Sports Betting, Stock Markets Could Share Future Synergy

First of a multi-part series on how sports betting will evolve in the United States

BOSTON – In congested hallways where MBA students with requisite blue blazers and hefty backpacks jostled past each other, in the eddy pools of convention hall conference rooms, the big-thinker panelists of the annual Sloan MIT Sports Analytics Conference had a big new topic to discuss.

Not exactly new, but more immediately pertinent.

The topic of sports betting has flickered on the periphery at this annual gathering of data scientists, sports league executives and media influencers. Wagering is, after all, a monetized system of collecting, analyzing and applying data. And the collection of “quants” and assorted spreadsheet enthusiasts that clog these halls appreciate that as much as a meaty set of data points on reducing injuries in cricket.

But this spring, at the first Sloan conference since the repeal of the Professional and Amateur Sports Protection Act in May of 2018, sports betting chatter was prolific. And as big thinkers tend to do, many were already thinking big, as in how the pastime and the industry could be Moneyball-ed into a new business sector.

More specifically, a new investment market with sports results as portfolio performance, bets as bonds. Stock market meets jock market.

How Stock Market and Sports Betting Could Merge

Bill Chen, a two-time World Series of Poker bracelet winner, now a quantitative researcher specializing in statistic arbitrage at the Susquehanna International Group brokerage, believes similar firms “will definitely get into this.”

SIG opened a “sports trading desk,” he said, because it saw value in being an early mover.

”We wanted to say we’re out there, we’re willing to provide liquidity, take big bets and see where it goes,” Chen told at the Sloan conference. “I feel like sports betting is just part of the whole sports entertainment complex. It’s more fun if somebody can watch a game and while they’re in the game, bet on the game.

“So in-game trading is a big part of what we’re trying to do. And I think that it enhances the fan experience, so there’s going to be a big market for that. The liquidity for the U.S. is going to be huge. There’s just a lot of frictions in terms of legalization and everything. But I think when the market opens up, it’s going to be really big.”

Wall Street companies are interested. NASDAQ owns a subsidiary named Longitude that provides pari-mutuel technology to gaming entities, that it claims on the company website “enables sports betting and race track operators to offer a wider range of bet types, a richer display of odds data, and bigger pools with more stable odds.”

“People from finance now feel comfortable stepping into gaming opportunities post-PASPA,” Ball Street Trading CEO Scott San Emeterio told EGR of his company’s trading-style sports betting platform. “I think we have an opportunity to create something great here. I think the American betting markets will ultimately develop in a market format where the players feel they have an advantage over simply paying -110 to a sportsbook. Markets work. If done correctly with integrity there is no reason why it shouldn’t work.”

Can Sports Betting and Stocks Mingle?

Will the sports betting market become a new stock market?

“I really hope not, to be honest,” Victor Bigio, head of sportsbook at Sportech, told “I think it’s a little different than let’s say poker, but I’ll use poker as an example: In 2003, 2004, poker was fun and everybody was playing and people were still learning. And yes, a small percentage of that population were better than most and were professional players and being backed and playing multiple tables online at the same time.

“Sure, sports betting, it can be very similar to let’s say picking stocks, but if you think about it, the best sports bettors in the world are right 60 percent of the time, and I mean, that’s like the top, top, top tier. So there’s no home-run scenario here unless the amount of being wagered is crazy.”

Interactive Brokers is gazing at the fences, however. The automated global electronic broker announced on July 1 the launch of a “simulated sports betting exchange” and offers up to $1,000 in commission credits for its first 2.2 million new customers. The ultimate aim is to drive customers to the securities business, but sports betting plays a forward-facing role.

The simulated money credited to players in the exchange can be used to place sports bets, with those placing bets at the Interactive Brokers site effectively bidding against each other to move odds on games.

Players bet on the percentage chance of a team winning, with each winning wager worth $100 simulated dollars.

”A player who assesses a team’s chances to win at, say, 40 percent may want to buy a bet at less than 40 or sell it at more than 40,” Brokers Interactive chairman Thomas Peterffy said. “As more information emerges and as the event gets under way, these odds will change and the price of the bet will begin to fluctuate, similar to the price of a stock.”

Key points from Interactive Brokers:

  • Players may “buy and sell bets with each other by placing bids or offers for a specific outcome” as they would stocks.
  • ”Bids and offers” will range from 0.05 to 99.95 in virtual currency, “reflecting the bettors’ estimates of the percentage probability of outcomes.”
  • Losses are also deleted from accounts with zero-value accounts closed.
  • IB deducts a commission just like sportsbooks, but at a far-lower rate. According to the company: A “virtual commission per contract will be deducted on each trade equal to the lesser of one percent of the bet amount or (100 – the simulated bet amount).”

According to an Interactive Brokers release, simulated winnings are converted to actual dollar credits for use against brokerage commission charges. Peterffy told the Financial Times that he believes the enterprise does not violate interstate commerce laws monitoring gambling or electronic payments because actual money is not exchanged with customers. According to a company statement, winnings are “virtual, non-transferable and has no cash value.”

“We expect this promotion to attract customers who may be new to the Interactive Brokers platform, and who are more familiar with spectator sports than they are with the financial markets,” Peterffy said. “Our intention is to teach people about the probabilistic nature of markets, trading and investing.”

“By partaking in this promotion, our players will learn about our platform, how to trade and make investments and how to keep track of their finances, all while being entertained. We are betting that many of these participants will also try our free demo brokerage account and that eventually many will become Interactive Brokers’ clients.”

Many of their competitors are making the same bet.