A BILLIONAIRE’S VISION
In 2004, billionaire mark cuban wrote on his blog, his vision to create a sports gambling hedge fund. Cuban makes some great points here paralleling the similarities between gambling markets and financial markets. He gives us three very important points to consider. The first major point that cuban makes is that gambling markets attracts a greater amount emotional money than do financial markets.
Why is this so important? Well, we know that emotional money tends to make more bad “rash” decisions. So consequently, the more emotional money in the market, the better value it creates.
Another great point that cuban emphasizes is the amount of data that’s available in sports betting vs the amount of “true” data in the financial markets. Financial data tends to be more skewed and long-term. While sports betting data is more readily available, relevant and current. This means that if you know which data is significant you clearly have an advantage in the sports betting market.
The third and most important argument mr. Cuban makes is the efficiency of the sports betting market. Cuban writes “how efficient can a market be where the majority of investors expect to lose money.” If this statement doesn’t scream “there’s money to be made here” then nothing will get your attention. Investing with others who are expecting to lose money is definitely a market worth exploring.
So as you can see by billionaire mark cuban piece, there are huge opportunities to make legitimate returns in the sports betting market. As stated, he highlights the fact that the biggest and brightest clearly have an edge. Now it just becomes a matter of which data is relevant to winning you money and how you go about leveraging that information.
Nevada recently passed a bill into law allowing the creation of wagering entities to be licensed in the state.
Senate Bill 443 allows Nevada business entities to register for the purpose of betting on sports at the state’s sportsbooks with funds that are pooled, which may include money from out-of-state investors. It legalizes sports betting investment funds, similar to investing in financial markets via traditional mutual funds, that are registered and managed in Nevada but which could include participants from outside the state.
Nevada Senate Passes a Sportsbook Bill to Allow Business Investments in Sports Bets
The Nevada Senate passed a controversial sports betting billwhich would allow businesses to invest in skilled bettors on Saturday. Current state law allows individuals and partnerships to place legal bets on horse racing and sporting events. The current proposal would investors to put money on a skilled gambler, then share in that gambler’s winnings.
The idea of the bill is to create a market for investing in sports bets. Pooling resources would allow for “backing agreements”, though opponents are concerned about opening the door for criminal backers and also providing advantages for businesses, who might hire the services of oddsmakers to make a quick buck. The current laws do not allow a gambler to receive compensation from a consortium of investors.
Passed by 11-10 Vote
The proposals were discussed in session for the first time last month in Nevada Senate Judiciary Committee meetings. On Friday, the Senate Bill 443 passed by a razor-thin vote of 11-10. All Senate Democrats stood in opposition to the bill.
Market Demand for Skilled Bettors
Quinton Singleton, VP and deputy general counsel of CG Technology, said of the gaming proposal, “We believe that there is a market demand for skilled bettors to utilize the various forms of Nevada’s entities, have individuals invest in the entity and then share in the success of the wagering activity.”
The current proposed bill would require “detailed personal information” on each person involved in the sports betting business to be submitted to the Nevada Gaming Control Board. The bill also calls for registration fees.
Questions on Oversight
Proponents hope that the final bill will bypass the need for such information to be disclosed to the Gaming Control Board. Instead, they would prefer to see that information provided to the sportsbooks in question.
Similar to Poker Backing Agreements
Gaming experts believe a system could be set up which would be quite similar to the backing agreements common in the professional poker tournament circuit. Several big events happen every year in the poker world which require an entry fee of $100,000 or more. Despite their skill, most professional card players are not going to want to risk so much cash. Therefore, those pros can line up backers who pay all or part of their entry fee, in exchange for a percentage of the winnings (if that player has them).
The same could be done for sports betting, though in a much more regulated way. Investors could back proven winners, who then would make the decisions based on their own oddsmaking calculations. Investors would be paid out a percentage of the winnings.
Comparison to Mutual Funds
From the perspective of the investor, gambling attorney Bruce Leslie says such arrangements might work the way mutual funds work in the investment world. In that scenario, Mr. Leslie says that the sports gambler would fill the role of the “fund manager”.
At present, Nevada is one of only four states which allows legal sports betting, along with Delaware, Oregon, and Montana. All four states are allowed sports betting, due to provisions of the Professional and Amateur Sports Protection Act or PASPA. New Jersey is attempting to legalize gambling in the state, challenging the federal ban imposed on it by the PASPA law.
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