-Matt Cox
Nearly two months have passed since COVID-19 took our proverbial ball and went home. Left empty handed with all sports parked on the shelf, we shortly followed suit and retreated to our own humble abodes – but unlike the quiet coronavirus assassin, we stormed off kicking and screaming…
As much as this whole thing sucks, for most of us the damage is merely spiritual. For casinos and sportsbooks, many of whom operate around the clock 7-days a week, the pandemic cuts much deeper. Articles detailing the economic impact to the gaming industry are ubiquitous, but this detailed breakdown by Jay Ginsbach at Forbes.com revealed a few jaw-dropping data points – since this is a college basketball website, I picked out the figures specific to March Madness:
In Nevada, the amount of betting activity generated during the first three days of March Madness, the NCAA Tournament’s opening weekend, stacks up with the volume of bets placed on the Super Bowl. For context, $155 million was bet on this year’s Super Bowl LIV showdown between the Chiefs and the 49ers in Nevada alone.
Last year, the 2019 NCAA Tournament brought in $349 million of wagers in Nevada, generating net profits of $37 million. In New Jersey, the total handle hit $372 million, which produced a net profit of $32 million.
Consider these estimates in the context of a 2020 gambling universe, where 17 states now have legalized sports betting. While Nevada and New Jersey dominate the overall share of the U.S gambling pie, the money left on the table elsewhere across the country was enormous.
From a gambling perspective, college basketball’s marquee event has ballooned into a booming business for sportsbooks all over the country. However, for the casual sports fan, college hoops remains an afterthought for most of the season. Only the diehards test their luck in the betting battleground during November and December. Most *generalists* prefer to cozy up in other arenas, such as the NFL, college football and the NBA. This dichotomy in fan interest between the non-conference portion of the season and the mayhem of March Madness is a relevant backdrop for the college basketball betting market.
Inspired by this fascinating nuance (along with accentuating COVID-induced boredom), I whipped up my own elementary tale of ‘the evolution of the college basketball betting market’, which hones in on two key questions:
How have sharps shaped the efficiency of the college basketball betting market? (the past)
How are sportsbooks adapting their business models in response to sharp action? (the present)
Note that for many of you, a lot of what you’ll read below is yesterday’s news. Professional bettors and advantage players are already privy to many of the trends identified below. This analysis overlays relevant data - specifically, historical line movement - to underscore those observations.
1) Since 2008, the college basketball betting market has seen a spike in volatility, evidenced by the rise in average line movement from opening to closing spread numbers
The chart to the left shows the average line move per game by season for Power-6 conference games. Isolating Power-6 conference games creates an ‘apples-to-apples’ comparison across seasons. This is a necessary adjustment because oddsmakers only recently began making numbers for nine of the 32 conferences over the course of the entire season. For instance, prior to 2019, you had to wait until the conference tournament or the NCAA tournament to bet on a SWAC or MEAC team. Since these low major leagues are prone to massive overnight line moves, honing our focus on the Power-6 reduces this noise and enables us to clearly observe the average line movement trend over time.
With that established, how do we both interpret and explain what’s happening in the chart above? There’s a clear upward sloping trend in the early part of this series (2008-2017), but that trend starts to reverse course by 2017. Without jumping to any definitive conclusions as to what’s driving this, here are the key factors we know impact line movement:
The precision of the oddsmakers’ opening lines
The precision of bettors’ handicapped lines
The oddsmakers’ propensity to move the line
Let’s isolate the first two factors above. It’s safe to assume that oddsmakers are getting more and more precise in setting their initial numbers. The same assumption applies to bettors, who are undoubtedly getting smarter and smarter in their own handicapping precision. This is a function of both oddsmakers and bettors gaining access to more data, as well as continuously recalibrating, retuning and improving their respective handicapping methodologies.
