Gambling Commission In-Play Integrity Concerns

The debate about Sporting Data and their business model continues in the blog and Twitter worlds, as well as mainstream media, although old media in general appear to have no clue about the issue, confusing it with match-fixing which is clearly nonsense as I have previously written.

Sporting Data are not doing anything legally wrong, but:

“Is it fair play and is it morally the right thing to do? I wouldn’t think so,” the founder of online betting company Sportsbet Matthew Tripp said. “But I wouldn’t call it illegal.”

And I wouldn't either. Sporting Data, and reportedly others, have clearly invested much time and money into exploiting this opportunity, as they are quite entitled to, but there are some serious questions that should be asked.

The media also seem obsessed with the idea that Sporting Data's clients are betting on points. They aren't - they are betting on the match outcome, but with the advantage of being a point or so ahead of many.

Hejik commented:

A hot topic and some interesting points raised. I don't think Betfair operations are really ever called into question quite as much as they should be. Considering this style of operation would run into "Super-PC" very quickly indeed, it certainly makes one wonder if (a)there is some kind of "agreement" in place (wouldn't be the only "agreement" Betfair have with a customer) or (b)indeed they are levied the full PC amounts but happy to pay it regardless as there is no risk involved whatsoever. If losing weeks are not an option then PC is in fact no problem at all. It's merely an inconvenience, like Income Tax. Also, I'd suggest this arrangement suits Betfair all ends up (tight markets, illusion of liquidity, regular income) Questions clearly need asking before they can be answered but I'm struggling to see Betfair's motivation for making them go away.

So one question to be asked is if there is a special arrangement in place for former employees or certain companies and their clients to somehow be exempt from the Super Premium Charge. As Hejik says, if there is minimal risk in their trading strategy, then perhaps Sporting Data's clients are happy to pay the charge. Perhaps, but another related question is this.

Many traders found themselves left high-and-dry when Betfair introduced their Premium Charge and again by the Super Premium Charge. Several had given up jobs to reap the rewards of full-time trading, only to find that overnight the rules had changed significantly. Would Sporting Data's directors, and others, have been so willing to take the risks involved in setting up their businesses without some kind of guarantee that the goalposts would not be moved again, or at least not for a minimum period? 

The £250,000 limit on winnings is one variable that could easily be changed in an instant to any lower figure, and while exchanges proudly claim not to ban winners, at least one exchange has been accused of doing so, as was discussed a little over a year ago, and there's no reason why others shouldn't do this in the future. It would be a huge risk to give up a career (or three) for an enterprise that could be stopped in its tracks at any moment.

In fact, it may well be in Betfair's interests to ban winners in some instances. Anonymous left this comment:

One also wonders if Betfair has any kind of a business relationship with Sporting Data?" Many courtsiders I talked to along the past years, they all have the same suspicion: someone out there is still faster than them. It has to be somebody on the court, of course, but also with some kind of technical advantage. There are two theories: it could be someone related to the ATP circuit, who enjoys a fast dsl connection wherever he is, while the other courtsiders rely on unstable 3g/4g connections. Or Betfair is getting their cut on the markets using a third part - somebody with a little plus that allows them to put their hands on the money a bit faster than anybody else.

I'm not feeling too much sympathy for court-siders being beaten by other court-siders, (and hard to see how any technological reason would explain a five second delay) but another, or possibly the same Anonymous, had this to say:

Superb article. Would not surprise me if Betfair are taking a cut of courtsiding profits . In effect Betfair are killing off the exchange as they have run out of people to bleed dry.

G added:

Great piece again, however it does leave me wondering if there is any chance for the ordinary punter in these markets where syndicates with models are operating? Talk about being up against it, cant see the field ever being level though.I suppose like sharks they'll always need the little fish to feed off- so, easy solution, all the small fish (casual punter)should leave Betfair now..:) I've also found the NBA in-play markets virtually impossible nowadays so back to pre-play markets for me as well- perhaps 10 team accas are the way to go......:)

The NBA markets are different this year. For example, if the true price is 2.0, the back and lay prices available are 1.8 and 2.2. I haven't traded them so much this season (getting old, need my beauty sleep) but when I have, this is what I see. Someone with access to real-time data appears to be mopping up anything of value. It would be interesting to know if liquidity is down on the NBA this season. As for the 10 team accumulators, they are certainly NOT the way to go :)

It's not in Betfair's interest to publicise that some users have, quite legally, access to price-changing data several seconds ahead of others, and are regularly beating the countdown. They have to put their disclaimer out there of course, and hope that like most small print, it is widely ignored.

