Arbitrage betting is a strategy aimed at beating bookmakers. But how does it actually work? And does it really harm betting businesses? This article answers these questions and reveals how KYC tools can be used to detect arbers. Let’s get into the details.
Sports betting accounts for 48 % of the US gambling market. So it’s no wonder that this industry faces a large number of gamblers devising strategies to gain the upper hand.
One of these strategies is arbitrage betting, or “arbing”. This is when a player bets on all possible outcomes of the game and makes a profit no matter who wins. Bookmakers consider this to be a risk to their businesses, so they take active steps to detect and restrict it. Let’s dive into the finer details.
Arbitrage betting (or “arbing”) is a gambling strategy that involves placing bets on all possible outcomes of an event in order to guarantee a profit. In a tennis match, this would mean placing two bets: one on each player to win. A football match would require three bets: one on each team plus one on a draw. This can be done by placing bets at different betting companies or at the same betting company. To guarantee profit, arbitrage bettors calculate the right combination of odds and bets, which are called arbitrage opportunities.
Arbitrage opportunities occur when bookmakers imprecisely calculate probabilities. This can happen when the bookmaker:
Arbitrage opportunities can stem from a single bookmaker or from a difference in odds for the same event between several bookmakers. Let’s see how bettors take advantage of these opportunities in more detail.
Let’s take a look at this imaginary sporting event. Due to human or technical error, the bookmaker has set the following odds for the match:
Let’s say the player bets $195:
It turns out that the player will receive guaranteed profit for any outcome of the game due to the inefficiency of the bookmaker’s odds.
To identify arbitrage opportunities such as the one above, players need to constantly monitor the odds of one or several bookmakers and calculate potential income using both manual or automated solutions.
Bookmakers often react ambiguously. Some actually welcome arbing as it helps them sharpen their odds and enhance their modeling. But the majority see arbers as unwanted customers and enact penalties against them, which include:
As arbers can threaten the profits of bookmakers, detecting them is quite a big deal for betting companies.
Arbitrage detection is handled by the security departments of betting companies. Using special algorithms, employees calculate players falling under the arber category according to the following parameters:
Standard monitoring based on the above-described triggers can be reinforced by AML/KYC procedures, weeding out arbers more efficiently.
All in all, if companies want to ward off arbers, detecting multiple accounts and keeping an eye out for red flags are essential steps to take.