Asymmetrical Information

Betting on baseball is typically odds-based rather than involving a point spread, but that has more to do with the nature of the sport (even the best baseball teams lose one-third of their games, and runs scored vary day to day as different pitchers start). The odds system is also difficult to understand, and would likely deter bettors. The biggest problem is, as you've said, getting someone to take the weaker team. No matter what the odds, I'd never bet that the Sixers would beat the Spurs. But fifteen points would make me think twice.

Yeah, I think what he is confused on is that people aren't actually betting on the spread like its a derivative (there are over/under type bets, but they're different), they're only balancing out the payoffs for an underdog. The point spread isn't immaterial, it's a measure of how well an inferior team fared against a better one. Not only is there little incentive to bet $100 to win a buck, there's little incentive to bet on a team who always loses, which would still be occuring for a team that pays fantastic odds on those magical occasions when they win. With a point spread, there's a reason to bet on team to not be beat by the spread, bringing the bet closer to 50/50.

When faced with a betting scandal, a sports league usually hardens its anti-gambling stance. But that doesn’t work.

This is a statement pulled out of nowhere.

MLB has had the ultimate anti-gambling, no tolerance stance, put in place after the aforementioned Black Sox scandal, and there has been one headline-worthy gambling incident that I can think of in the 80 years since (Pete Rose, a case of an addict, not a corruption ring/fix). Compared to the other types of scandals within the sport, and with gambling in other sports (hockey and basketball both have black marks in the past few years), MLB looks pretty good on this.

Of course, most gambling scandals are in college, where the athletes are getting paid nothing. If you really want to make gambling scarce, make sure that all of your participants (players, coaches, refs) are making a salary that would frighten them to lose, combined with monitoring and enforcement.

See here for an explanation of what he means:\
http://myespn.go.com/blogs/truehoop/0-26-96/Economist-Justin-Wolfers--Proposal-to-Limit-Influence-of-Gambling.html

I'll refrain from getting geeky about horse racing.

It's all true about point spreads, of course. The whole point is to get the bets as close to 50-50 as possible, since bookies (and casinos) make their money off their take, not off "winning" or "losing" the game.

But most importantly, why does this person think sports leagues and their interests would have any sway in what kinds of gambling are legal or illegal? People are gambling in spite of what the leagues might want. It's up to the leagues to make sure the games are fair -- period. No matter how gambling laws change, there will also be SOME illegal action that can be influenced by corrupt players, officials, etc....

I understand that the appeal to doing away with spreads, bets on the score, etc. is that coaches, players, and officials will be less inclined to to adjust their performance in a way that still allows them to win. I think that this sytem would also 1)reduce the number of people actually betting (since there aren't realistic enough chances of winning despite the payout) and 2)probably only put the pressure on those involved in sports to actually throw games. If you're accepting that gambling should be allowed to exist, you may as well come up with a system that is attractive. With the amount of illegal gambling in place, bettors will seek out the people that will offer them the bets they are looking for, and will in turn generate the capital and incentive to bribe the athletes and others who can make a critical difference. Either everyone involved will need to be making so much money that bribes are irrelevant, or China will need to be the sanctioning body for all athletics. Otherwise, we have to rely on people's better natures.

I just read the whole piece. It's utterly ridiculous. There seems to be almost no basic understanding of how sports gambling works. And to repeat, he seems to believe that the sports commissioners can get together and do something about the existence of point spreads. As long as illegal gambling exists (aka, "forever"), there will be point spreads, somewhere.

I'm with JMW on the legality of gaming. So, can there be a market solution? A casino maybe could offer insurance, returning bets on games that have can be shown to have been influenced by cheating (assuming that a third-party organization could reliably provide that service). Then people could price select how much this assurance is worth (is a cheating check worth an extra 10% ?) I don't know if this is the solution (the time lag between catching a cheater and the game itself alone is huge), but I don't believe a solution can take place outside the gaming world, as JMW has said.

I think I'll go found overruled.com offshore. I'll take votes on what calls people thought were BS, and base the winner on what the adjusted point score would have been.

Illegal gambling enjoys an inherent advantage over the legal version in that winnings aren't taxed. In addition, gamblers often can get credit when they're short on cash.

Building on Peter's point, it's that extension of credit that can give unscrupulous types the leverage they need to influence games. Adjusting the rate at which people can get loans won't help things.

