Nothing galvanizes the casual bettor like the Super Bowl, and consequently nothing provides a better yardstick for the growing popularity of online gambling than pro football’s championship game. And dubious legality notwithstanding, millions of Americans will log onto their computers before 6:30 p.m. ET Sunday to either place traditional bets or engage in new forms of gambling that can’t be found at land-based sports books.
A spot survey of online gamblers and wagering sites by MSNBC.com indicates that a growing number of sophisticated bettors will get their action on Sunday’s game between the New England Patriots and the Philadelphia Eagles through new forms of wagering ideally suited to the Internet, such as spread betting and peer-to-peer wagering.
Others will use techniques perfected by Internet “day traders” during dot-com boom of the late 1990s to try to squeeze profit out of the game, just as they once did by timing market fluctuations.
‘The squares are inevitably wrong’
The “whales” of the murky ocean that is online gambling also will be out in force, looking to make a killing by outsmarting the neophytes and casual bettors venturing into their waters.
“As a rule, the odds on a football game don’t move off square business – meaning grandpa, grandma and your little sister,” said Russ Hawkins, who runs the MajorWager.com. “But the Super Bowl is so big that it does. And that makes the pros lick their lips because the squares are inevitably wrong.”
No one can say with any certainty how much will be wagered over the Internet on Sunday’s game, but Sebastian Sinclair, an analyst with Christiansen Capital Advisors who has tracked the online gambling sector almost since its inception, says the total will be in the neighborhood of $450 million, an increase of $50 million from the $400 million he estimates was bet online last year.
If his educated guess is accurate, that will be nearly six times as much as is bet legally in Nevada, the only state that has legal sports betting. Last year the Silver State’s 152 sports books accepted a record $81.2 million in wagers on the game, turning a profit of $12.44 million for three hours of football.
“Internet gambling has reached a critical mass,” Sinclair said. “If you went out on the street and asked people if they know they can gamble online, the majority would say ‘yes.’ That wasn’t the case five years ago.” That reflects the online gambling industry's evolution despite the government’s position that sports betting is illegal under the federal Wire Act of 1960.
A handful of market ‘movers’
On the upper rungs of the hidden economy are a handful of gambling syndicates that dominate online gambling.
“There are only about five movers, or big operators,” said Harris.
The syndicates have an army of operatives who, when they decide they want to bet at a given price, fan out and get as much action as they can at the hundreds of offshore Internet sports books, he explained.
This in turn creates opportunities for bettors schooled on stock market day trading, many of whom have betting syndicate contacts that enable them to get a jump as the “market” on a particular sports event shifts, he said.
“A lot of the guys who are day trading want to know where the big money is going so they can get in quickly,” Hawkins said. “… When a well-respected book moves a team from -4 to -5, the guys will lay a bit and -4 at other books and hope it goes to -6, then take the other side.”
Ideally, the sport trader wants to have equal amounts on both sides of the equation -- meaning that at worst the bet will only lose the bookmaker’s cut -- and a spread of several points between their positions. That gives them an opportunity to “middle” if the final score falls within the spread, an outcome that would enable them to collect both bets.
“In order to break dead even, out of 100 times they do this, they have to have five hit a middle to break even,” Hawkins said. “Anything more than that and they’re ahead.”
Sports futures a hot commodity
Other sports bettors schooled in the stock market prefer spread betting, a futures-type market that revolves around the shifting probabilities generated by seasons and games.
John Murray, a 38-year-old financial trader from Morris Plains, N.J., said he enters the game having already realized about $20,000 in profit thanks to his early assessment that the defending Super Bowl champion Patriots would again be a force to be reckoned with.
“I’ve been buying long-term contracts on New England all year long, so now I’ve been getting out and locking in my profit,” he said.
Murray, a regular on TradeSports.com, said he bought $10 futures contracts on the Patriots to win the Super Bowl at the beginning of the season for between $1.40 and $2.50 and has been selling them for about $7.10 over the past week “because it’s getting to the point where the risk vs. reward isn’t as great.” At the end of the game, the contracts will either be worth $10 or nothing, depending on the outcome of the game, which the Patriots are favored to win by 7 points.
Instead, he said he will concentrate his firepower on various proposition bets and in-progress wagers that can change with each play.
“I’ll be watching the game with my laptop right there and I’ll be trading almost every play,” he said. “Let’s say the Eagles score the first touchdown, the market will reform and maybe say now they have a 50 percent chance of winning. … Then, if the Eagles are marching down the field, the market will keep moving after every play.”
An end run around laws?
While the legality of such market-type betting exchanges has never been tested in court, most Internet gambling experts say they are probably illegal under U.S. and various state laws. But a new player in the sports wagering space claims to have a technological solution that makes an end run around the laws.
“We just got a legal opinion from one of the top gaming lawyers ... that unequivocally states we are not operating in violation of the U.S. Wire Act,” said John O’Malia, CEO of BetBug.com.
BetBug, which is operated by the Toronto-based Ix Inc., has been taking bets for just over two months and bills itself as the “Kazaa of sports betting,” a reference to the similarity of its peer-to-peer (P2P) architecture to that of the file-sharing network.
