Friday, October 30, 2009

Lack of Parity in NFL Increases Sportsbook Risk

The Chicago Sun-Times has a nice article on the lack of parity in this NFL season. The NFL has been touting the "any given Sunday" line for years, stating that any week any team can beat any other team. This year, that tagline has been shown to be completely inaccurate. Do you really think the St. Louis Rams or the Oakland Raiders have a snowball's chance in hell of beating the New England Patriots, Minnesota Vikings, Pittsburgh Steelers or Indianapolis Colts? Nope.

Now TV ratings are not suffering, but there has been some impact with regard to attendance at the home stadiums of the poor teams. The lack of on-site attendance will have a future impact with regard to finances of the poorer teams as although there is sharing of television revenue, the teams use attendance revenue to assist with singing bonuses, etc. So, in this case the rich get richer and the poor get poorer.

Sportsbooks also suffer from lack of parity. That's due to the particulars of spread betting. Bettors put up $110 to win $100. So, for example if the Raiders and Chiefs were playing, with the Chiefs favored by 3 points, if you bet the Chiefs, they would have to beat the Raiders by more than 3 points in order to win the bet. If they won by just 3 points, the bet would be returned and if they won by less than 3 points (or lost the game outright), you would lose.

The sportsbook makes money by taking $110 from bettors on both the Raiders and Chiefs. They take in $220, pay the winner their $110 plus the winnings of $100, and the sportsbook keeps $10, or about a 4.5% profit.

This system works to ensure the sportsbook makes money if you can get equal bets on both sides - in the example equal bets on both the Raiders and Chiefs. Point spreads are set to help ensure this occurs. When the two teams are evenly matched, the spread is low, with the converse when they are unevenly matched. In theory, you can set the spread large enough to attract equal action. In practice, that doesn't always happen.

This is the problem with the current lack of parity in the NFL. If some teams are just horrible, they are just not going to attract betting interest, unless the spreads are set to a dangerous level. Usually, a very high spread may be 13 points. With the current disparity, a game between between a top team and a bottom team might have to have a spread of 20 points or more to attract ANY betting interest on the poor team. So far, favorites are winning and underdogs (particularly of the poorer teams) aren't winning (even against the spread). If all the betting action is on the favorites and the favorites win, there aren't losing bets on the underdogs to finance paying the winners. That means the sportsbook has to pay out of their pocket, which means the sportsbook actually loses money.

Parity in the NFL isn't just good for the fans - it's good for the sportsbooks too.

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Saturday, October 24, 2009

Audit Determines Montana Lottery Breaking State Law

Montana station KFBB and the Helena Independent Record reported on the results of an audit by the Audit Division of the Montana Legislature. The audit focused on the implementation of fantasy sports wagering by the Montana Board of Horse Racing and the Montana Lottery.

The basic findings are that:
  • The Board of Horse Racing's agreement with the Lottery circumvented rule-based procedures;
  • The Board of Horse Racing and the Montana Lottery did not proceed according to statute in implementing HB 616; and,
  • The involvement of the Montana State Lottery is not in compliance with statute.
According to the well researched and public legislative audit as opposed to the allegedly poorly researched (if at all) and non-public "due diligence" from the Board of Horse Racing and the Montana Lottery, the Lottery is outside its statutory authority to offer a gambling game of this kind. Since Montana gambling law is very strict, in that all gambling is illegal unless specifically authorized, the audit found the Montana Lottery is breaking the law. Because of that, the Montana Lottery may be considered to be an illegal gambling enterprise, a term that has specific liabilities in both Montana law and federal law.

A previous post discusses how in Montana bettors that lose money participating in an illegal gambling enterprise can sue to get their money back. This audit could make the persuasive case for an attorney with some time on their hands and a desire to perhaps pick up some contingency case cash.

What has not been reported and was kept out of the audit findings is going to be revealed. This blogger assisted in the audit by providing internal information that showed to what extent other parties could have offered a pari-mutuel fantasy sports gambling game compliant with HB616 well before the beginning of the 2008 NFL season, completely negating the lame arguments from the Board of Horse Racing that no one else but the Lottery and their vendor partner could offer a game and therefore were deserving of the "sweetheart" 8-year sole source agreement.

If a private entity in Montana was operating a game like this, it is very likely that entity could be facing both Montana and federal criminal charges of operating an illegal gambling enterprise. However, it appears that according to Montana law, it doesn't matter if the improperly operating entity is a government or private entity. Illegal gambling is illegal gambling.

The current game is not very popular, as discussed in previous posts, here, here, and here. With several horse racing board members' terms expiring in January, we'll see if some new and more competent thinking will come to the fore and put an end to the joke that is the Lottery's fantasy sports gambling game, Montana Sports Action.

What is lost in this discussion is another loser - the Montana horse racing industry. By placing their trust in the Board of Horse Racing, they placed a bet that may have doomed live racing in the state.

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Tuesday, October 13, 2009

Tribal Gaming Is Good, But Not Invulnerable

The Kitsap (WA) Sun had a story back on September 28th that reported on the closing of the inaccurately named Lucky Dog Casino, owned by the Skokomish Tribe. It wasn't a large property, but even the modest employee base of 120 people losing their jobs is very sad. The casino management is stating the closure is just for the winter, but with the economy in its current state, there are no guarantees for next spring.

Management is pointing to the economy as the key driver of the closure. The general manager is quoted as saying, "people who used to come in three times a week were coming in three times a month." That's a very telling indicator regarding slowing patronage. With their winter slow season approaching, that was the final straw to move to close.

Not all tribal casinos in the state are doing that poorly. Net revenue for 2008 was $2.11 billion vs. $1.96 billion in 2007, according to state gambling commission records. It is possible the Lucky Dog may have had issues other than just the economy.

The story further reports that certain gaming products, such as lottery, are holding up well in the economy. Other products, like bingo and card rooms, are suffering. This recession is putting to rest the notion that gaming is a recession-proof industry.

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