Odd Lots - How a Professional Sports Bettor Really Makes Money

Episode Date: May 27, 2024

The gambling industry in the US has exploded in recent years, and suffused every aspect of sports consumption. You can bet on who will win or lose just about any game in the world from your phone. In fact, you don't even have to just bet on games. You can bet on how many home runs a player will hit, or how many sets it will take to complete a given tennis match. So how does it all work? Who is setting the lines? Can a user actually make money? And how do the sportsbooks make money? On this episode, we speak with Isaac Rose-Berman, a professional sports gambler and author of the How Gambling Works newsletter. He talks about the tactics he uses to make money, and also how the betting sites make money from their users. We discuss market structure, the societal impact of the gambling boom, and what types of regulations might best curb the more harmful aspects of the industry.See omnystudio.com/listener for privacy information.

Bloomberg Audio Studios. Podcasts Radio News. Hello and welcome to another episode of the Odd Lots podcast. I'm Joe Wisenthal. And I'm Tracy Allaway. Tracy, guess what? What? I'm going to Vegas tomorrow.

I know you are. Have I mentioned that before? I'm trying to restrain myself. The irony is that you left me high and dry in Vegas last time. But now for the next week, I'm going to hear how much you love Vegas. Come out. It's not too late to get a ticket. I would love to come out.

You're welcome. But I'm doing the opposite of Vegas. I'm going to Vermont. Oh, yeah, you're going antiquing. That's right. I'm not sure if I was supposed to say that. The pinnacle of middle age. Thank you, Joe.

It's the, well, it's both, it's two expressions of middle-agedness, right? Like, I'm going out with four friends. I'm going to go see a dead and co-show at the sphere. That's something other than middle age, I think. Oh, like post-middle age. I'm going to take a road trip to the Hoover Dam. Maybe I'll get some good infrastructure photos. And yes, I'm going to gamble.

I like to play poker and you're going to be in Vermont Antiquing. But you know what's something I find really interesting, Tracy? And Vegas is booming despite the fact that for years Vegas had this monopoly on gambling. And you would think, okay, now gambling is everywhere. It's on your phone. Many more jurisdictions have opened up casinos. And yet that doesn't really seem to have slowed it down. Well, I will say the last time I was in Vegas, which was, I guess, October of last year,

I did notice some differences. So I was wandering around the big casinos, as one does. And I was going past, you know, those big sports betting areas where they have, like, the armchairs and you can recline in them and stare at like. It's like this big theater of like 50 screens. Yeah, exactly. And those looked pretty empty to me. So I kind of wonder if like, okay, people still like gambling at table games or whatever. But maybe you're getting less interest in the sports aspect of it because why go all the way to Vegas?

to watch a basketball game and bet on it if you can do it from your couch at home. No, that is a good question. It would be interesting. I mean, I feel like the last time I was in Vegas. I don't remember exactly when. Like, I think there was like a big game going on. So like that environment of the casino can get like super raucous and exciting. But it still does raise questions.

I mean, about the rise of being able to bet literally on your phone everywhere in basically every state, I think, or close to it. I have a random collection of. thoughts on this topic, which is kind of ironic because I know absolutely nothing about sports betting. And now you're going to rattle off a bunch of facts. Here are all my thoughts on it. Well, I remember when I used to come to the U.S. from other places, a big culture shock was when you would watch TV and there would be all those ads for medicine. And it would be like, talk to your doctor and request the specific medicine, which doesn't happen as far as I know in any other country in the world. Now, I think the big culture shock is all the gambling ads. Yeah. Like, you're

watch TV and there are all these ads going, oh, you know, we'll pay you an initial lump sum to get on our platform and make a few bets and you're going to win all this money and it's going to be loads of fun, blah, blah, blah, blah. And then the other thing I was thinking is I feel like a lot of the gambling operators, and this isn't exclusive to the sports bettors, but maybe to the casinos in Vegas as well. I feel like they're getting smarter with a lot of the way they're operating. So again, the last time I was in Vegas, I noticed, for instance, this isn't necessarily new, but it was kind of more extreme. The minimum bets on tables change a lot between the weekend and the weekdays.

But I feel like they change even more than they used to. Like, I feel like the pricing is more dynamic. And Joe, I know you make fun of me, but it ruined my crap system. Tracy claims to have had a crap system. And my response says, no, she didn't. And if you think you have a system. I just said it was a good system. I just said it was a system.

Okay, okay. It was a way of betting, and I couldn't do it last time. Casinos getting more sophisticated about pricing strategies. But you're right. Like, sports media, as everyone knows these days, it's just completely suffused with gambling. And it sort of funds the whole thing, and gambling has become not just more prevalent and more exotic.

And, of course, you can bet on the games and you could always bet on the spread. But now you can bet on, like, who's going to be winning at the end of each quarter, or you could be betting on how many home runs a certain player will hit or how many three-pointers a certain hit. And it's basically just like what we've seen in the stock market, you used to just be able to buy stocks,

and now everyone's doing like zero-day options and stuff. An endless sort of like exotic number of bets have just become, you know, become part of how people talk about sports period. Oh, yeah. That was the other thing I was going to say. So the weird thing now is watching sports. Some of the commentators will, like, call out these specific plays and like mention the odds.

