Pari-mutuel sports betting

State anti-gambling laws pose an existential threat to the business models of sports betting companies like FanDuel and DraftKings. (See, for example, pages 26-33 of this treatise by law professor Marc Edelman.) But what if you were to bet on athletes like you bet on horses? Betting on horse races is based on the pari-mutuel system of wagering (“pari-mutuel” means “betting among ourselves”), and this system is already legal in 43 states! You may have heard of exotic Trifecta bets, but the most common types of wagers under the pari-mutuel system are Win, Place, and Show bets. Here is how these wagers work (via turfnsport.com):

Win: If you wager $2 to Win on your horse, you collect only if your horse finished first.
Place: If you wager $2 to Place, your horse must finish first or second for you to collect. But remember, you don’t get the Win payoff, just the Place payoff, which is generally smaller than the win payoff.
Show: If you wager $2 to Show, your horse must finish first, second, or third. But remember, you only collect the Show payoff.

Now, according to this fascinating report by Stephanie M. Lee, Vic Salerno, a Las Vegas legend, has created a new sports-betting company (USFanstasy Sports) based on the same pari-mutuel system of wagering used in horse races. In summary, he lets fans choose from 20 or so athletes according to position: “Bet on Aaron Rodgers to ‘win’ in a quarterback contest, and you collect if he gains more yards and scores more touchdowns than all other quarterbacks that week. For a ‘place’ bet, you collect if Rodgers comes in first or second, and for ‘show,’ if he finishes first, second, or third. You could also make wagers like a ‘daily double,’ where you’d have to pick, for example, both the winning quarterback and running back.” Moreover, as Ms Lee reports, “USFantasy also shows odds changing in real time. If most people bet on Rodgers, their wagers won’t pay as well as ones on much-maligned Mark Sanchez.”

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2 Responses to Pari-mutuel sports betting

  1. Craig says:

    Without doing a lot of research on this (OK, I haven’t done any at all) my guess would be that state anti-gambling measures had more to do with protecting the industry of sport than the fairness of gambling. Owners of sports teams have players under contract and don’t want them to be influenced by betting money. These days, I’m not sure whether betting money would or would not even compete with a player’s salary so as to disincentivize a player’s performance, but it’s probably less likely now than in the days before free agency and cable television money. Nonetheless, I doubt that ownership would want to even crack open the door of possibility of their players being compromised by a bettling line. Ownership wants those taxpayer-funded stadiums — they want the legislatures on their side and I’m sure they will do what it takes to keep these kind of “betting innovations” from taking hold.

    • Thanks for your comment. Your reasoning is sound, but it’s worth noting that many sports leagues (like the NBA and MLB) have an ownership stake in these sports betting sites. Since the leagues are run by the team owners, they must be okay with some forms of sports betting.

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