This article discusses the type of people who wager on sports events and the reasons they gamble. It describes different types of bets on sports events, how betting lines are set, and the odds and probabilities involved. It examines in detail the difficulties in estimating the amounts of money wagered illegally in this country, and, after describing the nature of bookmaking operations, it concludes that total dollar amounts wagered with bookmakers are usually underestimated while the net income of bookmakers is typically overestimated.
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References
1.
1. According to data supplied by the Nevada State Gaming Control Board, between 1975—the first full year after the federal gambling tax was reduced from 10 percent to 2 percent of handle—and 1979, the horse racebook handle increased from less than $41 million to $116 million, and the sports handle—excluding horse racing—increased from $41 million to $258.7 million. In 1973—the last full year before the tax cut—the horse handle was $16 million, and the sports handle was less than $4 million.
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2. It is also legal to bet on sports in Montana and Washington, but the only type of legal bet involves a sports pool with a maximum wager of $1 and a maximum possible win of $100. In addition, gambling debts cannot be enforced in state courts.
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3. “Casual,” or nonsystematic, interviewing methods tend to substantiate these conclusions. Bookmakers have mentioned to me on numerous occasions that televised games get much heavier play than nontelevised games; for similar views, see Larry Merchant, The National Football Lottery (New York: Holt, Rinehart and Winston, 1973), pp. 6-7; and H. Roy Kaplan, “Sports, Gambling and Television: The Emerging Alliance,”Arena Review 7(1):4-7 (Feb. 1983).
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originally published in 1738 in Latin); for a full discussion, see George Ignatin and Robert Smith, “The Economics of Gambling,” in Gambling and Society, ed. William R. Eadington (Springfield, IL: Charles C Thomas, 1976).
5.
5. Paul A. Samuelson, Economics, 10th ed. (New York: McGraw-Hill, 1971), p. 425 n.
6.
6. Commission on the Review of the National Policy toward Gambling, Gambling in America (Washington, DC: Government Printing Office, 1976), pp. 297-326.
7.
7. Ibid., p. 326.
8.
8. Edmund Bergler, The Psychology of Gambling (London: International University Press, 1958), p. 5.
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9. When a person puts up $ 14 to win $10 on F, the bookmaker must pay the government $.28, and when a person puts up $10 to win $12 on D, the bookmaker must pay $.20 in taxes. If $10 are bet on each team, the bookmaker must pay $.48 to the government, and he or she wins $2, for a net of $1.52 if D wins. If F wins, the bookmaker still pays the $.48 tax and breaks even on the two bets. However, because F is a 40-cent favorite, F is likely to win about 57 percent of the time. Thus the expected value of the two bets to the bookmaker is about $.45. An illegal bookmaker, using a 10-cent line and not paying the 2 percent tax, would make $2 if D wins and break even if F wins, for an expected value of $.86.
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10. Larry Merchant says, “I regard [a] two-team parlay as terminal cancer.... Parlays are get-rich bets that make you poor.” Merchant, National Football Lottery, pp. 50-51.
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11. The break-even percentage for two-team parlays is .5270. For three-team parlays, it is .5228, which is less than the break-even percentage—.5238—for straight bets. For four-team parlays, the break-even percentage is .5373.
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12. If bettors are right 60 percent of the time, 100 straight bets of $100—$110 to $100—will win $1600, but 100 two-team parlays—$100 to $260—will win $2960, 100 three-team parlays—$100 to $600—will win $5120, and 100 four-team parlays—$100 to $1100—will win $5552.
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13. Law enforcement officials regularly make estimates based on undisclosed methods. Since these officials have an economic interest in overestimating and do not discuss their methods, such estimates have little usefulness.
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14. Oliver Quayle and Company, “A Study of Betting on Sports in New York City,” in Legal Gambling in New York: A Discussion of Numbers and Sports Betting (New York: Fund for the City of New York, 1972), p. 31.
15.
15. Commission on the Review of the National Policy toward Gambling, Gambling in America, pp. 94-95.
16.
16. Ibid., p. 105.
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17. This is a very low estimate: out of that $30,000, expenses must be paid. Merchant reports that in 1971, “a bookie in suburban Boston... with two clerks... grossed approximately $7,300,000, handled $4,645,000 himself and laid off $2,655,000.” His gross win was $214,500, his “operating costs, including $20,000 in bad debts, came to about $60,000. He made $155,000 in profit.” Merchant, National Football Lottery, pp. 136-37.
18.
18. Oliver Quayle and Company, “Study of Betting,” pp. 14, 23, 28.
19.
19. Ibid., p. 2.
20.
20. Peter Reuter, Disorganized Crime: The Economics of the Visible Hand (Cambridge, MA: MIT Press, 1983), pp. 21-33.
21.
21. George Ignatin, “Taxing Peter to Spite Paul: The Effects of Taxes and Regulation on Sports Gambling, ” in The Gambling Papers: Proceedings of the Fifth National Conference on Gambling and Risk Taking (Reno: Bureau of Business and Economic Research, University of Nevada, 1982).
22.
22. President's Commission on Law Enforcement and Administration of Justice, The Challenge of Crime in a Free Society (Washington, DC: Government Printing Office, 1967), p. 188; Humbert S. Nelli, The Business of Crime (New York: Oxford University Press, 1976).