Fixing games is more profitable when the odds are long. No point spread and the odds become long for low quality teams playing against high quality teams. Sell "Celtic Pride" for a comedy movie about two fans trying to handicap the more powerfull team.

Not all legal gambling winnings are taxed. With the horses, you have to win a certain amount (I think at least $600 on a $2 bet) to have it taxed.

JMW: Legal gambling winnings are taxable income no matter what the amount. It's just the IRS doesn't require reporting (a W-2G) for amounts $600 and under (or so).

In poker, this leads to a lot of small tournaments structured so the top prize is under the limit.

I think the column makes perfect sense. (And the idea that Wolfers doesn't understand the betting market is laughable.)

First of all, very few professional games in any sport would have the 100-1 odds that Megan seems worried about. And when such long-odds games do arise, the bookmakers could probably make a lot of money off them, since people tend to bet on longshots irrationally often. Such mismatch games would also be very hard for a single player or ref to "fix" without being detected.

The main point of the piece, though, is that most gamblers would prefer to bet legally if they could do so. So if only straight-up win-lose bets were offered legally, they would dominate the market. There might still be illegal bookmakers offering point spreads, but their frequency would be much reduced, and it would be much less likely that someone like Donaghy (or a player) would get involved with mob types in the first place. And if they still did get involved with the mob somehow, "throwing" a game would be both more difficult to do and more difficult to justify to himself.

As for the tax issue, remember that you can write off your losses against your winnings.

Ed, I don't doubt that Wolfers understands the market, generally, but that's what makes the piece silly. He's vastly underestimating the size of the illegal gambling population, and how badly they want to bet legally. Most people simply don't bet in Vegas. They're elsewhere, betting illegally, no matter how casually. You could legalize gambling across the board, which would be a much more effective solution (for what Wolfers wants) than simply changing what type of betting is allowed.

Most people want to bet on a spread because, while I agree that the 100-1 shots would be rare (nonexistent, really, in basketball and football), people would prefer even-money propositions, which the spread provides. If the Mavericks are hosting the Knicks, I'd rather bet the spread than either make a small profit on a likely outcome (the Mavs winning) or hope for an unlikely, more profitable outcome (the Knicks winning). Granted, I've been in Vegas when I've liked an underdog to win a game outright, and it's great fun to bet them to win and feel like you're getting the odds AND the better team, but that's a very small slice of the gambling universe.

Also, there's the issue of what influence the commissioners can have. Vegas oddsmakers don't produce spreads because David Stern ALLOWS them to. If Wolfers is talking about governmental action, not action taken by the leagues, he should have made that much clearer in his conclusion.

"100-1 shots would be rare (nonexistent, really, in basketball and football)"

What about in college football, particularly in non-conference games? Say, when you have a ludicrous mismatch like Auburn-Citadel or Georgia-Georgia Southern?

Yes, I meant the pros. 100-1 shots would be possible in college football. But those games would not be bet heavily at all if they were only available as no-spread propositions. Unlike Lotto players, most gamblers are looking for an edge. Praying that St. Mary's School for the Blind beats USC and pays 750-1 isn't an edge. And even legal operators like to protect against huge losses (again, this is the entire purpose of point spreads). If people WERE betting lots of money on St. Mary's to win straight-up for some reason, the casinos wouldn't be happy -- because an upset, even if very unlikely, would mean a huge loss for the house.

Also, these 100-1 shots hardly reduce the possibility of corruption. Say you go into a locker room and tell the guys they're 100-1 favorites, but you have a group of people who are putting several thousand dollars on the other team. You've got a lot of potential money to divvy up and tempt people with. You might get caught, but that wouldn't keep the sport from getting a black eye.

That’s right: Legalizing wagering on which team wins or loses a particular game, while banning all bets on immaterial outcomes like point spreads, would destroy the market for illegal bookmakers and make sporting events less corruptible by gamblers.

Okay, lets diagram the contradictions. If illegally betting on games, whether for outcome or point spreads, is happening now, then legalizing one forr of betting is highly unlikely to make gamblers give up on the illegal form of betting. These are people who are perfectly happy with making illegal bets now, so why would they be so reluctant to continue to make illegal bets?

This shows the same warped logic that led the Dutch to legalize prostitution, thinking that a regulated legal sex trade would make the illegal sex trades obsolete. It didn't work that way.

> Legal gambling winnings are taxable income no matter what the amount.

Illegal gambling winnings are also taxable.

I suspect that one can offset winnings with documentable losings for illegal gambling just as one can do for legal.

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