Plugging the leak: Solving the industry's in-play pains

Most gamblers have a leak. For poker players, it might be an ill-advised bet in the sportsbook; for sports bettors, it might be a few hands of blackjack, and for advantage blackjack players, it might be rolling the dice in craps.

And the US regulated betting market currently has a hole in its game, just like its customers. The hold rates in places like New Jersey have not necessarily reflected this leak to date, thanks to a margin pumped up by parlays and the growing adoption of high-hold expectation bets like First TD scorer, but there is a leak nevertheless.

“The challenge is on the in-play side of things,” says Paul Chopin, a consultant overseeing trading at Golden Nugget. “In-play is where you can really see an under-performance in terms of hold.” In short, the models underpinning the live pricing across the four major US sports are simply not where they need to be.

Paul Chopin is a consultant overseeing trading for Golden Nugget

“The models are not robust right now,” says Chopin. “They haven’t been tested enough. They have obviously been used in Europe and there is a bit of sharp activity there, but the US sports are nowhere near as well-modeled as soccer and tennis are today in Europe.

“You can see precisely in the numbers where the modeling is weak – the hold is fine for tennis and soccer,” Chopin says. The weakness is understandable – while European operators take up to 80% of their wagers in-play, the US has traditionally been a fraction of that thanks to the retail nature of the Nevada market and the friction of betting offshore.

However, 12 months after regulated betting really started rolling in the US, operators have realized they need to start investing heavily in their in-play products.

The oil in the machine

The first port of call is of course good data. There has been a steady flow of firms signing up for official data feeds from the NBA and MLB in recent weeks, and Chopin expects that to continue and be matched by operator deals with the NFL and NHL too.

“I think everybody in this industry would want to pay for official data,” Chopin says. “Everyone wants that to power their tools.” The sports leagues of course seem to be aware of that and are committed to driving a hard bargain for their feeds which has caused some grumbling, but Chopin ultimately envisages a move towards the tennis/IMG commercial model, which has seen an official feed with sharp pricing that satisfies players, the sport and operators.

“What we’re offering today as an industry is not good enough, but we’re getting there,” Chopin says. “When we get NextGen NFL data, for example, you’re going to see some incredible innovation come out of the US when you can bet on fastest player on the field and so on.”

People power

Of course, once you have the data, you need the data scientists and modelers that can turn it into an accurate price. Unfortunately, people who are comfortable with data, US sports, algorithms and machine learning don’t necessarily grow on trees – especially since just about every operator and provider in the US market is looking to build out its trading capabilities.

“If you have those skills and a US passport, you can basically name your price,” says Chopin. “Six months ago, this type of trading was being outsourced to Eastern Europe or England with someone trading US sports overnight, but over the last three to six months, you can see so many of these third parties and outfits moving trading rooms to Vegas and setting up an office on the ground in the US. I think that’s where the future of the business will be.”

Talent is key, not just in building the models initially but also in overseeing them. Because while football – pro and college – is the biggest betting sport in the US, it is more difficult to model live than its European counterparts.

The NFL, for example, is difficult to model thanks to the intricacies of the sport and the sometimes-questionable decision making of the coaches.

“The coaching tendencies matter a lot,” says Pinnacle head of trading Marco Blume. “Some teams, even in identical situations, will do vastly different things, so you actually need to have some NFL knowledge from the trader.

“In soccer, most people who run in front of an empty goal will try to score but in the NFL, very famously, the coaches don’t always take the optimal play. So, if you want to price it right, you can’t just have a simple algorithm – the algorithm has to understand incentives from the coach.”

The offshore world would be an obvious place to look for trading talent, but given the stringency of the background checks needed to get licensed in places like New Jersey, it’s near certain no offshore traders would pass scrutiny.

There’s also an argument to be made that offshore traders are only as good as the information they receive (in the form of bets). “If you don’t have syndicates betting into those accounts, those traders might not be so useful,” one regulated bookmaking exec tells EGR NA. In short, top-tier pricing and trading talent is not going to come cheap in the US.

College pains

There are also some structural issues opposing the improvement of college football in-play trading, starting with the National Collegiate Athletic Association (NCAA) still refusing to embrace the betting industry and collaborate on an official feed. Games can be traded via video, but with 100+ games on a Saturday, it’s near impossible to find video footage for all games.

“I don’t see an effective way [to cover all college games in-play],” says Blume. “If you don’t have any data feed, how can you offer live betting?”

It’s an important gap in the product offering, given that college football generates similar handle to the NFL in southern states, but Chopin is optimistic the NCAA will see the commercial benefits being reaped by the other leagues and ultimately cut a deal with bookmakers.

“If they want college football to remain relevant and entertaining, then the betting product can really help with that,” Chopin says. “You need a robust live betting product and trading off 10-20 second delay TV feeds is not the way to go.

“I know it’s difficult for the colleges to embrace betting, but it inevitably has to happen otherwise the sport will deteriorate.”

The experience of the European industry shows that US operators will tighten up their leaks before long, but firms would be wise to invest now. Sharper pricing leads to larger limits, less downtime and ultimately a better product.

Given the room for growth in US in-play betting, the reward for the operator that gets it right first could be huge.