It was June 6th, two days before the 2017 UK Election results would be announced.
In Toronto, David had been closely following the polls for two months. As a professional bettor, his main income came from betting on sports and political events.
In April, the U.K. Conservative Party leader had called a snap election to build support before Brexit negotiations. At the time, it was considered a smart move since polls showed the Conservatives had a 20% lead over the opposing Labour Party.
However, over the past two months, the Conservative’s national lead had fallen dramatically due to public backlash from their proposed “dementia” tax. With two days before the election, they held a 5% lead in the polls.
Yet, the odds on Bet365, the most popular UK sportsbook, had yet to reflect this shift in public opinion.
Bet365 inexplicably set the odds of a Conservative election victory as if their national lead was still 20%, the lead they held two months ago when the election was called. Nobody really knows how sportsbooks set odds, so it was impossible for David or any other bettor to know why the election odds were so mispriced.
This was the opportunity David had been searching for. The Labour Party was dramatically undervalued by Bet365.
Even after accounting for the high fees that Bet365 charges, David could make money by betting on the Labour party to outperform in the election. For a professional bettor, this was the opportunity of a lifetime.
Why mispriced odds = almost guaranteed profit
The UK is a parliamentary democracy, with 650 individual elections for each member of parliament (MPs).
David looked at all 650 election markets to find the ones that Bet365 had underpriced the most. By choosing the most underpriced markets, David could maximize his profit if his bet won.
David had to act fast before Bet365 realized their mistake. Despite the max betting limits imposed by Bet365, David managed to place 17 bets that night. Although this was only half of the races he wanted to bet on, he had deployed all the capital he had in his account.
Because Bet365 is a UK-based company and he was based in Canada, it would take three days to wire more money to his account. But with the election in two days, there wasn’t enough time to send a wire transfer.
Instead, he began the process of opening an account with a third-party payment processor. These apps allow customers to rapidly transfer money overseas with a credit card, but charge a 3% transaction fee.
An Outcome Worse Than Death
The next morning, David woke up to find an email in his inbox from Bet365:
After seeing those first 17 bets come in, Bet365 realized their mistake. However, instead of simply updating the odds to fair value, they decided to go a step further and lower David’s max bet size to $5. As a professional sports bettor, it meant that David was banned from using Bet365 ever again.
On June 8th, the results of the UK election came in. David won 16 of his 17 bets, taking home $30,000 in profit. But winning came with a terrible cost.
Due to Bet365’s slow funding options, David had missed out on the opportunity to make far more money. More importantly, he had permanently lost access to the Bet365 platform.
David feared that Bet365 would prevent him from withdrawing his winnings that were currently in their company bank account, so he immediately started the three-day process of withdrawing money from the site.
Online sports betting is rigged against bettors
In the world of sports betting, online sportsbooks are the house. They take the opposite side of every bet that is made by their users. This means that every dollar that bettors win, is a dollar that the sportsbook loses. Their entire business model relies on making sure their users consistently lose money, something we call The Bet365 Problem.
To guarantee that they profit from their bettors, sportsbooks do a number of things.
1) Sportsbooks Hide High Fees in Odds
Sportsbook’s fees are reflected in their odds. For example, when betting on a 50/50 event such as which team will have the longest punt return in the Super Bowl, Bet365’s odds are as follows:
Bet365 thinks that both teams have an equal chance of winning this bet, which is why the odds are 1.83 on both sides. If two bettors were to each bet $100 on opposite sides one would lose $100 and the other would win $183. Bet365 takes the $17 difference as a fee.
The average transaction fee being paid by both bettors in this scenario is a whopping 8.5% ($17 divided by $200 bet). This means that bettors need to win this type of 50/50 bet 58.5% of the time just to break-even. For reference, blackjack players that count cards perfectly expect to win around 51% of the time.
2) Sportsbooks Provide No Information to Users
Users have little way of determining how the odds are set, how their maximum bet sizes are calculated, and how other bettors are betting. This is all material information that sports books systematically hide from their users.
Imagine if the New York Stock Exchange hid current stock prices, past trades, and daily trading volumes. That is the level of transparency in online betting today.
3) Sportsbooks Censor Winning Bettors
With these massive informational and economic disadvantages, it’s not surprising that less than 10% of bettors are able to be profitable over the long run. Yet, as we saw with David’s story, even if you are one of the few elite sports bettors that hunts for profitable opportunities, the platform will simply kick you off.
Sports Betting Should Be a Free Market
Free market: where buyers and sellers can make deals they wish to make without any interference, except by the forces of supply and demand.
We believe betting should be a free market and we think that a blockchain-based sports betting exchange is the best way to make it happen.
That’s why we built SportX, the world’s best crypto sports betting exchange. Users bet peer-to-peer against other sports bettors.
Bets are placed in a tokenized US dollar called DAI, which is a cryptocurrency pegged 1:1 with the US dollar. By betting in DAI, users can avoid the high fees, slow processing times, and withdrawal limits of regular sportsbooks.
Our mission is to give sports bettors greater control, total transparency, and higher profits.
Want to learn the difference between a sportsbook and a betting exchange?
Keep Reading: SportX Explains: Sportsbooks vs Sports Betting Exchanges