/2178648/

This is just a sampling of the full story ...

Why would you use a site like Betfair to fix a sporting event? Let's say you have some valuable inside information. It would be foolish to place a massive bet with a bookie—overt, conspicuous wagers draw unnecessary attention and depress the return on your investment. Instead, you'd want to fleece other bettors directly, offering such generous odds on the opposite side of your "sure thing" that people will think they are taking advantage of you, not the other way around.

Like any money-driven marketplace, exchange betting is a game of sharks and minnows. Think of it as eBay for gamblers. Anyone can offer or bid on existing odds. The difference is that pros will take hundreds of thousands of dollars in action while a beginner will stipulate that all he can handle is five bucks. Sharks can set traps for minnows if they have superior expertise (or inside information), and the Davydenko match is an example of how such ploys can spiral out of hand: Almost certain that the superior player would lose, Russian gamblers in on the alleged fix flooded the exchange with bloated win odds on Davydenko. These "too good to be true" odds kept getting scooped up by unsuspecting novices thinking they were getting a bargain. At the same time, the syndicate likely laid as much money as it could on Davydenko to lose, chomping up whatever odds it could. When so much cash continued to slam through the exchange on such an unlikely outcome, Betfair raised the red flag.

While betting exchanges can be a dicey proposition for the uninitiated, the odds are vanishingly small that an amateur gambler will get suckered into some sort of match-fixing scheme. On balance, Betfair offers a number of advantages over traditional sports betting. Compared with bookies and casinos, exchanges keep a much smaller cut of the action, a 1 percent to 3 percent "vig" that's far less than the standard 10 percent. (In the long run, the exchanges are banking on greater betting volume far outpacing the difference in price: Betfair handles 5 million transactions a day, processing more than 300 bets per second.) For bettors sick of picking against point spreads or money lines, the site also offers an eclectic menu of diverse wagers. On a recent Premier League soccer match between Derby and Chelsea, gamblers could choose between 26 different side bets, including such esoteric plays as total corner kicks. And the action isn't just limited to major sports. Anyone up for a wager on water polo in Greece? How about the high temperature in the United Kingdom next year, or the Miss World pageant? Currently, Miss Dominican Republic is favored at 6-1, while Miss Zambia and Miss Cambodia are rank outsiders at 900-1. But remember, this is exchange wagering—the price is always negotiable.

... and here's a great explanation of the advantages BetFair offers.

Betfair is no fly-by-night operation, and it continues to flourish in Europe. One major reason for its success is the company's willingness to share detailed records with professional sports organizations and the government if corruption is suspected. The exchange also operates an internal sleuthing squad to look for dubious patterns—when placing bets, customers are unidentified to one another, but their account information and IP addresses are known to Betfair. These practices exposed the tennis scandal, and Betfair also handed over evidence that led to the ongoing trial of a champion British jockey who allegedly held back horses at the behest of a betting syndicate. Here in America, where an estimated $200 billion in sports wagering takes place underground, such transparency is nonexistent. No black-market bookie, for instance, would ever alert the feds that he was seeing a suspect amount of action on games refereed by a particular NBA official.

[TheGooner]

It's a useful article - if a little out of date when it comes to painting the landscape of European bookmakers - but then I guess this was a Washington article designed for domestic consumption?

Live betting, side markets and novelty bets on non-sports have been playing on European sites for 5-10 years - and in this regard Betfair are not innovators but simply following a trend.

And as for 10% vig - well maybe there are some bookmakers that can get away with it but 3-5% is pretty much the norm now in this competitive environment, which is exactly where BetFair sets its own commission levels.

Finally, Betfair and most UK and European bookmakers monitor all markets electronically looking for signs of abnormal patterns or volumes. Betting on Betfair doesn't hide it.

Still - an interesting article Buzzy - thanks for posting that link.

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Oh and about those side markets - there was a related scandal - much like the tennis match fixing - about 5 years ago :

There used to be a bet you could play - which side will get the first throw in - rather like who will get the first out-of-bounds paly in basketball.

About 5 years ago they actually finally banned the "first throw-in" bet because supposedly a couple of rather high profile teams were betting heavily on their opponents to get the first throw in and then kicking the ball directly out of play from the kickoff.


The team were putting their match bonuses on it - using intermediaries - and doubling their money in the first 5 seconds of the match - and not really giving any advantage away.

(one possession in soccer means nothing)

These days you can still bet on a lot of side markets though - but they are more carefully monitored and some of them like FIRST PERSON TO SCORE A GOAL are actually carrying riders saying that OWN GOALS do not count.