Opinion: The War Over Sports Betting Data: Lies, Half-Truths and Statistics: Part II – Sports Handle

Over the past several months, Sports Handle has reported extensively about the battle over sports betting data occurring across the U.S., between professional sports leagues, sportsbook operators, state legislatures and other stakeholders. This piece is opinion.

And please keep this in mind: Many operators believe that using “official” league data and/or establishing data and marketing agreements with sports leagues is, or will be, best for business. But most are opposed to being forced to obtain it — by government mandate — with costly strings attached.

For what I’ve identified as the first three problems with the arguments and positions set forth by the National Basketball Association, Major League Baseball and the PGA Tour (collectively the “Leagues”), please go to Part I

Problem 4: High risk or high growth?

The Leagues, depending on the audience and the goal, have said different things to different audiences: that in-game wagers present a terrific opportunity for fan engagement, but also that in-game wagering represents the greatest risk and threat to sporting integrity. 

From the testimony of MLB Senior Vice President and Deputy General Counsel Bryan Seeley on March 13, 2018:

Opinion: The War Over Sports Betting Data: Lies, Half-Truths and Statistics: Part II - Sports Handle nevin manimala

Now, compare the above position on in-game wagering with this anecdote from MLB Commissioner Rob Manfred from SportTechie’s State of the Industry Conference in March 2019:

MLB Commissioner, Rob Manfred, kicked off the conference as the keynote speaker. And while esports is currently top of mind for baseball, he did share a story about a conversation he had with his NBA counterpart, Adam Silver, a few years ago around sports betting. During this call, Silver then told Manfred, Just remember, your pace of play is perfect for in-game sports betting.”

“And he’s right about that,” Manfred said. “I do think that it gives us an opportunity. There’s a natural flow to our game. Lots of people love that natural flow the way it is. I think the development of the sports betting landscape provides an opportunity to fill in those slow moments in our game that not everybody loves.” 

NBA Commissioner Adam Silver has expressed similar enthusiasm for live basketball betting. From an April 2018 story by SportTechie, Silver said: 

“In Europe, for example, where sports betting is legal, people can watch streams of games and then bet as they’re watching them. That could conceivably be another form of a microtransaction, and much of sports betting has moved to in-play, which is one of the reasons why people want to watch the live feeds.

“Those are all potential, additional forms of engagement for viewers,” Silver said.

So which is it? High risk or high growth?

The Leagues answered long ago by making investments in DraftKings and FanDuel, at a time when the companies only offered daily fantasy sports — a form of gambling, yes gambling — based on individual player performances. And consider that daily fantasy contests involving professional athletes present a remote, and even lower risk of fixing than in straight betting, given that DFS players must pick multiple players to form a team, such that any one or even two players getting compromised would not guarantee a result. In sports betting, with in-game wagers based on single-player props, there is, theoretically, a greater risk of fixing. 

Problem 5: Promotion of… irresponsible gambling?

Opinion: The War Over Sports Betting Data: Lies, Half-Truths and Statistics: Part II - Sports Handle nevin manimala

While league officials sing the praises of near-zero latency live-betting feeds and the ability to, for example, bet on the outcome of any/every single pitch or at-bat … what is the potential result of that and who is betting on such rapid, discrete outcomes? For the most part, I suspect, it’s action junkies.

Do you think professional sports bettors have built models that can consistently identify advantages on a pitch-by-pitch basis? Or even if they could, could they get down enough money (in-play betting markets have fairly low limits, maybe $300 per) to turn a profit? 

Wagering on every pitch or every possession is basically slot-machine sports betting. I say people should have the choice to bet that way if they want. If it’s something like a halftime wager or mid-first-quarter wager, I don’t see it becoming a problem, necessarily. But people who takes odds that Pete Alonso will hit a homer on the next pitch, and then again on the next pitch and again in the 7th inning, or bet any such pitch-by-pitch outcome, are going to bust a bankroll very quickly. 

Consider this literature from the International Journal of Mental Health and Addiction in April 2018, “In-Play Sports Betting: a Scoping Study,” by Elizabeth A. Killick and Mark D. Griffiths:

It has been argued that structural characteristics of an event, including higher event frequency betting, are associated with problem gambling (Griffiths and Auer 2013; Harris and Griffiths 2017). One of the most important differences between being able to place an in-running sports bet as opposed to a pre-match bet is that the nature of the market has turned what was previously a discontinuous form of gambling into a continuous one (Griffiths 2012; Griffiths and Auer 2013). The gambling-study literature has suggested that in-play sports betting may offer more of a risk to problem gamblers because it allows the option for high-speed continuous betting and requires rapid and impulsive decisions in the absence of time for reflection (Hing et al. 2014a, b, c; Lopez-Gonzalez et al., 2017a, b, c, d; Nelson et al. 2008). 

