A Look at Progressive Parlays and Picket Pools

Wagering has long been a favored – if not always government sanctioned – pastime for sports fans. Its prevalence has led most sports media outlets to report on and provide analysis of betting odds for high-profile games. In its most basic form, betting is a simple activity. If a wager is successful, the bettor is rewarded with a payout whose proportion relative to the original bet is dictated by the odds of the wager. If the bettor is unsuccessful in predicting the outcome of the event, the original wager is forfeited. However, some bettors favor more intricate betting arrangements which has led to the rise of various types of wagers. This paper looks at two in particular: progressive parlays and picket pools. It examines the peculiarities of these types of bets as well as the legal framework regulating their operation.

Progressive Parlays

Understanding a progressive parlay requires an explanation of general wagering procedure. The simplest form of wagering is an individual bet in which a bettor picks the outcome of a single event (StatFox 2013, 2). A parlay bet is differentiated from an individual bet in that it involves the outcome of multiple separate events (Frandsen 2009, 1). The most common parlays involve 4-12 events although smaller and larger parlays are possible (Matrix Sports Investing, 2013). In an individual bet, the bettor wagers some amount of money on a particular outcome at a particular set of odds (StatFox 2013, 2). If the bettor chooses the correct outcome, he is rewarded with a set payout according to the odds he wagered on. If the bet is incorrect, the bettor loses his original wager. A parlay can be thought of as a series of individual wagers (Frandsen 2009, 1). In a four team parlay, a bettor predicts the outcome of four separate events – each of which typically have low odds. Because a parlay is dependent on a series of events, the cumulative odds are typically lower than the sum of the individual events themselves (StatFox 2013, 4). Wagering the same amount of money on a parlay then usually results in a larger maximum payout than an individual bet (Kaiblinger & Schrötter 2011).

In a progressive parlay, the maximum payout only occurs if the outcomes of all events are predicted correctly (Kaiblinger & Schrötter 2011). However, there may be a smaller payout even if the bettor loses some of the events (Matrix Sports Investing 2013). For example in a 4-6 team parlay, a single incorrect bet may be allowed. In a 7-9 team parlay the number of acceptable misses rises to two. In the largest parlays – 10-12 team parlays – a bettor can miss on up to three events and still collect some profit (Five Dimes Casino 2013). Each miss, however, reduces the potential payout until the payout is eliminated and the original bet is forfeited (Five Dimes Casino 2013). Parlays can be offered in conjunction with any betting event, but they most commonly involve sports teams.

Traditional parlays work the same as progressive parlays except that a single missed bet results in the loss of the original wager (Frandsen 2009, 1). A traditional parlay is essentially an agreement by the bettor that if his first prediction is correct he will wager both his original amount and his winnings on a second subsequent event (Frandsen 2009, 1). This process is repeated for each successful wager until either every event in the parlay has been completed or the bettor loses a wager in his parlay. In the first situation, the bettor will receive a cumulative payout rewarding his success against the odds. In the second situation, the bettor loses his original wager and any winnings accumulated up to that point (Frandsen 2009, 1). In each case, the bettor is wagering on a series of outcomes which must all occur or else the bettor wins nothing and loses his original wager.

Several strategies have been suggested by gambling consultants when wagering on parlays or progressive parlays. One piece of advice is to pick interrelated outcomes. For example, a bettor may believe that one team is likely to win if the game is a low-scoring affair while the other team is almost certain to win if the game becomes a high scoring shootout (StatFox 2013, 10). If the bettor uses a parlay to bet on the first team along with an under bet against the point total, he stands to gain 2.6 units on an original investment of 1 unit (the most common unit in betting is $100 although any amount can be substituted as a unit) compared to a payout of just 1.82 units if the bets are made independently of each other (StatFox 2013, 7). Conversely, if he misses both outcomes, he will only lose his original 1 unit investment rather than the 2 units he would lose if he had wagered on the events individually (StatFox 2013, 7). This minimized risk is another notable potential positive of a parlay. If a bettor wishes to bet on a significant number of events without putting a substantial amount of his total bankroll at stake, parlays may represent an attractive option (StatFox 2013, 9). By turning 12 individual events into four 3 event parlays, the bettor reduces the number of units he is risking from 12 to 4 while simultaneously increasing his potential payout if all events are correctly picked (StatFox 2013, 6). This may be especially important for gamblers with small budgets.

However, progressive parlays should not be used without some caution. Some gambling consultants argue that in order to realize the benefits of parlays a bettor must avoid playing a progressive system – that is betting smaller amounts on parlays than individual bets (StatFox 2013, 7). While the lower odds of a parlay mean that a smaller initial wager will still result in a comparable payout, this thought process fails to account for the statistical reality that a bettor is likely to miss a parlay bet more frequently than an individual bet (StatFox 2013, 10). In order to offset the lower success rate, the bettor’s standard wager must remain constant. Additionally, bettors must be wary of parlays whose odds do not justify playing them. A good rule of thumb is that a parlay should offer odds equivalent to 11-10 odds on an individual bet (StatFox 2013, 4). For a 4 bet parlay, that means parlay odds below 12-1 represent a net disadvantage compared to individual betting and should be avoided (StatFox 2013, 5). Some experts also caution against regularly betting parlays larger than 5 events as their frequency of success is lower than smaller parlays which means a player may run out of money while waiting for his next big win (StatFox 2013, 11).

