Post on 21-Dec-2015
• as old as organised sport itself
• sometimes home-made
• sometimes betting syndicates
• historically a purely domestic crime
Match fixing
A new world
• online changed the betting market
• size of the global market has increased
• stakes increased faster
• competitive environment
Asia• market is globalised• Asian domestic leagues discredited• honest competitions in Europe and
Australia• attracted more betting interest in
Asia than at home• Asia provides liquidity that
supports potentially high profits from fixing
• a very international crime• event on one continent, bets on another • regulation ineffective• international organised crime:
• organise• synchronise • manipulate
• Bochum:• +300 soccer matches• 12 European countries (+Canada) • most bets placed in Asia
Asia
• won €19.5m and spent €12m• Asian markets - large stakes• Turkish fourth division - staked €36,000• up to €300,000 on Belgian second
division match• player wages are very low• situation is structurally “made for
corruption”
Asia
• fraudulent money outside jurisdiction
• own bettors defrauded
• better understand the Asian market
Asia
• sports betting illegal in nearly all jurisdictions
• same in Britain prior to 1961 • today in USA except Nevada• participation in betting is still
high in the presence of prohibition
Asia
• street bookmakers with local focus• not enforceable by law• agents to recruit and maintain
clients• Koleman Strumpf - five illegal
bookmakers in New Jersey• American model similar to Asian• American bookmakers seldom
hedged• pass bets upwards to manage risk
Asia
Today...• structure adapted to online• four online supra-national operators • aggregate bets from super-agents• local bookmakers - virtual franchisees• supra-nationals use e- and m-commerce• SBOBet & ibcbet largest bookmakers in world• gross gaming revenue more than double UK
bookmaker William Hill’s • Cagayan - a special economic zone of the
Philippines• lax in terms of regulation
European & R.O.W.
Sportsbooks
SBObet IBCbet 188bet
Other Asian
Bookmakers
Hedge Hedge Hedge Hedge
Trading F
low
Trading F
low
Trading F
low
Trading F
low
C L I E N T SC L I E N T S
Master AgentMay act as a sportsbook
Master AgentMay act as a sportsbook
Master AgentMay act as a sportsbook
National
Super AgentMay sometimes act
as a sportsbook
Super AgentMay sometimes act
as a sportsbook
Super AgentMay sometimes act
as a sportsbook
Super AgentMay sometimes act
as a sportsbook
Regional
AgentAgentAgentAgentAgentAgentDistrict
Betting Syndicates
Larger Staking Clients
Legal betting in China
• Sports Lottery one of two national lottery operators licensed in China
• offers sports betting in the largest market in the world
• but unappealing to serious bettors
• no single match bets
• only parimutuel combination bets
• pay-back rate only 65%
• winnings subject to income tax
• does permit single match betting on NBA
• foreign websites often blocked
• unattractiveness of legal product
most sports betting business in China is captured by local underground operators and international websites
Legal betting in China
• Japan, South Korea, Hong Kong and Singapore
• Singapore - serious money diverts to international market
• Philippines - operators ‘hoover’ up money from all over Asia
Legal betting in China
Differences between European and Asian bookmakers
• business models:• Ladbrokes (European)• SBOBet (Asian)
• European - position takers • Asian - book balancers• contrasts in a number of
dimensions
Ladbrokes SBOBet
high margin low margin
low volume high volume
exclude sophisticated traders
sophisticated traders
low maximum stakes high maximum stakes
major product is 1x2 major product is Asian handicap (hang cheng)
changes odds infrequently changes odds frequently
All these features hang together…• position taker - exploits
superiority in evaluating probabilities over naive client base
• book balancer - maximises turnover, no reason to exclude informed traders
• Asian handicaps provide binary outcomes - easier to balance the book
Empirical support
• Grant and colleagues:• recorded odds on 2,132 matches
in six major European soccer leagues during 2012-2013
• odds were recorded at eight fixed points in the betting process
• from one day to one second before kick-off
Margins• even in 1x2 betting, overround was
lower at SBOBet (mean at 1 second: 6.4% versus 7.7%)
• understates relative tightness of Asian odds
• SBOBet volume dominated by Asian handicap betting where overround is close to 2%
• Ladbrokes offered similar overround on Asian handicaps as on 1x2
Frequency of odds changes
• mean number of price changes per match was 0.795 at Ladbrokes and 5.360 at SBOBet
• price changes at SBOBet were a strong predictor of price changes at Ladbrokes at the next data point (but not vice versa)
• the results of the model confirm that Asia is the leader and Europe the follower
• but Ladbrokes responds to movements in SBOBet prices only above a threshold
Efficiency of the odds
• odds predict match outcomes more accurately as kick-off approaches
• kick-off odds at SBOBet predict match outcomes significantly more accurately than kick-off odds at Ladbrokes
• if SBOBet is book balancing, this implies that smart money in Asia drives the market towards efficiency
• why do Asian operations provide a threat to European sport?
• two features of Asian markets:• high liquidity • weakness of regulatory framework
Asia
Liquidity• volume of betting on European sports
in Asia dwarfs that in Europe itself• Liquidity defined by ability to make a
series of transactions without driving price against the investor
• liquidity is the friend of the fixer - permits large stakes at favourable odds
• in-play and pre-match markets facilitates larger stakes
• fixers will exploit both markets
• high liquidity • unregulated betting market• honour their liabilities• no ‘know your customer’ requirements• accept large aggregations of bets• most customers are betting illegally• agents have incentive to accept bets from fixers• promotes corruption
Asian betting markets are at the core of the crisis of integrity and credibility faced by European sport
Liquidity
Monitoring betting markets
• ‘petty’ criminals within sport• likely to use domestic betting
markets• fixing is relatively straightforward
to detect• French handball case:
• volume of betting • concentrated in the home town of
one of the teams
But….• organised crime will always bet on Asian
markets• monitoring agencies cannot observe quantity,
only price (odds)• movements of odds must be interpreted in
terms of how much money is flowing• on high profile events several hundreds of
thousands of euros might not shift odds perceptibly
• monitoring of Asian markets is essential• quantities wagered on European markets -
there may be echoes of what is happening in Asia
In defence of Cagayan (!)• biggest villains...?
• relatively transparent legal tip to traditional pyramid structure
• supra-national operators display odds and maximum that may be placed at these odds
• raw material which enables agencies such as SportRadar to pick up just what is going on in Asia
• offers some scope for protecting soccer where the majority of volume originates in East Asia
• not just soccer - cricket and tennis• America does not appear to have
experienced the same upsurge in corruption seen in the rest of the world
• domestic fixes in college sport have not gone away
• fixing in mainstream sports does not appear to have surged
America
• protected by the unpopularity of its sports• lack of betting interest in Asia• heavy domestic betting on American sports in
an illegal market • structure deters fixing because bookmakers
and bettors know each other almost personally
• American sports are actively seeking to promote themselves in Asia
• Asian bettors may move on to American sport in search of ‘honest’ wagering?
America
The long run• large-scale fixing depends on high liquidity in
betting markets which are unregulated and non-transparent
• the more jurisdictions which provide legal, well-regulated markets offering odds which attract the bettor, the less liquidity will be available in illegal and ‘grey’ markets
• starving illegal markets of liquidity is one of the few policy approaches capable of mitigating threats to the integrity of sport and betting
• other policies can secure short-term results• new criminals will eventually replace the old