Like many other cogs in the industrial content machine, I woke up this morning and checked my email. There, as per usual, was fodder from one of the major sports betting sites in the U.S., ripe for sharing on social media.
According to the latest from BetMGM, many people are wagering that a team will lose every single game during the upcoming National Football League season. And, again per BetMGM, a lot of people think the Arizona Cardinals are going to lose a lot of games.
Perfect. A few screenshots and a tweet later and I shared this negativity with the world. However, the only reaction this tweet received (and, yes, I realize this is a very self-centered way to start a column) was the following: “Geoff no one with a pulse is able to bet @BetMGM this insight is absolutely useless.”
Pushing it to the limit
Well, ouch, but I can’t verify for certain if the above is universally true. Maybe the tweet will amuse a guy sitting in a bathroom somewhere or someone will use this factoid in a water-cooler discussion with a fellow employee. Moreover, I have a BetMGM account, and last I checked I do have a pulse because the blood moving through my body is helping me to write this. However, I’m not a sharp bettor. I’m just a guy who bets.
This brings me to the point I’m here to make: overly-aggressive limiting of players will undermine the whole point of legal sports betting. This is an opinion, and maybe you disagree. But, in short, if people can’t make a decent bet through a legal channel, I think they will go somewhere else that is not regulated, licensed, or taxed.
If so, by cracking down on good bettors, legal sportsbook operators can create demand for illegal sportsbook operators. This flies in the face of one of the main reasons to legalize sports betting in the first place, which was to redirect wagering going on in “gray” and “black” markets into totally legal ones.
Here's the full exchange between Peta Murphy and Sportsbet CEO Barni Evans over whether successful gamblers get blocked. pic.twitter.com/nS59mn7yPx
— Jack Snape (@jacksongs) April 4, 2023
Like every other business, gambling has supply and demand. Notably, the American Gaming Association and others are urging federal lawmakers to crack down on the suppliers of offshore and non-U.S.-regulated gambling.
"Illegal and unregulated gambling is a scourge on our society, taking advantage of vulnerable consumers, skirting regulatory obligations and robbing communities of critical tax revenue for infrastructure, education and more,” AGA President and CEO Bill Miller said in a press release last November.
Again, though, regulated operators can create demand for offshore and non-U.S.-regulated gambling by refusing to take action from certain players. Going after supply but not considering demand means only addressing half of the problem.
Some data suggests a sizable amount of such demand could be created by limiting. Citing bookmakers, the Washington Post reported in November that “genuine sharps” may only make up less than 1% of the betting population, but limiting policies could affect as much as 10% of players.
If you can't beat 'em...
What’s more, the AGA report released last year estimated Americans were wagering $63.8 billion a year with illegal bookies and offshore sites. Meanwhile, around $100 billion in legal sports betting was projected for this year, findings the AGA said "imply that illegal sportsbook operators are capturing nearly 40 percent of the U.S. sports betting market."
Some illegal wagering is in states without legal sports betting, such as California or Texas. Still, a sizable chunk at least is attributable to states where people continue to use unauthorized operators. Indeed, the AGA report found 49% of sports bettors wagered with an illegal operator over the past year.
So, there is some know-how in wagering with illegal operators. If someone in a legal market can’t get a bet down, there’s a chance they could return to their old, illegal provider. Yes, that’s illegal, but the only other option may be not betting at all, or betting a very small amount, which isn’t going to fly with some folks.
Also, if the authorities could snuff out all illegal gambling activity… why haven't they done it already? The ongoing legalization of sports betting is partly a capitulation. States couldn’t stop illegal gambling, so they are trying to nudge it under their oversight through regulation.
The business of limiting
And then there are other arguments I could throw at you. For instance, legal bookmakers can benefit from sharp action because it helps them refine their lines and odds. If somebody smart takes Miami -7, an operator may realize the line needs to go to -7.5 or -8. And what about all this Mattress Mack publicity? You let a guy bet millions with you but you won’t take $1,000 from a sharp?
