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.

Sports Book Deposit Bonus Vulturing

Many online sports books offer various types of bonuses for players to sign up, deposit funds, and play. They also offer special event based bonuses such as free bets and bonus payouts. Recently a friend of mine opened an account with an online sports book, deposited funds, and thought he was going to receive a deposit bonus, only to learn afterwards that there is a betting requirement associated with the bonus. He also learned that his initial deposit is tied up unless he makes the betting requirement.  He is pretty frustrated, but there is a fairly easy solution to his problem.

Many sports books offer deposit bonuses such as a 100% first deposit bonus. The sports books understand that most players will deposit funds, claim the bonus, and lose the entire amount deposited. The sports books are trying to give players a taste of the action and hope those new players become regular customers. Even though the sports book offers players “free money”, the sports books know that most players don’t have a bankroll strategy. Most players don’t size their bets to match their bankroll using a statistical method like the Kelly Criterion. Most players just bet a an amount picked “out of the air” and end up betting above their bankroll, and so blow thru their entire deposit plus the bonus.

Players can also get caught up by not reading the fine print. Most deposit bonuses have a betting requirement attached to them. The requirement will be a betting factor of the deposit amount in order to withdraw the bonus cash, the player must run the deposit thru at least 50 or 100 times. This betting requirement effectively bleeds out the bonus by way of the edge built into the game odds. But if you are stuck with cash at a sports book with a betting requirement, but you want to get your money out without meeting the betting requirement, below I have provided a way to do this.

Let’s use an example of a first deposit bonus offered by Sports Interaction. The basic description of the bonus reads:

“Sports Interaction gets right to the point with their sportsbook bonus – 100% cash bonus with a $200 maximum when you sign up. The rollover rate on this bonus is 10x. If you deposit the maximum of $200 – your account will show $400.”

So with this bonus, you may have to make $4000 worth of bets in order to withdraw your deposit plus the bonus cash. If you are unwilling to make these bets, there is a way to withdraw your money plus the bonus amount without running it thru the required number of times.

The first thing to do is to open an account with a reputable sports book that is regulated and legal in your home jurisdiction. Make sure you disclose all your personal identification to this sports book and confirm that you can make deposits and withdrawals without any hassle.  I suggest actually making a deposit and making a withdrawal to confirm you won’t have a problem.  Also research the limits the sports book might place on withdrawals.  They could limit withdrawals up to certain amounts without further delays. Test out these limits if you think they may be relevant. Fund this account with enough bankroll to cover any bets you might have with sports books where you are trying to claim a deposit bonus or another bonus (more on that below).

Now that you have a “home” account setup and in good standing, search out a deposit bonus that you’d like to take advantage of. Using the example above, you could deposit $200 into a Sports Interaction account and be eligible for the 100% deposit bonus. What you are going to do next is make one bet at Sports Interaction and the exact opposite bet at your “home” sports book.  Find an event with a favourite and an underdog. It also helps if you can get the sum of the odds on each side to be close to break even, but if you are claiming a 100% deposit bonus, a fee of 1% isn’t such a big deal (but every penny counts).

Let’s assume that Ladbrokes is your “home” account, and you find a bet on an NBA game with a moneyline bet between Chicago and Philly for the odds listed below:

Chicago Philly
Sports Interaction 1.30 3.65
Ladbrokes 1.29 3.60

In this case, to get rid of the deposit bonus with a single bet, you would bet the entire amount in your Sports Interaction account ($400) on Philly. If you lose the bet, your Sports Interaction account balance will then be zero. At the same time, you bet $1,400 in your Ladbrokes “home” account on Chicago.  If you win this bet, your profit will be $400 (which is the amount you would have lost in your Sports Interaction account).  Oppositely, if your bet wins at Sports Interaction, you’ll win the exact amount in your Sports Interaction account as you lost in your Ladbrokes account.

The reason why you may want to choose bets with an underdog and a favourite is its more likely the favourite will win and shift your money to your “home” account right away. Otherwise, it will take several bets to shift the funds. Obviously, you need to be able to calculate your ability to fund further bets in your “bonus vulturing” (Sports Ineteraction) account should your underdog bet win.  But this calculation can be done separately based on the size of your overall bankroll. If your bankroll is not big enough to shift the money using a single bet, you can split up the transactions in any number of smaller chunks. They key thing to remember when doing this is the house edge. Just make sure that the sum of the odds on both sides of the bet are close to 100%. You will probably be able to find an arbitrage opportunity (and even make more money in the process), but if you’re lazy and don’t want to search, just find a bet where you are only paying about 1% spread between the two sports book’s odds.

Using this method, you can go around the internet and “bonus vulture”. You shouldn’t even care much about the reputation of the sports books where you are vulturing since you won’t even need to withdraw the money from these accounts anyway, you don’t need to verify the account at the vulturing books.  Hopefully, all you’ll be doing is opening an account, claiming the bonus, and losing it in one big bet, or a series of smaller bets.  The funds in your “home” account should grow proportionately to the bonuses you are vulturing. This is also a good way to grubstake an online sports betting bankroll. You could probably make at least $1,000 in bonuses with some effort and research. Also, if you do this with a team, you can also grab the “refer a friend” bonuses.