Betfair want their customers, and also the Gambling Commission, to believe that the playing field is almost even. There will always be some ahead of others, but so long as the time between the first and last is less than the countdown, then the field is playable.

Some readers may remember the X-Factor 'scandal' of 2011, when the Gambling Commission found three Virgin Media Inc. employees had misused access to company data on telephone voting on last year’s edition of the television talent show to bet on which contestant would be eliminated. They were caught after Betfair flagged suspicious betting patterns. While the data from the Australian Open isn't technically inside information, it certainly isn't information that is (for a few more seconds at least) in the public domain. Again, nothing illegal about being the first one to see the news, but surely Betfair can see that allowing a few sharks to consistently clean up isn't a sustainable strategy.

There are some out there who claim that the presence in the markets of such organised opposition is just a minor inconvenience, but this is somewhat disingenuous. On any given day, anyone can of course win money in any market, but it should be obvious that if someone is consistently, say ten seconds ahead of you, any bets you are matched at will be bets being made at poor value. Poor value doesn't mean a loss in any one market, but it does mean a loss in the long run. No one can beat poor value over time - it's kind of what 'value' means. The exception does not prove the rule, and while Matt's (@puntdotcom of the now dormant punt.com) big win last night on Ana Ivanovic's win over Serena Williams was fantastic (although very disappointed to read on Twitter that he "did an Iverson" and locked in his profit at poor value...), it comes despite the presence of syndicates in the market. Incidentally, with the sums involved for Matt, doing an Iverson wasn't unreasonable. It may not have been optimal, but understandable.   

The Sultan is one proponent of this dangerous idea, but as a trader who has, by his own admission, worked with a set-up similar to that of Sporting Data in the past, we should be wary. Anyone with access to fast data of course has a reason to take this approach and do what they can to encourage 'normal' people to keep playing the markets. After all, if there are no tiddlers in the pool, the sharks will die, but to imply that Mr Normal has just as much chance of success as those with fast data is nonsense. In fact, one now wonders how much of the Sultan's turnaround in fortunes is due to this big advantage. Quite a lot, I suspect. There have certainly been several posts hinting at something a little secretive was going on.

January 2013:

I've had a very interesting offer put on the table for me. I've been given the opportunity to trade with a bigger bank. Basically, I've been approached through this blog by someone who is willing to risk their own money in order to take a share in my profits. I won't go into exact specifics of the deal but it is still being discussed before we come to an agreement on all aspects. Suffice to say, I'm a tad sceptical but at the same time, very excited. If this goes to plan, I will be able to make significantly larger profit than I have so far been able to accrue, due to my relatively small trading bank, even accounting for the shared profits. This was something I was not going to reveal on the blog but as the interested party shows no problem with it, I don't see why I should keep it a secret.

And now we know more. I'd be excited at trading with data ten seconds ahead of most people too! I hope this significant edge was revealed to prospective Sultan Academy members though, otherwise a few people might be claiming refunds due to a lack of full disclosure.

The nature of gamblers, as opposed to investors, is that they will bet despite the odds being against them. There's a reason that casinos and bookmakers thrive, but the arrival of exchanges a decade or so meant that the sharp-minded (Betfair's words, not mine) could make a profit. In-play was a revolutionary idea, and one that has been very kind to many of us, but the revelation that this kind of activity is taking place is sure to raise questions and if Betfair and other exchanges don't close the loophole, lawmakers likely will.

The Gambling Commission's mission statement is "Keeping gambling fair and safe for all" and their 2009 report into in-play betting wasn't wholly accepting of it in my opinion, but took more of a 'we'll let it go for now and keep an eye on it' approach. Much emphasis was on making sure that bettors were aware of the risks, and that not all data-feeds are born equal.

At the risk of ruining the ending form you all, their conclusion was this:

Although in the last 18 months we have received few specific complaints about particular aspects of in-running betting we have heard from those who have general concerns about in-running betting in the context of the three licensing objectives. However those concerned did not provide much by way of specific evidence or corroboration of those concerns. From the evidence we have received and considered to date, we have come to the conclusion that the current regulatory regime we have in place for in-running betting is sufficient and does not need further controls at this time. However we will continue to monitor in-running betting as part of the Commission’s compliance programme. Particularly we will focus on developing information sharing under licence condition 15.1. We will address in-running betting’s potential for facilitating cheating as part of the Commission’s wider efforts to maintain integrity in betting. 

