How Much Is Sports Betting Like A Financial Market? Data Is Key In Both

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The financial market is a different kind of animal in that there is nothing like it. On Wall Street, seconds can mean the difference between a company making $10 million or losing $100 million.

Equally so, sports betting has evolved into a similar beast. Sportsbooks use data to ensure proper odds are set in the time it takes LeBron James to make a basket.

If odds are slightly off, customers placing in-game wagers could potentially earn themselves a hefty payday leaving sportsbooks empty-handed.

The one constant between Wall Street and sports betting operators is access to quality data. For now, they remain different creatures. But some experts predict there may come a time when both markets operate in similar ways.

With great power comes powerful data

When the US Supreme Court did away with the Professional and Amateur Sports Protection Act (PASPA), it not only opened the doors to sports betting across the country, it also provided professional sports leagues with the opportunity to capitalize even more on their multibillion-dollar product.

According to the American Gaming Association (AGA), the NBA, MLB, NFL, and the NHL will earn a collective $4.2 billion from legal sports betting.

The leagues’ first capitalization attempt came in the form of the now infamous, much-talked-about “integrity fee” or 1% of total handle. That plan sparked outrage. Lawmakers and gaming stakeholders pounded their fists and demanded to know why the four pillars of sports deserved a cut of the profits.

League representatives argued they should receive compensation because customers were betting on “their” games. The leagues insisted money would be used to protect the integrity of the game. Remnants of the proposed integrity fee continue to float around statehouses, but a majority of sports betting bills have no mention of such a tax.

But now, the leagues have pivoted to another more critical argument. It’s one that could put sports betting down the path to operating much like a financial market.

The topic of official data

Up until now, sports leagues have never attempted to capitalize off data. There may have been whispers in board rooms, but no formal partnerships were created, and no lucrative contracts were signed.

“For all the legal operators it’s a sore subject, especially here in Las Vegas,” said Jay Kornegay, vice president of race and sportsbook operations at Westgate Resorts.

“We have been operating without (official data), but we do respect the leagues and want to work with them,” Kornegay told Play USA in an interview.

Sportsbooks in Nevada have relied upon second- and third-party data providers for years without complication. But according to the leagues, “official data” is the only way to ensure integrity remains intact.

But there are data experts like Ed Miller, author of The Logic of Sports Bettingwhose view aligns more with the accuracy of data rather than the source.

“From a technical perspective, I just want the best data,” Miller said in an interview with Play USA. “I don’t care if it comes from the leagues or someone else, so long as it’s accurate.”

An engineer by trade, Miller has devoted his life to data and said never has he come across a feed that is without error, including the data feed from the leagues directly.

“I would say it’s about 98% correct all the time but, that still leaves 2%,” Miller said.

“To me, what matters is, is it right or not. Can I rely on it? I think the leagues can and should be able to produce the best feed, but I don’t know if that’s currently the case,” he said.

Data accuracy

To Miller, official data is a legal construct, and it’s something he is not particularly interested in. Instead, he’s more focused on the value data can offer sportsbook operators.

“I don’t see why (official data) has to be enshrined in law. If you’re providing something that has clear inherent value, then you don’t have to force (operators) to buy it,” Miller said.

Rodney Paul, a sports economist and professor in the department of sports management at the David B. Falk College of Sports & Human Dynamics at Syracuse University, said there are two ways to look at official data.

“On the one hand, having the best information is paramount in any market. Assuming official league data is the best, most accurate, and most timely information on the games, then it is extremely important,” Paul said.

Adding to Miller’s point on the accuracy of data, when you look at something as monstrous as the New York Stock Exchange, having the best, most accurate information is pivotal to success.

“On the other hand, the sportsbooks seemed to do very well operating in the past based upon their information, which they have a financial incentive to be certain is the best,” Paul said.

Paul continued by saying since the leagues are the ones financing the games on which the sports betting markets place wagers on, “having the property right to their official data allows them to earn rents in the process for that information.”

Laying the financial market groundwork

Last year, the NBA announced MGM Resorts International had become the leagues first “official gaming partner.”

The NBA said, “MGM Resorts will use official NBA and WNBA data and branding, on a nonexclusive basis, across MGM Resorts’ land-based and digital sports betting offerings throughout the United States.”

AGA research shows that just from increased fan engagement alone, the NBA will net $425 million. Tack on an additional $160 million, paid directly from betting operators in the form of sponsorships, advertising, and product fees and the NBA’s total projected revenue is $585 million.

A professional sports league and casino operator were finally joining forces. That was unheard of before May 2018. But in a post-PASPA world, the leagues were forced to adapt.

The significance of this deal and all the other sports betting deals that have followed is that official data is becoming a significant part of the sports betting conversation.

On March 28, in front of a packed room of gaming stakeholders who gathered for the AGA Summit, Kenny Gersh, executive vice president of gaming and new business for the MLB, put the data argument in perspective.

“We only want clubs to do deals with sportsbooks that use official league data,” Gersh said.

That means sportsbooks that cannot afford official league data will miss out on marketing and branding opportunities that could bring ancillary dollars to their facilities.

Another benefit of official data

People who know how the sports betting machine works don’t need a poster of MLB superstar Bryce Harper outside a sportsbook to place a bet. However, new customers who have never placed a bet before might feel more comfortable going to a sportsbook with a legitimate link to the sport.

Think of it this way: where do you feel more comfortable buying your baseball tickets? The eight scalpers heckling you from the parking lot to the ballpark, or walking up to the ticket window at Citizens Bank Park in Philadelphia?

Sure, you might get a better deal from the scalper, but if you’re going to get ripped off, you might as well make it official.

Can sports betting & financial relationship model work?

In early March, when a handful of knowledgable gaming experts gathered at MIT to talk gambling, the question on if sports betting could follow in the footsteps of the financial market was proposed.

Responses varied drastically amongst the five-member panel. But Andrew Ashenden, COO of Perform, said, “at the moment, there are so many barriers to that happening.”

  • State regulation
  • Wire Act
  • Market infancy

Matteo Monteverdi, the US president of Sportradar, who was also on the panel, took it a step further saying sports betting is already highly regulated.

“(Sports betting) is a very regulated market, even more so than the financial market,” Monteverdi said.

While sports betting is not dependent on operating like the New York Stock Exchange, it could be a best-case scenario, according to Paul, the Syracuse University professor.

“Sports betting can act as a financial market; it’s just dependent upon liquidity and faith in the marketplace,” Paul said.

“Some scandal could derail this, although taking a look at betting popularity and volume over time leads me to believe that rumors of scandals and actual uncovering of some impropriety do not seem to dampen the publics willingness to place wagers,” he said.

What will the future hold?

Sports betting just had its first anniversary, and while it’s still very premature to compare it to an industry that has been around for more than two centuries, the similarities are there.

Thus far, only two states, Illinois and Tennesseehave given into league demands. Language in Tennessee’s new sports betting bill requires sportsbooks to buy official league data to settle in-play wagers. Similarly, operators in Illinois must do the same.

Illinois is a massive gaming market. It has everything from horse tracks, casinos, video gaming, the lottery and now sports betting. This can be viewed as a significant victory for the leagues, one that can shift the argument in their favor.

If professional sports leagues get the argument to stick, it could lay the foundation for sports betting to one day operate much like Wall Street.

Nicholaus Garcia

About

Nick comes from West Texas where he graduated from Texas Tech University with a degree in psychology. After a five-year stint in Chicago, where he wrote about local politics and graduated with a master’s degree in journalism from Columbia College Chicago, he moved to Washington, D.C. to write about issues related to gambling policy, sports betting and responsible gaming.

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