Beating the bookies – how the online sports betting market is rigged
A bookmaker&#x27;s tissue prices (the initial market prices they offer up), are not intended to be a measure of probability. They are meant to be a measure of expected Weight of Money (WoM).<p>A bookmaker&#x27;s job is not to accurately reflect odds of occurrence, but to ensure a balanced book of liabilities. There are many books covering this going back hundreds of years and is the principle discovery of those who gathered at Tattersalls coffee shop on the Strand and invented modern bookmaking (via horse racing), and for whom there is named an enclosure on all 55 British racecourses to this day.<p>The tissue has to be &quot;over-round&quot;, (i.e. the probabilities they represent have to add up to over 1.0, or 100%) because sometimes a market will look at the prices, see that the odds are very much in the favour of a selection and act accordingly. As such, the WoM causes a market to move.<p>This is not news. If you have a reasonable idea of true odds and you are being offered different odds, Kelly (who worked with Shannon - the creator of Information Theory), established the optimal stake to bet at each stage. A substantial amount of research has been done on Kelly Criterion and its application because it underpins many a hedge fund strategy: it works for fixed odds games, fiscal markets and bookmaker markets just as well.<p>There are trading opportunities here, and there is a wide community of people who look to exploit inevitable market moves using exactly this technique: establish average industry odds, look to where betting exchanges are and bet accordingly, moving out of the market when a profit comes to you.<p>The bookmakers don&#x27;t care - you&#x27;ve helping get turnover up, and they know increasing turnover through the market is the best way to get balanced liabilities.<p>On a horse race, they might offer prices that give up an over-round of 110%-130% most days, but on Premier League Football which has a much, much higher turnover, and WoM is far more predictable (due to team loyalties coming into play), over-rounds can be as low as 102%.<p>These markets are therefore more likely to provide value to the authors&#x27; methods, however I note they are making the majority of their bets between 5 and 1 hours before a game, and therefore to some extent are able to factor in team selection and some of their results might be the result of a market inefficiency: team line-ups aren&#x27;t announced until 60 minutes before kick-off.<p>Now, here&#x27;s two major downsides:<p>1. Bookmakers will eventually end up closing their accounts, because winners are never welcome long-term.<p>2. There is a reason why successful gamblers don&#x27;t publish. Even Thorpe who invented card counting and blackjack basic strategy realised publishing (which was his academic need) ultimately caused him to need to do something else: he ended up privately and quietly running a hedge fund.<p>These guys are probably finished within 2 weeks of this paper going around, and what&#x27;s more because now a whole ton of people will go to implement this method, bookmakers will adapt and simply move from tissue to industry average as quickly as possible, whilst limiting even more players to reduce liability exposure (as has been the style in recent years).<p>EDIT: I only skim-read the paper when I wrote the above. Now I&#x27;ve read it a little more closely I am even more convinced there is nothing to note here, and also, their accounts have already been limited or closed.