Profile of An Internet Bookie

prostoalex writes "The New York Times Magazine has a story about one of Internet's most lucrative businesses - online bookmaking. Writer William Berlind travels to San Jose, Costa Rica, where the offices of such online powerhouses as BetOnSports and SkyBook are located. Quite an interesting story about numerous Americans traveling to Costa Rica with the grand business plan of online gambling, US government trying to shut down the offshore gambling operations, and how the bookies operate."

Comments

how silly is the government?

[havaloc]

There's a tremendous oppurtunity for the government to regulate, tax, and profit from this by legalizing it and bringing it back on shore, and help make up budget short falls.

Re:how silly is the government?

[yintercept]

In the war between the government and the bookies, I will give 5 : 1 odds on the bookies...

Re:how silly is the government?

[The Brain Murderer]

But now you are expecting rational thought from people that are elected by the populous and work for business whilst trying not to get caught out with their fingers in the pie or doing something that is 'immoral'.

Were it not for the twisted religous aspects that creep into public life, not only would gambling be licenced and controlled, so would prositution. Imagine the health implications that regular medicals would mean to both the ladies and their clients. That is to say nothing of cutting out the people that introduce drugs as a method of control.

The Brain Murderer

Re:how silly is the government?

[Awptimus Prime]

The same thing goes with drug prohibition.

There's ample, untapped, opportunities for our government to legalize and tax commodities that have no real harm on society, but are illegal for moral concerns.

A 2000 year old book tells you gambling is a sin, so we've got to make sure it's illegal in 2003. It's amazing how far we've come as a society in some aspects, and how badly we've done in others.

I say we ditch all the 'moral' laws and stick to the ones that actual cause harm to others. End entitlement programs (hand outs, section 8, etc). Separate church and state for real. Ditch de-regulation of utilities. Make punishments for government employees who let contributions change a vote extreme. Then sit back and watch America become a better place to live.

Sorry for the bad grammar, it's the thought that counts. :)

Re:how silly is the government?

[leviramsey]

Number one reason sports betting is nog going to be legalized in the US:

It will kill the state lotteries.

Why? Look at the vig on sports betting versus lotteries (the vig is the amount the bettor can expect to lose and is the difference between the money returned by a winning bet and the actual probability of winning). For a typical Vegas-style bet on football against the spread or on an over-under, here's basically the way it works:

A line is set. For instance, tonight's preseason game between the Rams and Bucs has a line of "Rams - 2.5". A bet on the Rams means that, after deducting 2.5 points from their score, you are betting on them to win; a bet on the Bucs is a bet on them to win if 2.5 points is added to their score. Thus a bet on the Rams loses and a bet on the Bucs wins if the score is Rams 35, Bucs 33. Bets (assuming standard Vegas payouts, though many times the payout rates will be adjusted to encourage betting on one side or the other) are paid out on an 11-10 basis, i.e., you're betting 11 to gain 10.

The house will thus (if an equal amount of money is bet on both sides) make a $1 profit on every $22 bet (ie 4.5%).

Now, contrast this with a state lottery. In Massachusetts, 50% of the bet is the state tax on lotteries. An additional 10% of what's left is taken by the lottery as their share, for administrative expenses. Thus only 40% of the money bet on any given game will be returned to bettors in the form of winnings. These figures are not significantly different from state to state.

The end-result of this is that you only need to be right (or lucky) 53% of the time to make a profit betting on sports (when, picking totally randomly, you would be right 50% of the time), but you need to be right 2.5 times as often as random selections would be in order to reasonably expect to break even in a lottery.

One of the great appeals of sports betting is the better odds of making a profit doing it. Indeed, Oregon tried a few years ago to create a "sports lottery", which was sports betting but with payout rates similar to the lottery. No one bet with it.

Re:how silly is the government?

[sketerpot]

You're right, of course---but if you want examples of (in most cases fairly minor) transgressions, there's a list of recent ones. Looking at that list makes me glad that things aren't nearly as bad as they could be. Still, having to try not to look odd sitting through a teacher-led prayer at a public high school graduation (personal experience, two years ago) is not pleasant. And niether is hearing the president talk about the "bridge between church and state".

