More Bitcoin Gambling Sites to Review

Bitcoin gambling is still in its infancy, and there are many new innovative competitors emerging. Below is a review of three bitcoin gambling platforms that provide betting on events.

Bitbet.us

Bitbet.us offers pari-mutuel markets on a range of topics including politics, sports, entertainment, and bitcoins. Like many other bitcoin betting sites, users do not open an account with the site in order to make a bet. With the nature of bitcoin, users send their bet to a bitcoin address of the site, and if the bet is a winner, profits are then sent back to the same address. This enables users to remain anonymous.

Another interesting aspect of bitbet.us is they allow users to create and settle their own markets. Bitbet.us provides users with brief guidance with how to propose markets. I’m not sure their system is working very well as only 21 markets are currently listed on the site. I think bitbet.us would have a better platform if they created a easier system to post markets, and posted their own standardized markets in order to give users more choices since the marginal cost of posting and settling a contract could be low.

Another problem I noticed with bitbet.us is many of their listed contracts close in the distant future such as months in advance. Having markets that close in the distant future (longer than a few days) is a problem for a pari-mutuel market because there is no incentive to bet early. Sophisticated users will wait until the final moments of a market to place their bets because they will gain the information of the market (how much is bet on what) and from the underlying event. For example, a sharp better will take the market action into account before placing a bet by looking at the odds and amounts on each outcome to see whether the pool odds reflect alternative market odds or handicapping odds.  A sharp better will also use the current information of the market to place their bets.

To use a market on bitbet.us as an example of the problem with their market structure, let’s consider the market currently posted of “Francois Fillon wins the 2017 French presidential elections”. The market closes in three months and will be settled shortly afterwards following the election results. There is no reason why a better would place a bet this early in the market!  The early better only gives themselves a disadvantage. bitbet.us would do a better job if they created and closed the market each week, and then settled this “serial” of contracts at the same time. What amazes me is that there is already 6.98 btc bet on this market, and with a 2% rake from the pool, bitbet.us has a profit of 0.14 btc locked in.

Based on site stats, bitbet.us has collected over $600,000 worth of rake in the past two years of its existence.

Fairlay

Fairlay is a bitcoin binary option market. Its the closest thing to InTrade still available. The market displays odds on particular binary outcomes. For example, if a question is asked such as “will Emma Stone win best actress at the Oscars”, the outcome is either yes or no, and the current odds are displayed as 2.10. Users can toggle the odds format they want to display between decimal, american, and fractional. Fairlay also offers markets on a wide variety of topics such as sports, entertainment, entertainment, bitcoins, etc.  I can tell that they’ve made some effort to create markets automatically so there is some consistency in the way contracts are listed.

I noticed there are a bunch of markets on Fairlay without any volume, but there are still some market makers posting prices. Making markets on Fairlay can be profitable, especially where there are alternative venues with the same market structure (such as being able to place a bet on the oscars on William Hill and then comparing those odds at whats listed at Fairlay). I’m generally impressed by the Fairlay system. One of the early challenges with InTrade was latency. With new technology and programming methods, many of the latency issues are easier to overcome today.

Fairlay charges a 2% on winning bets and no fees on certain markets. They also list denominations in mBTC.

BetMoose

BetMoose is mostly a pari-mutuel marketplace, but there are a limited number of fixed price markets available. BetMoose users are also able to create their own markets.

The most innovative thing that BetMoose does is provide a time weighted factor to pari-mutuel bets. This is an attempt to encourage early betting. Their formula = 1 + (0.005 * # of hours between the current time and the bet deadline). As you can see, their formula provides a linear incentive, and does not account for the log-normal value of time. To provide a more accurate time weighted incentive, they should apply a log normal function. But kudos to BetMoose for even thinking of this. Its something that I’ve proposed and I’m calling it a dynamic rake.

 

Each of the sites discussed has its own pros and cons. I think one thing that the entire group of sites could do better is standardize their contracts. Its a good idea to have users post and resolve their own markets, but the value that a site can provide is minimized and I think it creates a more disorganized user experience. It would be better from the average user’s perspective to be able to easily view and manage a number of consistent markets. These standardized markets should be posted by the site so they are standardized over time periods. This way, its easier for users to compare and make more bets over time without having to worry about the particulars of each contract or market.

Although Fairlay is probably the best of the three, BitBet.us and BetMoose can improve their user interface. I also wonder why none of these sites has an open API. High volume betters really appreciate an open API that they can use to manage their markets in their own dashboard since they are managing a book for trades/bets over multiple platforms.

 

US Fantasy is Making Progress

Vic Salerno has been making steady progress with his pari-mutuel fantasy sports platform. He is reporting steady growth thru the NFL season and is also expanding the service to offer a wider range of bets. USF is also applying the pari-mutuel model to teams, not just players. Pick a group of teams to score an amount of points. If you’re watching college football or NFL all day, you can plarlay your bets using a pari-mutuel fantasy pool with USF.  There are some drawbacks for players to this type of wagering, but I expect USF to continue marching forward.

The pari-mutuel fantasy format is has another unique advantage of fitting in well with regulatory frameworks of many US states. If USF can gain acceptance with more US states, it would represent a huge growth opportunity. The first mover benefits for USF will end up being a huge advantage. The network effects caused by the most liquid pool is pronounced for par-mutuel betting.

USF’s model can be easily copied online, and the market is currently wide open for a bitcoin fantasy sports site to offer this product.

Businessman sees growth in pari-mutuel based fantasy sports

Vic Salerno’s bid to fill the gap created by the absence of daily fantasy sports play in Nevada has grown exponentially during the football season and is making even greater strides outside the state. Salerno, president of USFantasy and a 38-year veteran of the gaming industry, said handle has grown roughly 10 percent a week through the National Football League season.