and the payouts and things, which is completely different to the way sports used to be. Totally. I forget what it was. There was some screenshot someone took recently of like a baseball game and, you know, used to be like you look at a batter and it was like the stats they would show would be like batting average, home runs and RBIs. And that was kind of it, maybe steals or something like that. And now like there's all these other stats that are not really even probably that

interesting to normal fans unless you have a bet placed. And so there's been this proliferation. Of course, this a lot of like anxiety. tons of articles about young men getting addicted to gambling and what does it say about this generation and all kinds of stuff. And so there's a lot going on in sports betting. Yeah, we need to dig into it. As I said, I know nothing about this particular area. I don't think I've ever placed a sports bet in my life except that. What about like on horses? Horse racing. Yeah, but does that even, I don't know if that counts. Okay. But this is something that I feel like it's growing a lot. Yes. Clearly, there's a lot

of money involved here. So I'm very excited about digging into it. I am very excited. Well, I'm pleased to say we really do have the perfect guest today. We're going to be speaking with Isaac Rose Berman. He is himself a professional sports better. He also writes about the industry on his website How GamblingWorks.com. He also talks about the regulatory side and some of the tactics that businesses use to, as you say, hook people in for the first time and keep them betting. And I guess from the perspective of the businesses, keep them losing money. So Isaac, thank you so much for coming on outlaws. Thank you much for having me, big fan of the show. Happy to be here. Thank you so much. I introduced you as a

professional sports better. Is that really true? You can be a professional sports better. I mean, I'm aware of it. But what actually do you do? That's a great question. So unlike other casino games, it is possible to win on sports betting because the odds are dynamic and they're constantly changing. So when, you know, Tracy's going to play craps. Whenever she sits down at the table, the odds are always stacked against her and they're never changing. She can never really win. But when it comes to sports betting, things are constantly. constantly changing. So to give you a super simple example, let's say the Lakers are playing and LeBron James gets announced injured. If you rush to your sports book and you place a bet on the opposing team before they've factored in the information that LeBron is injured, you're going to lock in a really good price before the odds update. And so when it comes to being a professional sports bet, it's all about identifying value. And by value, we mean bets which have

a greater expected return than the amount state. So if someone offers you, you know, bet $10 to win $11 on a coin flip, and it's a fair coin flip, even if you place that and you guess the wrong side 10 times in a row and you keep losing in the long run, if you keep doing that, you're going to make money. And that's how professional sports beters make money by constantly placing bets, which have a positive expected return. So just so we can better understand this dynamic, walk us through your sort of day-to-day as a professional sports gambler. What kind of opportunities are you trying to identify? And then how do you decide how much money, for instance, to apply to each individual bet. Yeah, so it's a great question. So it really depends on, you know, what sports are in

season. So right now, you know, end of the NBA, but there's a lot of MLB, things like tennis are year-round. And so it does depend on the sports. There are in general two ways of identifying profitable sports bets. The first is you can take sort of a market-based approach. And by a market-based approach, what we mean is there are tons of sports books all out there. And as Joe mentioned, they're all offering all of these different kinds of bets. And if you constantly scroll through all of the odds, you're going to find slight mispricings. So let's say, A, you know, everybody has, you know, the Yankees is two to one underdogs and one sportsbook has them as a three to one underdog. You know, you can identify that as off market and you can place that bet.

So one part is just exactly. So you're not saying that like the platforms have the odds wrong. You're trying to identify like outliers among the platforms. That's exactly right. Yeah. So that's probably the main way that the majority of professional or winning sports betters make money is by identifying markets which are simply mispriced. And for that, you don't need any special sports knowledge. You just need to have a screen with all the odds and constantly be scrolling through them and looking for price changes and looking for books that are slow to update.

The other way to do it, which is a lot harder and a lot rare, is to basically create your own numbers. So you say, okay, you know, I know exactly how much each player is worth. I know what the weather is going to be today. I know these matchups. And so I'm going to generate kind of from scratch from my own model the odds and then apply that to the market. And when it comes to major liquid markets like the NFL or the NBA or the MLB, that's really, really hard to do. and there are very, very few people who can do that. But those are the people who make the most money.

To zoom out even further, so it's like there's some big game, cross-town rivalry, Yankees versus Mets, there's some odds or something. Where does that price initially come from? Walk us through how that line gets established. It's a great question. So when you log onto your draft kings or Fandul account, you're going to see all of these different bets and you're going to see all these different prices. And those prices come from one or two places.

The first type of bet you're going to see is the major market odds. Like you mentioned, you know, who's going to win, how much they're going to win by the total. And what those odds come from a price discovery process. And what that means is that a market maker sports book, not draft kings or fanduel, but places like pinnacle, places like bet Chris, what they do is well before the game starts, they basically throw out a price and they don't really know if that price is good. And what they say is, anybody can come bet here. You can only bet a very small amount, maybe $50, maybe $100. And they keep taking bets on both sides. And what happens is all of the smart people, they go there and they say,

we're going to bet on this side because it's good, and they keep adjusting their price based on the action. And then eventually, when sort of that betting flurry has settled, then Draft Kings comes in and says, okay, now we know that this price is roughly accurate, we're going to take it. And then when it comes to all of the derivative bets, like you mentioned before, stuff like how many home runs someone is going to hit, you know, whether or not this player is going to get seven threes, all that stuff is generated by third-party content providers who take the input of the odds from those liquid markets and generate the odds for all these other things.

So when you look at a sports book, either the odds are coming from a market maker or they're coming from a model based on that market maker price. Wait, can you talk a little bit more about those sort of like single plays or exotic bets or whatever you call them? Because to me, it seems almost, if you're watching a baseball game, to me, it seems almost random whether or not there's going to be a home run or two home runs or whatever. And I take the point that they're deriving those odds from maybe the more liquid markets, like which team is better overall or whatever, but it still seems kind of hard to price. No, it's really, really hard. And that's why there's, you know, in general, there are lots of

different content providers. So the person who's deriving the prices for how many home runs there are in a game is not going to be the same person who's deriving, you know, how many three-pointers there are in a game. So a sportsbook is going to work with a bunch of different content providers to get the odds for all these different markets, and their job, that's all they're trying to do. And in general, the sportsbook knows that these lines aren't perfect, which is why, you know, if you want to walk into a casino or go to a sportsbook and bet a million dollars on the Yankees, they're going to say, you know, oh, sure, come on in, you know, he'll give you a free hotel room, we'll give you anything.