There was a show about college bookie

[Anonymous Coward]

It was a couple years ago, I think. Anyway, they were showing these college students at places like Ohio State and wherever making $10k a week. I always thought it would be awesome to be a bookie, but you gotta have enough capital upfront to get started.

why illegal?

[siskbc]

I know I tend to a somewhat libertarian bent, but why is online gambling illegal? It can't be the exploitation of citizens - these sportsbooks pay better than state lotteries (which are nearly ubiquitous now). They can't make the "There goes the neighborhood" argument either, as the worst case is some guy looks at porn AND gambles online, instead of going to a casino and getting a hooker. If anything, online casinos could put "real" (and illicit) gambling out of business.

So what's the drawback again?

Re:why illegal?

[Creepy Crawler]

:So what's the drawback again?

The government's not getting their cut.

Re:why illegal?

[imadork]

The constitution gives very few powers to the country, more to the states, even more to municipalities, and the most to the individual.

I think you mis-spelled "corporation" at the end of that sentence...

Or you can make it legal...

[akiaki007]

TraderSport is an online exchange based out of Ireland that basically creates a market on Future Contracts. Very cool because you can buy and sell contracts on a LOT of different things, ranging from Index (DJIA, SPX, etc) to Superbowl winners.

The beauty of it being a true exchange is that you can sell your contract at some point if you don't want to hold on to it anymore. Example: You buy Giants win 2004 Superbowl today which is valued very low, and say the Giants win their first game and the value goes up, you sell it make a couple of bucks and invest it elsewhere.

So...legalized gamling?

You're missing the point

[0123456]

Vice-law enforcement is a multi-billion dollar a year industry (AFAIR anti-drug enforcement alone is a >$10,000,000,000 a year industry in America): if these things were legalised, that industry would vanish overnight, and put many government workers and their cronies out of jobs. That will not be allowed to happen until and unless a major crisis occurs, no matter how sensible it may be.

sports betting and lotteries aren't at all similar

[mblase]

I don't see the government's ban on sports betting as hypocritical at all. The problem with sports betting has always been one of authorizing the results: if anyone has a lot of money riding on a particular game, then he has a motive to rig the game or otherwise pressure the players involved to throw the game. This ruins the betting practice, the game, and everyone else's fun--not to mention making a lot more work for the government's law-enforcement agencies.

Lotteries and gambling devices like slot machines, on the other hand, are required by law to be completely random regardless of who's playing. It's awfully hard to "rig" a lottery when the numbers are being selected by ping-pong balls being bounced by random air jets on live television.

In other words, the government (on the average) has no problem with gambling, provided it doesn't increase the level of associated crime.

But...

[indros]

how do you break someone's legs when they don't make good?

Will answer questions

[yamla]

I worked for a company in 2000 and 2001 that wrote and sold the software to run these companies (well, some of these companies... BetOnSports was using our software at least for a while, several others were as well).

The software isn't particularly interesting but it means I have direct knowledge of a number of items... whether Wise Guys actually exist, how you really can regularly make money as an informed gambler (and why the gambling houses don't care), whether there's any back doors in the software, what language the software was written in, etc. etc. etc.

Ask away if you wish, I'll try to answer any question to the best of my ability. I'm well outside of the NDA now.

Re:Will answer questions

[Knife_Edge]

Thanks for offering, but I already have an unbeatable roulette betting system. You know how you are allowed to bet on colors in addition to numbers? Bet on one, at the minimum bet. If you lose, double your bet to make up your loss. Every time you lose, just keep doubling your bet. Once you win back your loss, return to making the minimum bet.

Yeah, it's a joke. But a serious-faced business major explained this to me. He actually asked to write some stuff down; I thought this meant he had a really complicated system. So I give him the paper, and he starts writing:
5
10
20
40

etc.

Of course the obvious problem with the system is that the probability of winning by betting on a main color is slightly less than 50%, because there are two main colors and then one or two thingies (don't know the technical term) with a third one. Also, while if you win you gain money slowly, if you lose, you lose it very quickly. I wrote a little program to use this method. It would stop once the doubling of the bet would take away more money than it had if it lost (otherwise it would really lose spectacularly). After many runs of this system, the result I expected became apparent. It made money with the same probability as a single bet. The amounts were widely different - but with no change in the likelihood, betting everything you had on one throw was just as legitimate a strategy. This was faster, too.