Problem 6: Fastest, but not the most accurate

The ultimate goal is accuracy, right? But fastest does not mean the most accurate. Just the opposite. 

When attempting to generate the lowest-latency or near-zero delay feeds, allowing sportsbooks to keep markets open for as long as possible, the feed is still only as perfect as the human inputting the data from inside the stadium. No matter how close that “scout’s” seat or how clear their view, humans, you might be aware, are not infallible. 

If the Leagues truly did want to eradicate the possibility of human error impacting a betting market and/or a game, they would be pushing against play-by-play wagering. Or at least prioritizing accuracy over speed, which may mean pumping the brakes a bit. They’re not, because to do so would be to eliminate the potential value of exclusive access inside the stadium, the thing over which they can exert the most control. 

Problem 7: “Integrity fee” in alternative different paper

From a public policy standpoint, this is the most egregious tactic, one we’ve discussed before. It goes like this:

  1. A state’s elected officials, after debate, decide not to mandate an “integrity fee” or “royalty” — a percentage of the total betting handle that a licensee must pay the league merely for existing;
  2. But the legislature does decide to mandate the purchase of “official league data” (as in Tennessee and Illinois and eventually in Michigan and New York);
  3. Leagues now decide that in order to access what the legislature has required, sportsbooks have to, yes, execute separate and direct deals with MLB or the NBA, that may require payment of a percentage of the handle (this is separate from the state tax rate) that the legislature declined to require by law;
  4. Or in some cases where a league can’t squeeze any percentage from licensed operators, they may settle for some flat fee. In any case, they are using a “data mandate” as a lever to force payment that the legislature opted not to impose;  
  5. So, in addition to having sportsbooks forced to buy “official data,” which in many ways gives the leagues the ability to extract even more money, the leagues by virtue of a “direct license” have in a way circumvented the will of the legislature through the execution of these forced, obligatory transactions. The alternative for the sportsbook is to not offer in-game wagering at all. 

Problem 8: Cost of inferior product

As a corollary of Problem 1 from Part I, “when ‘data’ is not ‘data,’” the official feed through a third party isn’t simply X’s and O’s and time on the clock. It’s that, combined with algorithms spitting out prices and odds. 

I have heard from bookmakers who have said that their hold percentage on markets priced by Sportradar for certain popular U.S. sports, namely, (American) football, is markedly lower than the hold on other sports. You can believe this or not, but if true, by constricting the market for “data” to just those providers paying for the right to be “official,” the Leagues may be financially impairing the very operators that they’re also requiring to pay for a direct license, which is on top of state taxes, the federal excise task and compliance costs.

So the sportsbooks would have their margins cut further. And that cost likely would get passed on to the end consumer, Joe Sports Bettor… whether it’s at the cost of inferior prices or technology or something else.

Problem 9: No IP right in data itself

Indeed, the Leagues are trying to overcome by legislation what is not recognized in accordance with established case law.  Some state lawmakers have complied. 

One of the leading sports betting data providers, Sportradar, is pro-competition and openly acknowledges that it furnishes “unofficial” data. Their League partners are anti-competition.

Sportradar recognizes that eventually they, as a third-party middleman, may have their access and supply cut off if the Leagues gain exclusive control of data, and find a more profitable way to disseminate it (i.e. do it themselves in a few years).

Problem 10:  Balancing integrity and profitability?

“Official data” is an absolute necessity to protecting the integrity of the game, the argument goes. Every legal sportsbook must use it. It continues that without “official” data, sporting contests and sportsbooks will both be ripe for abuse and manipulation, leading to a loss of public confidence in the games, and ultimately the demise of sports. Something like that.

So why, then, put “official data” behind a paywall?

In states where lawmakers have not bought the notion that “official data” is an imperative, will the Leagues furnish “official” goods to licensed sportsbooks at a discount? You would think if official data were the only true way to protect games from abuse in legal markets, the leagues would make every effort to furnish it or somehow ensure that all market actors can easily obtain it. 

So has the sale of data and quest to monopolize the market triumphed over protecting integrity?  No. Because there is another answer. 

For all or some of the aforementioned reasons, problems, and misdirections identified, it should be clear that the Leagues don’t truly believe that “unofficial” data will ruin their leagues. Just the opposite. They know it won’t. But fear mongering has prevailed as the Leagues’ primary mechanism to sell licenses and subscriptions. 

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