Upon hearing about sports arbitrage betting, almost everyone has the same reaction. Is it legal?
The concept of making money online by placing bets on the outcomes of sports matches sounds too good to be true. For years, we have been overloaded with ads about ways to make money online that invariably end up being scams of some sort.
It is natural to assume that sports arbitrage betting must be the same. There must be some kind of catch, some reason why the claims are not true. So, is it illegal?
Truth be told, arbitrage betting is actually 100% legal in your country as long as online wagering is permitted.
Arbers are simply placing bets with on good value odds at legal gambling institutions. There is nothing illegal about this.
Where is online betting prohibited?
- Parts of the United States of America
- United Arab Emirates
- North Korea
In Pakistan and Bangladesh, bets may only be placed on horse racing (no other events).
In some countries, it is illegal to operate a casino or gambling institution, but the actual practice of betting online is not illegal, which complicates matters. However, for these countries, it is typically fine to gamble online at websites not domiciled in your country of residence.
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Is Sports Arbitrage Betting Legal in the USA?
In May 2018, PASDA, the law which banned online wagering in the USA was struck down by the Supreme Court. Online wagering legislation now sits with the individual states.
Currently, online betting is legalised in the following US states:
- New Jersey
- West Virginia
- Rhode Island
- Mississippi (only while on casino property)
- New Hampshire
However, the laws are rapidly changing, with more states continuing to legalise online betting.
It is worth noting however, that the number of bookmakers in each state is quite small, making it difficult to find arbitrage opportunities unless you can access the international bookmakers.
Do bookmakers approve of arbitrage betting?
Surprisingly, the answer to this depends on the bookmaker! The reason for this is that some bookmakers can profit from arbitragers.
The point of arbitrage betting is, of course, to make money from the bookmakers but the gains you make are usually not symmetrical across the bookies.
All bookmakers can be categorised as either 'sharp' or 'soft'.
Sharp bookmakers are known for having highly accurate odds with quite low profit margins. They are lightning quick to change their odds in the event of a player injury or similar news that impacts the outcome probabilities of a match.
They typically don't offer any sign-up bonuses or other bonus bets.
Soft bookmakers, on the other hand, are slow to update their odds and are also more likely to price odds poorly (ie. have odds that do not reflect the true probabilities of each outcome occurring in a match).
They have poor odds but they attract customers by providing generous sign up offers and other bonuses.
Arbitrage opportunities usually arise from poor odds provided by a soft bookmaker on one side of a match. By poor odds, I mean that the odds are too generous; the provided odds suggest a lower probability of winning than is truly the case.
To cover the bet on these poor odds, the arbitrageur places a bet on the other outcome using the best possible odds available (to maximise their profit).
The best available odds are usually by a sharp bookmaker (remember that they have the lowest profit margin).
In the long run, the soft bookmaker will lose money (due to their odds not reflecting reality) and the sharp bookmaker will make a profit (from their small profit margin). Of course, the arbitrageur will also make money.
All of this was a long-winded way of saying: sharp bookmakers approve of arbitrage betting and soft bookmakers do not.
Sharp bookmakers encourage arbitrage traders to sign up with them, as they have a very high turnover of cash (ie. place many bets), making them profitable customers.
Soft bookmakers, on the other hand, will do their very best to find arbitrageurs and limit or close their accounts, as they are very costly customers.
If you are not careful, it is easy to find your maximum stake limited by a bookmaker after only a handful of bets.
That is why defensive arbing (using betting strategies to avoid detection) is the most important skill for anyone who practices sports arbitrage trading.
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Disclaimer 1: I am not a lawyer or legal professional and this article does not constitute legal advice. Please discuss arbitrage betting with your attorney to confirm that you are not in breach of any legislation.
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