But if you walk in, you say, I want to bet, you know, a million dollars on this player to get under 1.5 three-pointers, obviously they're not going to accept that bet because they know there's inside information. And so that's why in general in these markets there are both lower limits and there's higher scrutiny on the sportsbook side. And they also add a higher house edge. So you have to win by a much higher margin compared to betting on just who's going to win or how much they're going to win by. That was exactly what I was going to ask. So presumably they sort of like pad their own edge in order to offset the uncertainty of these single plays. So if you're throwing darts at a sports book and you know you're picking winners and losers randomly, you're going to lose four to five percent.

But if you're throwing darts at, you know, this player to get X number of home runs, you're going to lose 10%, 20%. When we talk about things like same game parlays, these bets where you're combining this team to win, this guy to get a home run and this pitcher to get a lot of strikeouts, unless you're doing it in a way that really beats the market, you're going to be losing 30 to 40 percent, really high margins. In a way that's really, that's very new and not seen until quite recently. And, of course, those are the bets that they really are like pushing more. and that's why we're flooded with all these exotic statistics to encourage this kind of action. I have to imagine that with these exotic bets, whether it's like, again, how many home runs someone's going to win in, or you mentioned tennis, how many sets it'll take for one player to beat another, that while the house does have a structurally higher edge for reasons that you've described,

I assume these are the markets also, which because they're less efficiently priced, because the fans just don't set the line, that one can find actual, I don't know, maybe alpha is the word, but true mispriced bets. Is that correct? That's exactly right. So I think, you know, people think that the hard part is finding profitable bets or even, you know, pure arbitrages, but it's really not the case, especially when you look at the total number of bets these companies are putting out. It's just impossible to price everything perfectly all of the time. The issue is, you know, once again, if you go into a sports book and you say, I want to bet a million on this one person to get X number of strikeouts, they're going to, you know, raise their

eyebrows at you. And if there's a systemic error, they might fix it or if you're, you keep winning, they're going to shut you down. And so the problem from a professional standpoint is not just identifying those mispricings, but actually being able to bet enough money and not get kicked out to make it worthwhile. Tracy, I had a friend years ago who is a semi-professional blackjack player. Most of the work that he did was not really in the strategy, but just like how can he maximize his time at the table without the odds of getting kicked out of the casino? I never, okay, hot take. I never understood why counting cards is like not allowed at casinos.

Isn't that just playing the game well? I don't get it. What's the answer to that is? I agree with that. The answer is that the casinos make the rules and they don't want to lose money. It still seems like nonsense. Yeah. So you mentioned this idea that, and Joe kind of riffed on it, just then this idea that a lot of the expertise of being

professional better is just figuring out how you can stay at the table for as long as possible or stay on the app for as long as possible. How do the platforms, I know how the casinos do it, but how do the platforms like identify you and then say, actually, we don't want you to bet anymore or in this particular size? It's a great question. So we kind of call it the science versus the art of sports betting. So the science of sports betting is figuring out what bets you want to place. The art of sports betting is figuring out how to place your bets in a way that you don't actually get kicked out. And so the The problem is that the way that sports books identify who's good is the same way that professional betters place good bets.

It's through something called CLV or closing line value. The idea there is that markets in general, they get more efficient. So by the time a game has started, the market is considered to be very efficient. And so what I mean by that is, let's say you place a bet on the Celtics, and when you place a bet, they're big underdog. So you risk $1 to win $5. By the time the game starts, it's now $50. So it's $1 to win $1.

No matter what happens in that game, even if the Celtics lose, you placed a good bet. The odds moved in your favor. And so from a professional standpoint, that's how you know you placed a good bet. But of course, from the sportsbook side, they can also track that on their end and say, okay, this guy is constantly getting the better of us. It doesn't matter if he lost the specific bet. We're still going to kick him out. And that's why, you know, I know many people who have lost many thousands of dollars on sports betting apps,

and they've still been limited or kicked out of sports books because it's not that hard. to tell when someone is placing really good bets. It's pretty difficult to be able to disguise the bets that you're placing. Wait, and then what is the actual message? They just say, like, you've been cut off? So it really varies in general when it comes to legal regulated sports books. They don't kick you out, but they'll just limit the bets that you can place to a very, very small amount. So, you know, if you might open up an account and at first you can bet, let's say, $1,000

in this game, once you place a few bets and they've identified as you as good, maybe you can only bet $50 or sometimes, you know, even as little as a couple dollars. or I've seen people limited to literal sense. And that's because in general, the laws in a lot of states are that they aren't allowed to kick you out. But from a professional standpoint, if they're only letting you bet a few dollars, it's really just not worth your while. And so it's essentially the same as getting kicked out. All right. Well, we've been leading up to the question, but let's just go to it directly.