Here are a couple of links that have long lists of deposit bonuses, there are many more online, just do a Google search:



Disney Bets on DraftKings

As I reviewed Amaya’s quarterly report last week, I was pleased to read about their intent to enter the fantasy sports market. Fantasy sports are likely to grow as it provides a more personalized and customized way to enjoy sports.  The best fantasy sports experience also brings together fun math and technology 🙂 I was thinking that DraftKings would be a good property for Amaya to look at, but today it was announced in the WSJ that Disney has made an investment for $250 million in DraftKings. This is a smart strategic move by Disney and cements a partnership with ESPN. The market for fantasy sports exhibits network effects, so users will likely congregate around the biggest and best networks, these are currently FanDuel (partnered with Comcast) and DraftKings.

Why do sports gamblers lose?

Last night, I was discussing sports betting with a friend of mine.  We were talking about the process management of sports betting such as how to move the money, execution risk management, evaluation methods, etc.  The conversation naturally turned to “why do most sports gamblers lose”?  My friend pointed out that the same information available to sportsbooks is also available to gamblers.  Gamblers can easily come up with an accurate theoretical likelihood that an event will occur simply by a survey of the market odds.  Do gamblers simply make the wrong choice more often?

When answering the question of “why most sports gamblers lose” it might be best to start with the term “gambler”. Most gamblers lose at sports betting over the long run because they are simply gambling.  Don’t get me wrong, gambling is fun.  Gambling adds an additional level of excitement and thrill to many activities, including sports.  Playing games is usually a lot more fun when there are stakes involved. Watching the Saturday night hockey game is even more exciting when you have something riding on the outcome, even if the stakes are small.  I suspect most sports gamblers are just placing wagers on their favourite sports and teams because they want to add a little more excitement to the outcome.  These gamblers are just playing for fun, to them, a wager on a sports event is a form of entertainment just like a movie date or a restaurant experience.

But what about the plungers who try hard to beat the sports books?  These gamblers spend a lot of time analysing the potential outcome. They are handicapping the contestants and then placing wagers with the goal of winning in the long run.  These gamblers plan to WIN, and I think there are two main reasons causing most sports gamblers to lose in the long run.  The first reason is they fail at bet sizing and the second reason is they don’t get the best price.

Bet Size

Bet sizing is a critical component of any gambling.  In a certain sense, bet sizing may be obvious.  You probably wouldn’t risk your life savings on the flip of a coin, but when your net worth is $10,000, would you risk $5 on a positive expectation game with a standard deviation of 40%?  Just like your financial advisor won’t suggest putting all your eggs in one basket.  If you want to prevent yourself from going bust, you need to diversify your exposure and have some sort of risk management strategy.  This strategy can be complex and sophisticated, or it can be simple and easy to implement.  If you have $10,000 to invest, it may be prudent to hold two different investments rather than just one.  If you’re betting on sports, and your bankroll is $10,000, it may be prudent to bet on more than one game, maybe for less than $100 each time.

After you have decided to diversify your action, you’ll then need to decide “how”.  There are lots of strategies that can be used to manage a sports betting bankroll.  One of the most widely used is the Kelly Criterion. Simply put, the Kelly Criterion is a formula used to determine the optimal size of a series of bets. You can create a Kelly calculator in excel, or you can find a calculator online or download a Kelly calculator app.  Last night I bet on the Dallas Stars to beat the New York Islanders and could get odds of +125 (2.25).  The easy part with sports betting is I could calculate the implied probability of the Dallas Stars winning as 45%. Meaning, 55% of the time, I will lose this bet. Using a Kelly formula and a $10,000 bankroll, I can calculate my bet size should be $99.  The Kelly Criterion works well because its easy to use and takes into consideration the volatility of the underlying probability.

Best Price

The second main reason sports gamblers lose in the long run is they fail to get the best price. If you are placing your bets with your local bookmaker or using the same website each time you place a bet without shopping around for the best price, you are very likely paying too much for your sports bets.  Today with online information, its easy to shop around for the best price on any sports bet.  Just go online and find a few good websites that will help you quickly survey the market for odds so you can find the best price.  A few examples are Vegas Insider and Odds Portal, but there are many others and new ones popping up all the time.  Another practical way to survey the market would be to have accounts a few different sports books, choose these books by their size and stability. The biggest and most stable books will more often have the best odds.  Then before placing your bets, compare the odds on the sports books where you have accounts and determine which book is best.  Maybe even come up with a composite odds based on your survey.  You may also want to add a betting exchange to your price shopping.  A betting exchange will present the best theoretical odds at all times and even if you don’t use the betting exchange to place your bets, you can use the information to make your choice.