There are also incentives for bookmakers to limit good bettors. Operators such as DraftKings and FanDuel are tied to publicly-traded companies that answer to shareholders, and those shareholders want to see profits. As a result, casuals get same-game parlays (because they lose more often than straight bets), while sharps get limited.
“This is an entertainment activity," DraftKings CEO Jason Robins reportedly said in 2021. "People who are doing this for profit are not the players we want.”
Yes, there are good reasons why operators limit bettors. If they are bankrupted by whales, they won’t exist anymore, obviously, and they need money to pay their costs, such as employee salaries. Still, there has to be a middle ground here. A sustainable sports betting industry needs winners, because, eventually, there will be no more new markets in which new bettors can be rinsed.
All of the above may have been said and written before, so why bring it up again now? To me, anyway, it’s becoming clear that limiting, and perhaps overly limiting, is becoming a cornerstone of the modern betting business.
I'll give you an example: The National Football League announced last week that it has extended a partnership with London-based Genius Sports Ltd., a data and technology company whose website states they can help you limit customers.
“Avoid a one-size-fits-all approach,” Genius says about its trading services for sportsbooks. “Factor your players as individuals and localize your experience in each market. With a global team and knowledge of the latest betting trends, we cover bet monitoring, limit setting and so much more.”
We could see more online sportsbooks in the U.S. streaming live NFL games during the coming season, as the league and data/tech company Genius Sports announced today they've extended their partnership through the end of the 2027-28 season:https://t.co/jQdfDcGlDP pic.twitter.com/yBra4Oj1rN
— Geoff Zochodne (@GeoffZochodne) July 6, 2023
Timing is another reason to rehash this argument. We are going through a period of regulation and re-regulation in legal sports betting. Most of that, however, is aimed at advertising, and with good reason, because some of the marketing that’s gone on needed to be curbed.
That said, while we’re at it, how about something for the winning bettors out there? While sportsbooks are businesses and should be relatively free to operate as they see fit, a license to take bets is a privilege, not a right, and it comes with conditions. Legalized sports betting was meant to protect consumers — aren't winners consumers, too?
The debate about limiting, or "factoring," is getting traction outside the U.S. In Australia, for example, a parliamentary inquiry into online gambling touched on limiting earlier this year, leading to a clash between one lawmaker and a gaming CEO over a question about whether bettors were restricted from betting because they win too much. And, in 2021, after a barrage of complaints from bettors, a French gambling regulator warned operators about rejecting or limiting action without a good reason.
More recently, during a panel at the Canadian Gaming Summit in Toronto last month, representatives from three sportsbook operators were asked if it is hypocritical to talk about the importance of educating bettors when sportsbooks are kicking out or limiting winners. The operators defended their practices, but one also noted the importance of keeping users engaged, which they can't do if they are thrown off the platform.
"If there's inside information... you might experience getting factored down," said Jared Beber, CEO at Sports Venture Holdings Inc., the company behind Bet99. "But, if you are simply making good picks, and you are winning as a result of that, fair game. There are winners, and there are losers as part of this game."
At minimum...
So what could be done? State regulators could set and enforce a limit on limits at sportsbooks. That way, even the sharpest of bettors could be guaranteed the right to wager, say, $50 at a sportsbook, even if they’ve been factored.
It's not a perfect solution, and not everyone will agree, but I think it's worth getting it on the radar of gambling watchdogs and legislators in gaming states. Surely they've heard it before, but the issue may need to hit critical mass politically before anything gets done.
In the meantime, bookmakers may want to think about their current approach. I think a lot about what famous sports bettor Billy Walters said in an interview before the 2022 Super Bowl on VSiN because I think it sums up the argument against overly-aggressive limiting of players very nicely.
“People are going to win from time to time,” Walters said. “And if you throw everyone out who wins, you're not gonna have many customers left.”