You're a professional sports bet. You've mentioned a couple different strategies. What do you do and how do you overcome the challenge of just sort of these constraints? So it's the million dollar question. Unfortunately, I can't tell you all the specific. of what I do would cost me a bunch of money, but I can tell you in general how people get around these limits. The first thing is you need a lot of accounts. If you go to a place like New Jersey, there's 25, I think, legal regulated sports books. And so any professional sports better

will have an account at all of those different sports books. And that's important for two reasons. Not only does it mean that if you get kicked out of one, you have another to go to, but also it means that you can constantly compare prices. So, you know, let's say if the best price for a game is on a sports book that I don't have, it means that I can't best there, and that's bad. You know, this is a game of relatively small margins. A few percent difference really, you know, makes all the difference. And so you need to have all of those different sports books to be able to find the best price and when you get kicked out to make sure. So that's one way. The other way is that you use, you know, non-regulated sports books. So there's

two different types of ways to bet on sports that's not on your legal regulated sports books like your Draft Kings and your Fandul. The first is offshore sites. And these are sites where, you know, you're going to be depositing and withdrawing in crypto, most likely. They've been around for a while, and they're still around, and they're used by a lot of, you know, both professionals and recreational betters. And in general, they're a little bit laxer when it comes to kicking you out. The other is bookies. Like if you think of what Shohei Otani's interpreter was using to place all those bets, he wasn't

betting on draft kings. He was using a bookie. And the benefit there is that, A, you're dealing with an individual. So they might be, you know, less savvy in terms of detecting you. really good and also you can bet on credit. So instead of depositing $100 like you would need to unfandule, you can settle up at the end of the week. A leverage. Exactly. And so that's why a lot of the, you know, particularly high rollers use bookies like was the case with Ipe Musuhar. So another thing that a lot of people do, obviously, is you bet on other people's accounts. You know,

you go and you get your roommates account, your mom's account, your friend's account, and you're just constantly cycling through different accounts. I'm not advocating for that. That's against the terms and conditions of these sites, but that's just a reality, and that's how a lot of betters are able to get down a sufficient amount of volume, especially when they're constantly getting kicked out. And the real thing is that, you know, you're just, you have to disguise your bets in a way that they don't see or they don't realize that what you're doing. And so one of the, one of the common ways that sports books identify and profile their customers is based on the first few bets that you place. So one thing that a lot of people do that's really quite

silly, in my opinion, is, you know, you go into a book and you bet a bunch of stuff that's pretty obviously a really smart bet. You know, if you open up an account and you're betting the maximum amount on, you know, Bulgarian table tennis and you keep winning, and then, you know, I have friends who come to me and they're like, Isaac, you know, why did I get kicked out of this book? And I look at their bet history and they're betting on the most obscure stuff at like random times for very large amounts. And it's like, yeah, you know, these companies aren't dumb. So the main way is, you know, when you open up an account, you place a bunch of bets, which look kind of normal. You bet on some NBA. Maybe these bet these beds.

Betts won't have a positive expected return. Bet for the home team. Exactly, exactly. You know, you're in New York. You want to bet on the Yankees. You place a bunch of bets, which in the short run, they might lose a little bit of money, but in the long run, they'll make you money because they're kind of putting the sportsbook off your set. This reminds me, so I finally opened a Spotify account the other day. I didn't have it for a long time because I was in Abu Dhabi, and you weren't allowed to have Spotify over there. And so I just waited a long time. And I felt so much pressure choosing that first song, because I was like, this is going to be my identity.

as dictated by the Algo forever. What did I pick? Oh, I did Beyonce, Texas Holden. Okay, solid. Yeah. We'll see how that goes. My impression is that the American market, because in many ways it's a lot more liberalized,

at least compared to Europe and the UK, that it's kind of seen as like this holy grail moneymaker for a lot of international operators. And you touched on some of the offshore operators just then. But I think we have big European gambling companies that are coming in as, well. Do you notice a big difference between the U.S. platforms versus the European ones? It's a great question. So this, in general, the European bookmaking model has been adopted

in the U.S. You know, Fanduel, the largest sports book is owned by Flutter, which is based in the U.K., you know, William Hill partners with Caesars, also a UK-based company. And in general, the European model is viewed as much less friendly towards winning players. And what that means is much more aggressive in terms of how quickly you limit people, in terms of, you know, even if there is, let's say, a 75% chance that this person might be a winner, the European bookmaking model is we don't want their action at all. In general, the way it used to work is if you were a professional better or a smart better, sometimes sports books would accept your action because then they could shade their lines.

They say, okay, this guy's winning and he's betting on this team, so maybe we can move the line over. In general, these companies today, part of that is the European bookmaking model. Part of that is just, you know, there's more information now. They don't need information with the individual better. They don't care as much, and so they're more willing to just kick you out. out or limit you to one or two dollars. I want to go back to this, um, constraint on bed sizing because this seems to be a way

that, um, sports betting is fundamentally different than say trading options. Whereas if, you know, if you're trading options and you're really good at it, suddenly like, you know, your broker is not going to say, oh, you can only trade a thousand dollars or options. And in fact, I think generally speaking with financial markets, the better you are, probably the more liberal line of credit you're going to get and, you know, the more leverage you can get and so forth. This seems really unfair. It seems like, okay, here's this platform that anyone can use, but they're pretty good at identifying who's good at it, and they're pretty good at identifying who's bad at it. It seems unfair to me. You know, I mean, I completely agree.

I don't spend too much time thinking about it because I don't think it's going to change. And the reality is that these are private companies. They can do what they want. I think actually the more predatory thing is not that they limit winners, but that they actually expand those limits if you're a big loser. Say more about that. Sure. And so, you know, when you open up an account, let's say the limit is, you know, $1,000 on a bet.

