Online Sports Betting: A Long Term Wager

Now that the U.S. Supreme Court has ruled that states can’t ban online sports betting, we wanted to help Barron’s readers prepare for the rise of sports betting as the next big alternative asset class. For Online Betting the World Cup final match on Sunday, when Croatia will face France, the French are strong favorites. At the online bookmaker bet365 on Friday, Online Betting it cost you 250 to win 100 on a French victory, while you had to risk only 100 to win 200 on Croatia. I left out the dollar signs on those odds because they can’t take Americans’ bets.

The difference of 50 in the payoffs is the sports-bookmaker’s "vigorish," which corresponds to the spread between Buy and Sell quotes that provide the profit for market makers in our financial markets. For sports bettors, Online Betting the Vig is more expensive than the spreads on a typical Wall Street stock trade. But the growth of online betting mostly illegal in the US has started to shrink the Vig below 10% in some places, which should eventually make betting a better deal for bettors.

That’s what you’d expect, says Toby Moskowitz, a professor of finance at the Yale School of Management and one of the principals with the $226 billion hedge fund manager AQR Capital Management.