Welcome All Sports Bettors

There have been more and more articles popping up in the media talking about all the degenerate gamblers opening stock trading accounts and how it won’t end well for them. Given the estimated $150B that’s wagered in the United States every year it’s possible there is enough new money coming into the market to move prices around beyond the normal noise of the market.

I kinda feel sorry for Renaissance Technologies – they’re going to have to re-do a bunch of their models to account for a bunch of new junkies seeking a dopamine hit. But eventually I’m sure the sports gamblers will be the new dentists in RenTech’s eyes and they’ll be happily relieved of their money.

But I’m not going to pile onto all the voices saying that these new sports gamblers are going to get taken for a ride. After all, there is a fair amount of overlap between trading and gambling. Every market participant is looking for an edge they can profitably exploit. Besides, they’re sports gamblers, 95 percent of them lose money anyway so losing some more in the stock market isn’t going to be that big of a change for them.

New Opportunity for DraftKings and FanDuel

Since I’m leaving the caveat emptors to others, what I would like to point out is the opportunity DraftKings and FanDuel will have once games start back up. The money quote from the Financial Times regarding a sports gambler playing in the stock market: “With sports, if I throw $1,000 at something, I lose the whole thing real quick, but here if things go south you can cut your losses.”

The opportunity: create a live marketplace where gamblers can buy and sell the odds of a team winning, similar to PredictIt, but for live sports games (if this already exists, please forgive my ignorance). The only difference is that the live market would have to stick with point spreads so the market opens up at a 50-50 proposition and then can float from there.

With a PredictIt-like market the sports gambler could apply a lot of the risk management tools and trading approaches used in the financial markets. If the team performs poorly out of the gate, they can cut their losses and move on or double down if they think there will be a second-half surge. If the team is performing well, they can either add to their wager or take their profits depending on their approach.

Now, I don’t watch sports but I have a number of friends who love to gamble on them. Their engagement with the game already boggles my mind but if they could place wagers on it throughout the game you wouldn’t be able to tear them away from it. Even Super Bowl XLVIII would have kept more people to the end.

DraftKings and FanDuel as Market Makers

If DraftKings or FanDuel implemented the live betting market using PredictIt‘s format they could generate additional profits by becoming de facto market makers. Instead of taking their 5 or 10 percent vig for setting the spread upfront, they could take half a percent or 1 percent on each buy or sell. And if there wasn’t a deep enough market throughout the game for bettors to trade against, they could take either side of the spread as needed. They already have the dataset to determine the estimated final spread, likely points per game based on historical performance and pace of play, and it would probably be a simple enough model to develop based on the standard deviations away from expected, which could be easily updated in real-time given the amount of computing power available these days. Maybe tilt it a titsch based on hot hand research. The end result is a new way to take their cut but in a way that players don’t really realize they’re paying.

Welcome Sports Bettors

So welcome all sports bettors with your new accounts. The environs should be cozily familiar if you approach it the same way you did your sports gambling. It’s easily addictive, can waste an inordinate amount of time, and if you have absolutely no idea what you’re doing you can easily be fleeced without even realizing it.

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