I never bothered trying to correct the guy. I was so flabbergasted when he showed me initially that I really could say nothing, especially since it was obvious he wouldn't understand me. I suppose the problem was he was having trouble imagining the probability of losing eight or nine times in a row, which, while unlikely, is not that unlikely. It happened every simulated time, of course, usually within a hundred throws, frequently in far fewer, once in the initial eight!

If you are interested in making easy money, I think running a casino to cater to people like this would be much easier than 'informed gambling', whatever the hell that is. Let them think they are gaining some sort of advantage when all they are doing is moving risk around.

Re:Will answer questions

[yamla]

I'll probably post a more detailed message later as a reply to my initial post, going in to a bit more detail.

As to why accounts get closed down, that is entirely up to the specific gambling house. Our software provided them only ways to help determine if the account was a wise guy or not. The only real explanation I can come up with for a legit house to close you down is that they are finding it hard to keep both sides of the line equal. That is, they need about as much money on X-to-win as on Y-to-win. You have to remember, though, that many (most?) gambling houses are run by organised crime so sometimes they're just going to be bastards.

Gambling houses are not generally interested in the true probabilities (which is why some people can continue to make profit). So long as they can collect their juice, they are happy. That way, the house wins regardless of which side of a line wins. Now, NOT every house runs like this... some try to get closer to the true probabilities. However, this is much more risky if the house is wrong. If they instead just try to balance the money bet on each side of the line, they are guaranteed to make a profit.

You wouldn't want the code, trust me. I don't have the code any more, of course, but when I was still working for the company, we had roughly a third of a million lines of code. In Visual Basic 6. Now, I don't like VB at the best of times but I acknowledge that it has its place. Also, VB.Net is meant to be much better. But there's no way you should have that many lines of code in VB6. Maintenance was a nightmare. Although we did put an effort into using a decent design, nowhere near enough effort had gone in at the beginning. That we could maintain it at all (while continuing to add features) was impressive, to be honest.

At least we did use a bug tracking system.

That said, there are no known backdoors. I'm not saying the software was secure because I know full well that it wasn't. But there were no backdoors that we knew about and we minimised the potential security issues for the web-enabled version as much as was reasonable.

What's the problem?

[ajs318]

Gambling at the racetrack is legal. Gambling in licenced betting shops is legal. Gambling in casinos is legal. What's the problem with gambling on the Internet?

Maybe some jurisdictions don't have the same rules of fair play or something ..... I can understand someone might want to limit offshore betting, but surely the proper way to do it is to use a domain name over which you have jurisdiction. EG. William Hill use a secure server with a .uk domain name. They could have that domain name withdrawn if they get a bad reputation.

I certainly can't see anything wrong with gambling per se ..... it's only a problem if someone starts spending more money than they could afford to lose, but you can do that in any number of ways ..... drink ..... fags ..... having kids ..... all of which are perfectly legal!

A proper bet at a bookie's is about one thing: can you weigh up the odds more accurately than the bookmaker? If you believe the probability of an outcome is greater than the odds would suggest, then the bet is justified. On the other hand, if the probability is worse than the odds would suggest {UK Lottery: 1 chance in [49*48*47*46*45*44*43]/[6*5*4*3*2*1] = about 14 million, as opposed to a payout of about 3.5M to 1} then you should steer clear.

And it ain't the government's job to stop people from doing stuff that might be bad for them ..... let 'em learn the hard way .....

"Most lucrative businesses"?

[heironymouscoward]

With a 3% profit margin, life as an exile in a foggy central American jungle, too much drink, too much stress and not even enough time to learn Spanish and enjoy the local nightlife?

Merde, someone's idea of lucrative ain't the same as mine.

I almost have pity on the poor bookmakers, humbly trying to make their million the only way they know how. What amazes me is the Fed's repressive attitude to what is after all simply a service industry. Creating criminals always seems to be good business for government agencies. Allowing adults to do what they want without hurting others, damn, that can't be allowed, can it?

My choice of "lucrative Internet business" would be something involving porn, I guess. That, or selling routers and firewalls.

Ah, yes, San Jose

[K-Man]

The newly remodeled airport is surrounded by chain hotels, freshly paved roads and shiny corporate plazas. After that it goes rapidly downhill.

Yes, that's San Jose in a nutshell!

Wait...Costa Rica?