But, who’s improving at a faster rate? The bettors… or the oddsmakers…
Based on the upward sloping trend line from 2008-2017, one might extrapolate that bettors are improving at a faster rate than the oddsmakers. Again, removing the aforementioned third factor from the equation, the fact that the average line moves are increasing in magnitude reveals that sharp bettors are pouncing on ‘softer’ lines at an increasing rate. If the opposite were true, we’d likely see the average line movement decline overtime, which would imply oddsmakers were posting efficient opening lines that offered little value for sharps to attack.
2) Oddsmakers are now facing immense pressure to limit sharp bettors’ talent and information advantage, prompting many operators to shun sharp action all together
Over the last three years, as seen from 2017 to 2020 in the chart above, the average line movement per game appears to have reached an apex. Does this mean oddsmakers have finally caught up to their competition across the counter?
It’s a fair hypothesis - one that might hold some weight in isolated pockets - but this is where the third factor, the oddsmakers’ willingness to move the line, comes into the fold.
While bettors are innovating their handicapping methodologies at a torrid pace, the oddsmakers have been slow to keep up. There’s a common misconception that sportsbooks, particularly operators here in the U.S., house armies of MIT- and Harvard-educated quant modelers.
In reality, the smartest guys in the room don’t work for the house. They bet against the house…
Rather than employ a crack squad of genius line makers, many sportsbooks are now gravitating towards a ‘risk mitigation’ business model. Instead of investing in top-tier bookmaking talent, these operators are content to copy and paste the opening lines posted by others, specifically BetCris and Pinnacle, the two offshore market leaders. CRIS and Pinnacle are a dying breed in today’s industry. They welcome sharp action with open arms, allowing anyone to bet into their numbers before any other book on the planet opens.
After early betting action at CRIS and Pinnacle sharpens the opening numbers, the rest of the sportsbooks will then post their lines using CRIS and Pinnacle as guideposts. Odds are the vast majority of you bet through either an independent bookie, an offshore account (5dimes, Bovada, BetOnline, etc.) or one of the few domestic operators (DraftKings and FanDuel). The lines you see at your book are heavily shaped by the opening numbers and early sharp action at CRIS and Pinnacle.
Risk mitigation focused operators are able to combat the bookmaking talent ‘brain train’ by simply trailing CRIS and Pinnacle, which reduces the need to hire an A-plus caliber bookmaking team. However, the other way these guys limit their risk exposure, which is a hot button topic in the world of sports betting right now, is by simply turning away sharp action all together.
In this instance, if a sharp bettor or large syndicate establishes a consistent track record of winning, the book can simply deny their business. William Hill has been labeled as public enemy number 1 in this regard, who has established a reputation for banning deep-pocketed wise guys from wagering at their book. However, many other sportsbooks are also leaning towards the same model, one that’s geared toward attracting large masses of casual bettors and filtering out proven winners. If these books tag you as an advantage player, there’s a chance you’ll eventually be turned away. This has prompted many high profile professional bettors to express their discontent on radio, social media and other platforms to try and inform the public on what’s happening behind the scenes.
Bringing this all back to the line movement data in the chart above, specifically the 2017-2020 timeframe, this explains why the average line movement per game is leveling off. Sportsbooks are increasingly shunning sharp action all together, which is compressing the line movement volatility seen in the marketplace.
This is a troubling trend for those aspiring to be professional bettors, but it’s a tough pill to swallow for all bettors. Everyone who wagers does so with the hope that they’ll win and win over the long run. The notion that any bettor could reach that level of success and ultimately be shut down by a sportsbook rejecting their bets is disheartening.
Luckily, not every sportsbook under the sun is following this path. Circa Sports is a prime example. Circa’s attempting to emulate ‘the old school’ way of booking, akin to the Pinnacle and CRIS models in which all wagers are welcome. Circa paid top dollar for a blue-chip bookmaking team, which enables them to post stronger lines earlier than the vast majority of other operators. Professional bettors everywhere are rooting hard for books like Circa to gain traction because if the William Hill model prevails, their livelihoods could be in jeopardy.
*Special thanks to Matt Lindeman for his insights, which informed and sharpened my perspective above*