If you place a few bets and they think that you're really smart, it might go down to, you know, $10. But if you keep losing a lot of money and you keep losing and redepositing, maybe you get into their VIP program, those limits often can increase to five, ten. I've seen accounts where, you know, the person is able to bet 50 times what a standard person is able to bet. And obviously, the only reason that's the case is because the companies know that these people are losers. And so from a professional standpoint, the Holy Grail is what we call flipping a whale, which is basically what you take someone who historically has lost a lot of money

and is in good with the casino, they can bet however much they want, and you say, okay, we're going to work together now and you're going to place these bets for me. And because they've already been profiled as someone who's not a good better, the sports book is more likely to take their action for larger amounts. And so that's sort of the real Holy Grail of. professional sports betting. And that's, you know, people like Phil Mickelson, Ashton Coucher famously work with professional betting groups because they were high-profile figures who identified or were identified as, you know, whales. And then they were flipped. Do professional sports betters, do you have a lot of privacy concerns in the sense that you want to make sure that, like,

a platform isn't using cookies to trace where you're going around the internet and you use a VPN and stuff like that to make bets? So yes and no. One thing that modern sports books, especially legal regulated sports books, are really good at doing, is telling where you are, telling your location. So if you try to, you know, have a VPN that puts you in a different state, you won't be able to use Vandle or draft cans. They're very good at that. So, you know, obviously, these companies, like any, you know, modern technology company, they're getting all this data about you. When you sign up for a sports book, they know what your birthday is. They know how old you are. They know where you live, your address. They know all of, you know your social security number,

all this information. So you do kind of give that up. They also probably know a lot more. They know when you log into the app, they're tracking everything. But there's nothing you can really do about it. Going back to pricing, and you mentioned tennis, but you mentioned these, you know, the more obscure, the less like, you know, Bulgarian soccer, tennis, etc. Talk to us a little bit more about. I like how you just suggested all of tennis is obscure. Well, you know, it sounds like in the U.S. in the U.S. in the U.S.

Yeah, right. Tennis is not in itself obscure, but I guess compared to some of the major sports. Talk to us about that. process because again it doesn't sound like a science where it's like okay you have the liquid markets setting the line and then you try to back out implications it sounds like back out implications from that line for what it means so imagine if like who's even big in tennis i'm still my head is still in like the federer nadal era or uh jockovic but jockovic nadal jokovic is the edge then you try to derive some price for he's going to win and three

for, took a list a little bit more about that process of backing out the price for the derivatives from the sort of headline liquid price. It's a great question. So the reality is it's just not a science at all. And I think what's really important here is what Tracy mentioned before, which is that they add a huge additional margin to these derivative and prop markets. And so what that means is that if there's a 30% house edge in a market, even if you can have a huge edge, you know, 20 or 25%, it's still very, very difficult.

to actually beat these markets. And the incentives from a betting company standpoint are not actually necessarily to have these prices be super, super efficient. They don't really care. They know that most people are not going to bet on these random niche markets that might be mispriced. And if they can, they set the limits very low. The reason they have these there is that they can have an expanded betting menu

so that when you log into the app, you see, oh, my God, you know, there's all of these options. And that's why, you know, I'm going to use Fanduel as opposed to some random sportsbook which doesn't. And Fandul, they know that, you know, you might be able to get an edge here and, you know, they're going to monitor that market. And if you win, they're going to limit you. But they don't really actually care that much about getting the prices perfectly because a lot of these markets are there just so that, you know, you can say, hey, we offer all these different markets. What's been the impact on sports themselves? So we mentioned, you know, some of the

commentators will sometimes bring up specific plays if there are odds on them and they suddenly pay off. But do you see, like, the actual activity of sports start to react? to all this gambling activity and all the money that's involved with it. Sure. So I think it really depends, as Joe mentioned, you know, between these high profile and lower profile sports. So in the NBA, these guys are making so much money that it really doesn't impact the actual play. You know, if you're making $30 million a year, you know, you're not really ever going to be incentivized to throw a game or really change the way you play. And it doesn't really factor into there. When it comes to smaller sports, you know, we talk about

tennis, there was this big scandal last year where it turned out that someone was running a giant match fixing ring. And it's because the players playing were making, you know, a few hundred dollars a match and the guy was able to bet tens of thousands of dollars in their match. And so when there's that mismatch, that's when you really get these game integrity issues. You know, in the NBA, there was recently this scandal with Jonte Porter. And, you know, he was a very low-level player. He wasn't that significant to the team. He wasn't able to impact the overall, you know, the overall outcome of the game. But if you bet, the fact The fact is, at Modern Sports Week, you can bet on anything, you can bet on whether or not Jonte Porter will have one or two threes, right?

And so that's really the issue when you get into these player props for very niche, unimportant players, for college player props. This is a big debate right now, whether or not you should be able to bet on how many points a college basketball player is going to have because obviously, you know, it's easier to control how many points you have versus throwing an entire game. So from a game integrity standpoint, from the major sports, I don't really think it's an issue, but especially for smaller markets and for prop markets, it really can be. But beyond the big risk of match fixing, do you see, like, I guess, more of an urge towards, like, satisfying some of those, like, single plays?

Like, maybe, I don't know, like, maybe the game, like... Which are really hard to hit a home run. Yeah, well, but not just, I mean, like, rebounds or whatever. So I think not from the player standpoint, but more from the viewer and the media standpoint, like you mentioned before. I think it's quite sad, you know, even as someone who bets on sports is my job, it's quite sad that when you, watch a game now, you can't escape the betting. And you know, you imagine a kid watching a game today, he just loves basketball or he loves baseball. He can't appreciate that without being inundated with betting advertisements. And so I think it's less about the game itself, but more

everything surrounding it. The experience. Exactly. If I started sports betting, I don't think I'd be very good at it, which is why I don't do it. But I probably wouldn't be very good at it. And then the casinos, then the sports books would let me bet more and more. And I would lose more and more money. Well, this is what I was going to ask, is there some, you know, I don't need the URLs here or anything, but are there places where someone like me or a listener to odd lots who hasn't been a successful sports better? No, seriously, like, you mentioned hunting whales. So I'm actually curious about how the whale hunt process works. Yeah, so no, it goes, it goes both ways. You know, you can be, let's say, you know, a VIP customer and get really fed up and, you know,

I'm not encouraging anyone to break the terms of service. But, no, it goes, it goes, it goes, But I do want to understand where that happens. Of course, yes. So it can work both ways. You know, maybe if you're a professional better, you can go out and try to network and meet a bunch of rich people who are all betting on sports and say, hey, you know, give me your sports winning account. I can win.