Other highlights include:

In-running betting offers some increased potential for individuals to exploit this form of gambling illicitly for their own benefit. However, other forms of betting and gambling also have the potential for such exploitation. On the information currently available the Commission does not consider that in–running betting requires special regulatory treatment but it will be addressed as part of the Commission’s wider efforts to maintain integrity in sports betting.

Note the '"On the information currently available" qualifier. Five years is a long time, and it will be interesting to see how this week's revelations are received if they are to fulfil their duty to keep gambling fair. There's a difference between betting into a 110% over-round, and betting against someone who knows what just happened. As the Commission's report said:

Although betting with varying levels of knowledge and skill is not unfair in itself, there may be a problem where betting customers perceive their chances to be better than they actually are due to a lack of knowledge of the in-running betting in terms of the subject-matter itself or the actual market and how it operates. 

I think the scenario being discussed might fit under the 'may be a problem' section. The report continued:

At present, operators set a time delay so that when a customer places an order for a bet in-running they will have to wait a number of seconds between pressing the ‘place bet’ button and receiving confirmation that the bet has been made. This is done in order to ensure that the odds on offer reflect the progress of the event and that bets made are a true reflection of what is happening with an up-to-date market. It should be noted that there is a difference in reasoning between traditional bookmakers and betting exchanges – exchanges put in place a standard delay to protect customers, traditional bookmakers put in a delay to ensure their own prices are correct. This delay usually covers the time delay in the speed of feed that is being used to adjust the market and a small margin to enable the operator to react to a significant event.

Are bets being matched at odds that reflect the 'progress of the event'? Is the time delay in place enough to protect customers? And more:

It has been suggested to us that the ability to obtain information ahead of the rest of the market would constitute an unfair advantage. This could apply to betting customers with shorter time delays on their feed showing the event, or equally to the betting customer who is betting while actually at the live event. The counter-proposition is that provided that customers are fully informed of the risks that they run, they should be free to decide whether or not to bet.

 The Commission would not take action against technological advances per se unless the risk to the licensing objectives were proven or probable. On the basis of our information to date there is an insufficient case in relation to any threat to the licensing objectives for regulatory action over the use of technological advantages such as differential feeds or use of bots. 

Information to date. By allowing certain individuals or syndicates to profit from a timing loophole, even if currently totally legal (but 'morally questionable'), Betfair risk the regulatory implementation of a complete ban on in-play betting, and many sharp-minded traders, and indeed Betfair, would lose out. Their integrity team knows who the consistent winners are, but it appears that for some reason they are turning a blind-eye to it. If the Gambling Commission are doing their job, and it's hard to imagine they are not following the news from Melbourne last week, we should expect some changes. The status quo may not be illegal, but it is clearly unfair.

Update: Just noticed an interesting post by Ballabriggs on the Betfair Forum, pointing out something I had missed:

1) Sporting Data is a company providing sporting data and services to certain individuals. Our clients use the information provided to place bets.

3) We use mathematical models to assess the probability of a match outcome. Bets will be placed when the odds generated by the model are significantly out of line with the market. A lot of syndicates use a similar methodology. Clearly, we need the most up to date information to generate accurate match probabilities. We cannot rely on TV pictures as they are out of date.
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There's another rather large rat that has been lovingly dipped into the bog of eternal stench right there. In the first bit they claim that the company is one which is in the business of providing data and services TO its customers, and then saying it is their clients who use their data and services to influence their trading. The second bit says that Sporting Data itself is using mathematical models, and placing bets according to those models, and that "we" [sic] need the most up to date info to do what they're doing. Maybe in the 60 seconds between writing parts 1 and 3 to their statement, the goblin king had cheekily Oublietted them.

They've basically left Betfair having figured out what they thought was a way to make big money using a non-skill based edge from the Australian Open (amongst others). It really is time for Betfair to put these clowns to the sword.

It is the tightest and most competitive environment there is and we have invested a lot of time and effort to become competitive.

should read

"It is the tightest and most competitive environment there is, and we have invested a lot of time and effort paying for flights and hotels, sending young people around the world, and finding the best devices to hide on their persons, using the finest creative tailoring we could find, to take advantage of loopholes which we think will get us to be able to try to beat the clock from the Australian Open".