Understanding Bookmakers : An Unethical Business Model

I’ve been betting professionally for years now, but back when I started I had a very different understanding of how Bookmakers operated. Now that I am a bit older and wiser with years of experience in and around the betting industry I can blow the lid on how the business model of the traditional Bookmaker has changed to be one that I believe is now unethical. Very few people understand this and even fewer people care.

In Australia we have nanny state politicians like Nick Xenophon going on a crusade against gambling but gambling in itself is not the issue. We don’t need a blanket ban. If we need any regulation at all then what we need is to go after some of the unfair and unscrupulous trade practises of some gambling operators who prey on the weak and the stupid. The sort of trade practises that would be illegal in the financial markets. They are the ones who give the whole industry a bad name.

Most average punters are of the view that the Bookie is not a bad bloke. He’s always a bit chummy and you’ll see Bookies on TV during the break in sports, talking like Old Mate from the pub. I suppose that is just marketing and there is nothing wrong with that. But the common perception (that they perpetuate) is that these Bookies are slaving away behind the scenes trying to figure out the statistics and probabilities to provide the punter with fair markets. When they are wrong they take a hit to the hip pocket and when they are right they make a few bucks. It all seems fair game and in Australia very much a part of our culture. But the truth is a bit different…..

Most Bookies, both big and small, don’t give a rats if the market prices for bets are accurate or even fair. They are interested in 2 things above all else. The first is, they want to balance their book if possible. If there is 2 sporting teams going head to head and they put them both up at 1.90 and take $1 million in bets on each….then they have guaranteed themselves a $100,000 profit regardless of the outcome. So they are more interested in the market DEMAND for backing teams or horses, rather than the actual chance of them winning. In the NRL there are often teams that have huge fan-bases who like to back their teams. This is important to the bookie because all those extra bets need to be balanced so they might skew prices toward that team – regardless of that teams actual chance to win. In Australia many Bookies just wait for the TAB to put their prices up on a Tuesday night and then just copy them. It’s a lot less work for them and they reduce the chance of being hit by the professional bettors or arbitrageurs early in the week.

The second thing (and here is where I have the big issue) is that because they are often putting up prices that are out of line with teams actual chances of winning they are vulnerable to the sharp bettors (professionals) who can hit those prices at over-the-odds and make a decent living out of it. So instead of putting the work in to sharpen up their lines, they just take a policy of shutting down winning accounts. They might take your promotions away as a warning shot, then maybe heavily restrict your bet stakes, or they might close your account outright. They don’t even have to explain why, it’s always in the fine print of their terms and conditions that they can cut you off at any time. I personally have lost dozens of betting accounts purely because I win too much.

At the end of the day, modern Bookmakers have a business model which is specifically designed to strip mug punters of their hard earned cash. They do very little actual analytical work and they copy odds from others. They then kill off any accounts that win too much….and this is a business model that works. They make a ton of money and nobody cares, except for the professional bettors who can’t get a decent bet on. In the old days we had trackside Bookies who HAD to take bets up to a certain amount. If you walked up to them with $20K in your pocket, they HAD to take your bet at the price that was quoted on their board. Those days are gone now and the Online Bookies are in charge.