Dynamic Pari-Mutuel Rake

Recently, Bob Dancer posted a blog that briefly reviews US Fantasy, which is a pari-mutuel based fantasy sports product currently being offered in Nevada. Bob Dancer touches on two major areas where US Fantasy should improve. First, there is no app and no ability for bettors to place wagers online. This is a major drawback for players. Much of the growth of sports book handle over the past few years is due to the increased access that players have by using mobile apps. But this is also a fairly straight forward downside to overcome. It just takes some commitment of time and resources by US Fantasy.

The second area where Bob Dancer thinks US Fantasy can improve is in the basic structure of the games. He notes because US Fantasy uses a pari-mutuel format, there is no reason to bet early. It is in the player’s best interest to wait as long as possible to place bets. Waiting longer gives the player two major bits of info. By betting late, the player gets to see more of the pool structure. The better can see the latest wagering odds. By betting late, the player also gets to use the latest information on the event.  This could come in the form of scratches, lineup changes, weather, etc, that can impact the outcome of the event.

I think Bob Dancer makes two good points and his comments got me thinking more about how the pari-mutuel DFS model and pool wagering in general can be improved, especially with new technologies that are available.

Essentially, a pari-mutuel pool works by awarding a pool of wagers to the bettors who bet on the wining outcome. Odds are determined by the amount bet on each outcome and payoffs are determined the same way. Typically, operators charge a fixed rake for running the pool. I describe pari-mutuel pools in more detail in a previous post. For example, consider a football game.  There are two teams, team x and team y. $4 is bet on team x, and $6 is bet on team y. The implied odds of team x is 4/10 = 40% or 2.50 decimal odds. The implied odds of team y is 6/10 = 60% or 1.66 decimal odds. If team x wins, then the $10 pool will get distributed proportionately to everyone who bet on team x and visa versa for team y.

Pari-mutuel pools are typically used for horse racing. This betting format takes away all the risk from the pool operator since a fixed rake is charged on the overall pool and the odds are set by the pool itself. It works well for obscure events where the outcome is difficult to handicap. The pari-mutuel betting format is not so great for bettors who have access to fixed odds alternatives. Pari-mutuel pool bettors don’t know the payoff/odds they receive until after the pool has closed. This makes it a little riskier for them and discourages them from betting early. The format can be gamed by sharps who can handicap the pool odds or who have access to an alternative pool or fixed price book.

For the reasons outlined above, pari-mutuel pools have not caught on with many sports bettors. Most sports bettors prefer to use bookies where they can receive fixed price odds. And since there are so many alternative bookies available today, especially online, a liquid secondary market exists on so many sporting events, bettors can know for sure whether they are getting a good price or not.

So how can we use new technologies to improve pari-mutuel pools?  Specifically, is there a way to level the playing field between sharps and squares to generate overall greater liquidity while also taking advantage of the beneficial aspects of betting pools?

According to Bob Dancer, there is a benefit to betting as late as possible in a pari-mutuel pool. Sharp bettors will wait till the last possible second to place their bets. They will scan alternative markets to determine the best odds for a particular outcome and calculate what the impact on the pool will be at a certain amount of wagering. Sharp bettors will find opportunities where a certain outcome is cheap in the pool and will place enough money in the pool for that outcome to gain an advantage. Square bettors are disadvantaged because they might not be able to spend the same time handicapping events and placing their bets at specific times.

I propose a system that will level the playing field between sharps and squares that will also grow the overall pool.  I call the system a “dynamic rake”. A dynamic rake will provide inducements to both sharps and squares which will level the playing field between both types of bettors while at the same time increasing the total amount wagered.

A dynamically raked pool will still have a fixed rake like any other pari-mutuel pool. What changes is the way players are rewarded for their bets and the information provided to participants. A dynamically raked pool will reward early bettors with more player’s club/cashback/credits. The earlier a bet is made, the more points it will receive. If a pool has a 10% rake, players who bet early might get a 20% bonus on their bets. This bonus will induce bettors to bet earlier. The points that are awarded can be determined by an algorithm and tweaked to suit the particular market. The pool operator’s experience will help them tweak the formula to an optimal amount so that the advantage between early betting and late betting is decreased or eliminated. The points could be awarded based on time, but also based on the amount that has been bet in the pool. The operator could determine the amount of points to award based on the amount the pool has received in wagers to certain limits. Once thresholds are met, the operator would be indifferent to inducing any more early bets as the minimum amounts will have been met.

In addition to awarding points based on time or amount in the pool, the pari-mutuel pool can also give pool participants more information concurrently. This will further induce sharp bettors. The pool operator could make it known the amounts bet on each outcome. This will help bettors determine how much certain wagers will impact the pool odds. The operators could also give betters an API that they could use to automatically place wagers. This will help sharps bet at the very last minute with the most up to date information.

What I believe a dynamic rake pool will accomplish by inducing early betting and helping sharp bettors, is increase the pool handle and increase the efficiency of the pool. This will enable the operator to make a higher overall rake and also make the odds closer to their optimal level.

Why aren’t dynamic rake methods used more commonly? I believe there are three reasons. First, regulations prevent pool operators from getting too creative. Most jurisdictions around the world put too many restrictions on wagering, and so stifle competition and innovation. Second, the growth of fixed price and betting exchanges has turned the industry’s attention away from pari-mutuel wagering. There is lot’s more growth left in legal sports betting, exchange betting, and DFS formats. Pari-mutuel pools are seen by the industry as an old horse racing format. Third many sports books, DFS operators, and betting exchanges have not become very sophisticated in their player rating systems. There is lot’s of room to grow in the way players are rated and rewarded but because the overall pie is still growing, more resources is being put into marketing and new player acquisition than into player retention.