The system allows bettors who want to take opposite sides in a game to make a wager, and ensures the winner will be paid. But O’Malia said that since BetBug only provides a platform for the wagering, and its payment processor charges a “transfer fee” to settle debts rather than taking a cut of the action, the company is not acting as a bookie.
“I’ve never been a gambling guy,” said O’Malia, an American who studied economics at Indiana University and worked as a stock trader before becoming involved in online betting. “I come from the markets and I’ve never wanted to act with the intention of violating U.S. law.”
O’Malia said that as of midweek most Super Bowl wagering on the site was focused on the outcome of the game rather than on proposition wagers, and that the action indicates many big bettors are siding with the Eagles, plus 7.
Big bets coming in on Eagles
“We are seeing bigger bets on the Eagles being matched by a larger number of smaller bets on the Patriots, which is an interesting indicator of who the ‘sharps’ and ‘squares’ are betting on, respectively,” he wrote in an e-mail.
O’Malia said he, too, sees more and more people from the stock market moving into online sports betting.
“They are literally the futures traders of old,” he said. “ … It’s the same mentality and the probabilities change the same way. A guy who knows how to trade stocks knows how to trade sports.”
While the systematic approach of economics and arbitrage theory may be helpful, other gamblers say they rely on instincts developed over years of careful observation.
Mark Royal, 31, an examiner with the Missouri Department of Insurance, said he made $40,000 last year “shopping around different online companies and spotting bad numbers.”
“Some books don’t do a good job of staying on top of the product,” said Royal, who spoke with MSNBC.com on the condition he be identified by a pseudonym. “They don’t notice injuries and don’t notice teams that are hot. At the beginning of the NBA season I got the (Phoenix) Suns at 15-1 to win the Pacific Division and I got the Sonics at 20-1 to win their division.
Royal, who funnels much of his action through the BetWWTS.com site in Antigua, said he will probably have $10,000 riding on the Super Bowl, much of it on proposition bets. He particularly likes several propositions revolving around the performance of Eagles receiver Terrell Owens, who is planning to play in the game just seven weeks after suffering a broken fibula and damaging an ankle ligament.
Taking a stand against Owens
Royal is wagering Owens won’t score a touchdown or gain 100 yards or more in the game.
“He’s not going to be a factor at all,” he said confidently, several days before Owens boasted he'll “very effective” in a press conference. “Those numbers are way out of whack.”
Royal said he also may wager during the game, but only if he sees a situation where he believes an online bookmaker is off target on the odds.
“I’ll keep the computer on and if I think I see a bad number I’ll play, but I want to enjoy the game to. I grew up a sports fan and I don’t want to tarnish that.”
Enjoying the game also is important to Seth. S., a 24-year-old banking industry worker from Hebron, Ky. At least some of that enjoyment will derive from the fact that he now has a computer in the same room as his television, and can make bets without racing from room to room.
“I used to wear a path in the carpet,” said Seth, who spoke on condition he not be fully identified. “It was down a hallway and two 90 degree turns, first a right and then a left.”
He said he will probably have between $1,000 and $2,000 riding on the game through the Costa Rica-based BoDog.com.
“I like the Eagles plus the 7,” he said. “I’ll also probably find some sort of play on the total and play about 10 or so of the proposition bets.”
Seth also offers a cautionary tale about the risks of wagering that is available 24/7.
Hard lesson for college student
He said that he and his college roommate began playing online in the winter of 1998, opening an Internet sports betting account and depositing $500 apiece after watching an HBO special about online gambling.
“We both ended up losing our money,” he recalled. “He didn’t get back in but I stuck with it.”
He said he started out Round 2 by betting $1,000 on a “sure thing”: Tennessee to beat the University of North Carolina-Charlotte in the 2001 NCAA men’s basketball tournament.
“Unfortunately Charlotte won and I didn’t know how to handle that well so I chased and tried to make it back,” he said. “... In four months, I ended up being down $5,000 and came to my senses.”
The experience helped Seth add discipline to his wagering game plan.
“It helped me realize that it’s not worth the stress that it created when you’re down a bunch of money,” he said.
Stan Z., a real estate broker in Orlando, Fla., agreed that it’s never wise to bet more than one can comfortably afford.
“Fortunately, I make a very good living and I have a bank account that I can piss away,” he said.
Stan, who also asked that his full name not be used, said even though he knows better he can’t help acting “like a kid in a candy store” on Super Bowl Sunday.
‘It's a sucker game’
“It’s a sucker game and everybody bets it, but how can you not play,” he said. “I’ll probably have $10,000 to $12,000 on the game on different props (proposition bets). To start with, I always put $500 on the coin flip.”
Not all online gamblers will heed the game’s siren call, however.
Sheryl, a 55-year-old from Shelton, Wash., said she will stick with playing online poker while doing jig-saw puzzles on Sunday in pursuit of her dream of qualifying for a $10,000 seat at a World Poker Tour event or the World Series of Poker in an online satellite tournament.
“With a little knowledge, you could wake up one morning with $5 million in your pocket,” she said.