It can also work from the other way where you can maybe be a VIP customer who's lost, you know, tens, hundreds of thousands of dollars and get really fed up at some point. And then you can reach out to a professional better or a betting group. You know, maybe you DM them on Twitter and you say, hey, you know, I have this betting account where they let me bet whatever I want. You know, you're really good at this, obviously. Can we partner up? That's sort of how it can work.

So how does all of this play out in the end? You know, if you had to make a bet on the overall direction of the sports betting industry, what would it look like? We've had this, you know, massive, like, liberalization of the market. Lots of people are making money. There's all these new bookmakers and platforms that are coming in. Everyone has an app now. What happens in the end?

Do we see like a crackdown eventually as this becomes a bigger and bigger market? So I think just to take a slight issue with part of that, which is that everybody's making a lot of money. Everybody's not making a lot of money. Fanduel and Draft Kings, I think, both just became profitable for the first time this year. And pretty much every other sportsbook is losing money. Wait, how is that possible? They control the odds. I would have assumed, as I just did, that they're minting.

Yes. So they're minting when you go in and place a bet, but there are tons of other costs. You know, every time you see Fandul is the official sponsor of a major, of a major sports. Sports league that cost them a lot of money. Customer acquisition costs are incredibly high. Actually, six years ago today, the Supreme Court struck down the rule that prevented states from legalizing sports betting. But ever since then, these companies have spent a ton of money trying to acquire customers to increase their market share, to do all sorts of branding deals. And so it's not just the betting itself, but all of the things surrounding it. And in reality, sports betting is a relatively low margin game compared to other casino games. So all of the these companies, they actually don't care that much about sports betting. Most of this is all an angle for online casino gambling because that's where the real money is. Even if you, let's say, lose 5% on every bet you place, that bet gives you entertainment for two hours. If you're losing 5% at the roulette wheel and you have that on your phone and you can click it and play a new

spin every five seconds, that's where the real money comes. And so when we look at more mature markets like Australia and the UK where online gambling has been around for longer, the vast majority of profits for these companies come from online gambling. When we look at the U.S. right now, online, it's called eye gaming, is legal in certain states. It's illegal in most states. But in the states that it's legal, the vast majority of the revenue is coming from eye gaming. And that's probably where you're going to see the industry headed. And that's what Fanduel and Draft Kings. That's where they envision most of their revenue coming from in the future. I like gambling. I don't really like the table games. I like casinos. The thought

of like sitting there like playing a virtual room. Spinning a roulette wheel. It's so depressing. It's really depressing. It's really depressing. Actually, the most depressing thing that I've seen gambling-wise is not even a phone thing. I was in Iceland one time, and I was watching this one of the TV channels, was just a woman on the TV channel, like spinning this roulette wheel on TV. And my God, that's so bleak. But it also, like, it gets very bleak when you sort of think about the person at home watching a TV network that's a roulette wheel. Yeah, no, and sorry.

And so in the UK, for example, we don't have this data yet in the U.S., but it's incredibly concentrated. In the UK, 5% of customers make up about 85% of the gambling operators' revenue. And so we don't have those numbers in the U.S., but you can assume that it's relatively similar for sports betting with eye game. It's going to be even more, even more extreme. Yeah, Joe, you mentioned Bleak. You haven't seen Bleak until you've seen, like, Patty Power on Edgeware Road on, like, a Sunday morning. That's depressing.

And it's like, you know, sometimes they show those, you see those, like, gifts or videos on Twitter of like a bunch of old elderly people to the casino like hitting the bed over them. At least they're like kind of around their friends or something. But the idea of like doing that and like casinos are fun and maybe you even get a free drink or it's like lively and whatever and you can smoke there.

Oh, that was the other thing that I noticed when I was last in Vegas. You know, a lot of them you can just put your like card in now and just keep redrawing on the same machine. It's super grim. But then so how bad, you know, the other element of this and Tracy brought up the concerns about like match fixing.

is like sort of like one societal concern and is particularly acute at the NCAA level where there's no the players aren't really making much money if any and you know it sort of disturbs the purity of a non-professional amateur sports but then the other big concern is this sort of like you know people there tons of articles the world of like young men out there predominantly men addicted losing tons of money how I don't know I guess it's subjective question because everyone's going to have a different perspective But, like, what is your view on what's going on? So it's a huge problem. And after I started writing about this issue, a bunch of different addiction counselors and social workers who were working with these people reached out to me. And, you know, the predominant segment of the population, as you mentioned, that was having problems was young men. And in particular, what they told me is that sports spending is different than other forms

of gambling because we have this emotional attachment to it. You know, if you go to the casino, you're always going to have one friend who's like, you know, five reds. The next one must be a black. classic classic. Yeah, I don't understand probabilities. I never have. But that's kind of fine. But, you know, when it comes to sports betting, people are much more delusional when it comes to their ability to win. So, you know, addiction counselors will tell me, it's like, you know, I have a 16-year-old boy who comes in. He says, you know, I'm a huge Yankees fan. I know the Yankees are a lock tonight. It doesn't matter if they're, you know, three to one favorites, four to one favorites, five to one favorites.