Las Vegas Update Oct 9th

So I’ve been in town for a couple of days now.  I arrived monday night and picked up a cheap rental Yaris for $8 per day before fees/insurance/taxes.  I also got a $12 per day (before $14 per day in “resort fee”) at Texas Station.  Its funny that Texas Station can charge a “resort fee”. Oh well.  My budget is $50 per day max room and food.  So far, so good, but it will be a lot easier in November and December as hotel rates drop to rock bottom levels and many hotels are giving their rooms away for free.  I’ll probably also get a bunch of room offers as my time down here progresses.

One of my main goals is to figure out how to beat the sports books using technical analysis.  I use “fundamental analysis” and “technical analysis” in the way they are used in investment analysis.  Fundamental analysis would involve researching the relative strength of the teams, and applying a formula or handicapping method to determine the likelihood of a team winning, the point spread being covered, etc. Technical analysis would involve researching price action.

Technical analysis – Wikipedia, the free encyclopedia

Fundamental analysis

I scratch my head a lot when I listen to fundamental analysis of sports betting, since its one thing to figure out who will win the game, but another thing to find the right price.  There seems to be too little discussion of the price of sports bets and too much time focused on who will win and why. I noticed in Vegas that some sports bets are just outright TERRIBLE!!!  Take most golf bets at most sports books, the odds offered about about HALF of what they are quoted on an exchange such as Betfair.  Anyone who is betting golf thru Vegas sports books must be completely clueless.

I completely forget about fundamental analysis when making my bets in Vegas. I only look at the price trends, and I use spreadsheets and data collection methods to determine good prices.  I look for arbitrage opportunities where sports books mis-price their offers.

Most sports betters seem to use fundamental analysis in order to try and beat the house.  The problem I have with this approach is that its usually not clear until the very long run whether a better has an edge or whether they are just getting lucky. My arbitrage bets yield about 1% to 5% per trade, but my market risk is eliminated. I do have some execution risk and other risk management challenges, but I’m not betting on who will win or lose, I’m betting on relative value.


Sports Connection Mobile – Station Casinos

Yesterday I tried to sign up for and run the Sports Connection Mobile app from Station Casinos.  I was pretty disappointed to learn that I won’t likely be able to use this app.

I went to Texas Station to sign up for the app.  I was greeted at the window with the question about who my mobile data provider was.  I told the order taker that I’m Canadian and that I don’t use a US mobile data plan.  I was informed that I would likely not be able to use the app.  I wasn’t sure why, so I asked if I could just sign up anyway.  Maybe I could switch over to roaming on the AT&T network.  I’m running an Android device and when I travel in the US, I use the Rogers One app which allows me to make wifi calls and texts.  So I’m not using a mobile data or phone plan when I’m in the states.

So the process to sign up for Sports Connection Mobile starts with filling out a form with all your personal information including your SSN/SIN. I fudged my SIN since I figured they wouldn’t be able to confirm or deny the right number anyway, and it was probably best not to give Stations (who might have to disclose my info to some federal agency for money launder compliance or other wire act compliance?). After I submitted the form to the casino rep at the sports betting window, they disappeared to the back room to enter my info in their system.  Players also need to provide ID and a players card.

After I was signed up, I deposited $200 and was told that this amount would go into my mobile account, which is segregated from your other sports betting account.  Basically, you can’t mix your mobile account cash with your sports betting account cash which you would use to place bets in person at the window.

Now that everything was set up, I went to login, but was blocked out since I was not on a US mobile data network.  The app asked me to turn off wifi and exit a list of programs including the William Hill app I use in Ontario.  Curiously, it didn’t ask me to close the Betfair app.

Since I don’t have a US mobile data plan, I’m not able to access the Sports Connection mobile app from Station Casinos.  This is disappointing since the GPS locator could act as a way to verify my location.  Maybe there are extra security features with a data plan that cannot be confirmed from a wifi connection or GPS?

Sports Betting Apps in Nevada

Mobile gaming is growing rapidly and new applications and types of games are being constantly developed.  With a planned winter trip to Las Vegas and sports betting on my agenda, I thought it would be helpful to review the mobile sports platforms available in Nevada. I haven’t tried any of these platforms in Nevada, but I have used many other sports betting apps. I will supplement the information on this page, and include reviews on each of these apps once I use them.

Nevada Sports Books

This app is makes sports betting available from the sports books of Cannerry, Eastside Cannery, the Rampart, and South Point.  Accoring to online reports, Jimmy Vaccaro has been recruited to run the combined books, and a $100 minimum deposit is required to use the App.

Cantor Gaming

Cantor Gaming has released a sports betting mobile app called CG Technology. Cantor runs sports books out of several Las Vegas casinos including Silverton, Palms, Tropicana, Cosmo, and the M.

Sports Connection Mobile

Station Casinos offers a sports betting app called Sports Connection.  It is available from all Stations and Fiestas, the El Cortez, and Wildfires. They also offer a sign up bonus and 0.1% points.

William Hill US

I already use the William Hill mobile app for sports wagering outside of Nevada, but there are a ton of locations in Las Vegas that offer William Hill Sports wagering, so making deposits and withdrawals should be easy.  They also offer 0.1% points on wagers.