I know they're a lock. And when you're delusional about your ability to win, that's when this activity can get really risky, and you're more likely to double down, chase your losses, and really exhibit signs of problem gambling. And so it's not necessarily that that sports betting is riskier than other forms of gambling, but particularly when it comes to young men and, you know, it gets into this ego and you think you have an edge when you don't. And that's what's really scary and what's really dangerous. And there are all of these companies which are actually, you know, catering to minors, really. There are these things called social sports books where you don't necessarily deposit with real money. You use, like, coins. And they're really targeting young kids, apps like prize picks and underdog daily fantasy, which are essentially just sports betting.

And they're available to people, you know, that are 18 and over instead of 21 and over. And, you know, this delusion combined with a lack of understanding of, you know, how much the house actually wins is creating a huge swathes of the popular. who were losing a lot of money, but they maybe don't even realize it. Or they think that they're just one bed away from winning big. I just have one more question and taking all of this into account. What advice would you give to Joe as he heads to Vegas? It's a great question. I would say, go with the amount of money that you're willing to lose and try to stick

to it. Obviously easier said than done. You go have a good time. You know, it's really funny on that. So I recently lost my debit card and I realized, you know, because Vegas needs cash. So I asked my wife, I was like, oh, I need to bring your debit card to Vegas. And she was like, well, why don't I just get out some cash? No, I did.

I said, why don't can I bring your debit card to Vegas? And she said, well, how about I just give you some cash? And then you limit your gambling to whatever the amount of cash you do. And I'm like, no, I'm not setting a cap. So she agreed. Thank you. Do you want me to share my now obsolete crap system with you? Please.

Then you can make negative money. One way to address the societal concerns would be to ban sports betting. But it doesn't seem like that. It seems like we're going full on in the other direction. Are there regulatory moves that I guess could actually sort of curb the addiction side and the devastation that can cause so whatever percentage of betters do get hooked while maintaining these viable businesses? Sure. So when it comes to sort of the optimal.

regulations or what we can do. I kind of think that there are three things that we can do. The first is, you know, better regulations when it comes to advertising. As Tracy mentioned, it's not just the frequency of the ads, but that they're really deceptive. You shouldn't be able to run a sports betting ad where it's a guy with a big check in hand and it's like, join now and you'll win big. And then there's, you know, a little thing at the bottom in the screen which says gamble responsibly. What the heck does that mean? There's a 1-800 number. You know, it's 20-24. No one is calling those. You know, why instead of gamble responsibly, isn't there, you know, a mandatory message that says 99% of people who gamble will lose money, and maybe even if you win, we're going

to kick you out. So that's the first thing, just the deceptiveness of the ads. The second thing is some things that should be done in app to make them more transparent. So if you're on, you know, a lot of these sports betting apps, it's very difficult to figure out how much money you've won or lost. And that's intentional. It should be mandated that when you go to the my account page on any sportsbook, they show you how much money you've won or lost in the last month or over the course of the lifetime account. Fairly simple stuff. And then the last thing I would say is we need more research, right? I don't know all of the exact solutions. I don't think anybody does, but we need good research. And a lot of the research out there right now isn't that good. It's funded by the

industry, which has obvious problems. But there are some simple things you can do. For example, a lot of these sites like to use things like responsible gambling tools like deposit or time limits, where you say, you know, if you had set a deposit limit of $1,000 a month, once you reach that, you can't deposit anymore, and all of these are opt-in. And the reality is that we know that no one uses these tools. Why not try to have these things be opt-out instead of opt-in like we do for, you know, organ donation when it comes to, you know, when you're getting your driver's license, that might increase adoption. But the reality is, you know, you make, you know, these sports betting companies team up with some researchers, have it be government or impartial funding that's not

funded by the research to see what stuff actually can work, as opposed to the industry, giving a bunch of money and saying, you know, here's what we think would happen, because we know that's not going to work. Identifying flaws and actually having that alpha to identify mispricing still seems like kind of a mystery to me. Sure. Yeah. So I'll give you one example, which is from a buddy that I work with. He made a lot of money off this, which was sportsbooks used to offer, and they still offer this bet on which basketball team is going to score the first point. And in general, the way that they would price this bet is it's roughly a 50-50, and sometimes the better team would be slightly favored. And because, you know, there's a tip-off at the beginning and whoever wins

that it's roughly 50% and whoever, you know, gets the ball first, that team is going to be more likely to score. But what they didn't factor in and what my buddy and a bunch of other people realized is that it's not actually a 50-50 because some teams have centers who are much taller than the other team. So, for example, if, you know, our two teams are going up against each other and my guy who's jumping is seven foot two and your guy who's jumping is six foot nine, my guy is going to win the ball toss a lot more. And as a result, our team is going to start with the ball a lot more, and that means that they're going to score the first point much more often. So that's kind of a simple example of how you can identify an edge in a market. And the important thing there is that that's a market that's derived from a model. It's not a market where the prices are derived through price discovery. So knowing how tall a center is is not going to give you an edge when betting on who's going to win a game,

but it might give you an edge when betting on who's going to score the first point. I'd have one last short question, actually, I realize. If someone wants to be a professional sports better, what should they know about themselves to say, actually, I'm the type of person that can live this life? The key is being able to handle variance. I think it's really easy to win, and everybody is, you know, everybody's really happy when you win, but it's really hard to lose. And especially if you're gambling professionally or even if you're gambling recreationally, that's when it gets hard. Even if you're betting with an edge, you can still lose, you know, five, ten bets in a row. you can lose a lot of money. And the real problems people have is when you start doubling down,

you're chasing these losses, all of these problems. And so the emotional regulation involved, especially when you're losing to try to keep your cool and not go crazy, that's the most important thing, both for anybody who wants to try to do this professionally, which I probably wouldn't recommend, and anybody who even wants to do this for fun is just make sure that you're able to control your emotions, especially when you're losing. Can you put a stop loss order on your gambling book, like pre-program one? So you can. You can use these deposit limits where you say, okay, I'm not going to do more than, you know, $1,000 a month. And at that point, you know, they won't allow you to. In reality, they just don't really work in that no one uses them. And then you can always just go to another sportsbook where you have and put that in and then go gamble there. So you can. But the problem is when we put the entire onus on the user and we have this personal responsibility, it's just it's just not going to work. What we need is more. active regulation of these companies.

Isaac Rose Berman. That was fantastic. Thank you so much for coming on odd lots. Thank you so much. It's been a pleasure. Tracy, I thought that was great. That demystified several things about this industry that I hadn't appreciated. Same. Again, this is something I'm totally unfamiliar with, but I thought Isaac laid it out all really clearly. Is it bad that I've come away wanting to make sports bets? It would be bad if that our listeners took away from it. I guess if you want to make a few sports I trust you to handle your... The world's most complicated single game parlorate.

You know, it would be fun now. Actually, I want to do it. We should... You know what we should do? Actually, this would be fun. We should both open up accounts. And you, like, bet on the Yanke... Or you, like, bet on, like, you know, Austrian rules football

or some other sport that I've never heard. And I'll bet on the Yankees. Let's do this. This is an experiment. And I'll just, like, bet on the Yankees and the Mets. And let's just watch what happens to our position limits over time. time. Yeah. Actually, I think that'd be fun. We start with like the same amount of money and then take it from there. All right. I would do that. All right, let's do that. I mean, I have to say when it comes to soccer or football, I've kind of, I've given up on the purity of the sport as a long time football fan who's watched FIFA for a long time. It just doesn't matter to me anymore. So yeah, I might as well make some money off of it. I also thought, you know, even though Isaac didn't identify it as like the key. issue here, the very, the betting constraints and the fact that basically if you're good,

you're not allowed to bet very much. And the idea that if you're good, like, that strikes me it's very unfair. And that seems like kind of obvious. But again, you know, thinking about, because people look at, you know, when people get anxious for other brows about sports betting, they're like, well, why don't you get the, you know, you don't, you know, financial markets are casino too. And that's kind of true. But if you're good at financial markets or if you're good at trading, if you're good investing or stock selection, they're not going to, like, cut you off or de facto cut you off by telling you you can only, like, invest a dollar in a stock. Totally. It's very, it feels very animal farm to me. It's like everyone is allowed to make money,

but everyone is also allowed to be prevented from making money. The other thing we'll do after you and I do our experiment, no, I won't do this, but it would be fun to see who would buy one of our, I won't do that, because that is in terms of service violation. But, you know, I'd be curious with the market rate for my account where I lost a lot of money. For our naivete, We can put a price on our lack of expertise. The other thing that was really interesting, and I would love to dig into this more, but the sort of third-party pricing of some of the more exotic plays,

I would love to know who those companies actually are and how they come up with those numbers. Some of it, just to return to traditional finance and markets, some of it reminds me of like the third-party pricing providers in credit. Yeah, exactly. And they use like Matrix models. where they're sort of triangulating the market price for something that doesn't actually trade that much. No, there's so much good stuff here.

I like, you know, one of the things that's fun about these types of episodes where we explore a new market is we learn things about traditional markets that we didn't necessarily see before. But by looking at it in another context, suddenly things were more familiar with become legible in a new way. Absolutely. Shall we leave it there? Let's leave it there. This has been another episode of the All Thoughts podcast. I'm Tracy Alloway.

You can follow me at Tracy Alloway. And I'm Joe Wisenthall. You can follow me at the stalwart. Follow our guest, Isaac Rose Berman. He's at Round Robin 42. Follow our producers, Carmen Rodriguez, at Carmen Armin. Dashel Bennett at Dashbot and Kel Brooks at Kilbrooks. Thank you to our producer, Moses Ondom.

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instructions. Thanks for listening. Welcome to the Odd Lods podcast on Bloomberg Radio. I'm Joe Wisenthal. And I'm Tracy Alloway. Today you are listening to our conversation with professional sports better and writer Isaac Rose Berman about how a sports better actually makes money. Stay tuned for more of our interview with Isaac Rose Berman. He is a professional sports better and we are talking about the explosion in gambling in the U.S. To hear the full conversation, subscribe to All Thoughts wherever you get your podcasts.

I'm Tracy Alloway. And I'm Joe Wisenthal, and this is Oddlots on Bloomberg Radio. This is Oddlots on Bloomberg Radio. I'm Joe Wisenthall. And I'm Tracy Alloway. Today's episode is looking at the business of... Today's episode is looking at the business of sports gambling. How do the gamblers make and lose money?

How do the casinos make and lose money? Our guest, Isaac Rose Berman, a professional sports better and writer. More to come from our conversation with professional sports better and writer, Isaac Rose Berman. We're talking all things sports betting. I'm Tracy Allaway. I'm Joe Wisenthall, and this is Oddlots on Bloomberg Radio. To hear all of our episodes in full, be sure to subscribe to the podcast on your favorite platform. You're listening to the Odd Lots podcast on Bloomberg.

I'm Joe Wisenthal. And I'm Tracy Allaway. On today's show, we are discussing the explosion of sports betting. Our guest is Isaac Rose Berman, a professional sports better, and a writer at How GamblingWorks.com. This has been All thoughts on Bloomberg Radio. I'm Tracy Allo. And I'm Joe Wisenthall. To hear the rest of this episode and all of our other interviews, be sure to subscribe to odd lots wherever you get your podcasts.

Thanks for listening. All right. We good? Thanks. Great. That was a lot of fun. That was so good.