As a form of sports betting, progressive parlays are subject to the federal Professional and Amateur Sports Protection Act of 1992 which outlawed all sports betting in the United States except in four states: Oregon, Montana, Nevada, and Delaware (Ranjo 2010, 213). Of those four, only Nevada and Delaware currently offer progressive parlays on sporting events (McClann 2013 & Perez 2009). While Nevada allows virtually any type of sports bet, Delaware’s regime is much more limited. In 2009, Delaware attempted to legalize all types of parlays on sporting events (Perez 2009). However, a federal court ruled that under the specific exemption in the 1992 law, Delaware was only permitted to offer parlays on professional football games (Ranjo 2010, 216). Oregon at one time had a sports parlay state run lottery system, however that was discontinued decades ago (Grote & Matheson 2013, 9). Montana offers a fantasy football based lottery, but does not allow other types of parlays (Grote & Matheson 2013, 10). New Jersey has recently made a show of challenging the constitutionality of the federal ban (McClann 2013). If successful, this would open the door for most other states to offer progressive parlay betting, however so far New Jersey has failed to make any headway in its efforts (Grote & Matheson 2013, 10).

Picket Pools

A picket pool – also known as a betting pool or office pool – is a form of betting in which individuals buy entries predicting a specific outcome or series of outcomes for a set number of events (British Columbia 2012). A picket pool may involve multiple events like a progressive parlay, but it may also involve only a single event such as the Super Bowl (Deloitte 2013). While progressive parlay bets are made using fixed odds which determine the ratio of the payout to the original bet, picket pools are a form of parimutuel betting. In parimutuel betting, the overall payout is equal to the total amount of money wagered (Dunstan 1997). If an entry costs $10 and 10 entries are made, the total payout of a picket pool will be $100. The specifics of a picket pool may vary from case to case. Some pools for instance may allow multiple entries which require a higher entry fee but also boost a bettors odds of winning (Butler 2011). The winner of a picket pool is determined using an agreed upon formula taking into account the number of correct picks, the weighting system being used (if any), and tiebreakers if applicable. Examples of weighting systems include National College Basketball Tournament pools that place a higher value on correct picks in later rounds and confidence systems that require each pick to be assigned a corresponding confidence value by the bettors (Bialik 2011). Two of the events most commonly associate with picket pools are the NCAA’s “March Madness” basketball tournament and the Super Bowl.

While many bettors use a single entry in a picket pool, occasionally they will employ a strategy known as boxing. The term was originally applied to horse race betting (TRA 2013). In that case, boxing referred to betting on every possible outcome in order to guarantee a winning ticket (TRA 2013, 10.1). For example, if a bettor wanted to box a trifecta in a race with eight horses, they would buy buy 336 tickets (8x7x6) covering every possible three horse combination. While it ensures a winning ticket, boxing can come at a hefty price in an event with multiple possible outcomes (Strong 2013). Each ticket bought increases the initial investment to the point that a bettor may lose money by boxing even after the payout. Boxing may be more attractive in a scenario with fewer than 5 possible outcomes. Buying additional entries also increases the betting facilitator’s cut – or vigorish – as each entry typically includes a fee compensating the organizer that is pocketed rather than added to the prize pool (Strumpf 2013).

When conducted in conjunction with sporting events, picket pools fall under the same legal regulations as progressive parlays. Even informal pools such as office March Madness bracket challenges are technically illegal in virtually every state (Ontario 2013).. In spite of that, pool betting is a time honored tradition in the United States with millions of Americans participating in NCAA bracket challenges and pools to pick the Super Bowl champion (Ontario 2013). Some Super Bowl picket pools go so far as to break the game down by quarter with each entry corresponding to a specific score prediction for each quarter. Outside the United States, the legal climate is much more tolerant of sports related picket pools. However, the UK does have regulations which require a pool operator to obtain a regulatory license (UK Gambling Commission 2013). In large part, this is an effort to prevent bettors from being swindled by dishonest pool operators who either steal the money outright or attempt to rig the results based on inside knowledge (UK Gambling Commission 2013). Non-sports related picket pools cover a variety of public events including political contests and awards shows, but sports continue to dominate this type of betting.

Some of the largest picket pool payouts in recent memory have involved fantasy sporting competitions. In fantasy sports leagues, participants draft actual players to their team and accumulate points based on the players’ performance in games. In 2011, Lindy Hinkelman – a pig farmer from Idaho – won the prestigious National Fantasy Baseball Championship for the second time in three years (Fost 2011). His prize: $100,000 (Fost 2011). While most fantasy payouts are much smaller, the lure of big money attracts more than 380 players a year who pay a $1,400 entry fee for the chance to win big (Fost 2011). The National Fantasy Football Championships offer a similar promise. In 2011, that league promised players more than $1 million in total payouts including a pair of $100,000 grand prizes (Sweet 2011). Since its inception eight years ago, the contest claims to have paid out more than $11 million in prize money (Sweet 2011). Such pools have helped to spur the growth of fantasy sports from the domain of a small circle of academics to a social obsession.

Progressive parlays and picket pools offer an entertaining alternative to traditional individual bets. Played correctly, they can reward savvy bettors. However, strategists agree that it is important to understand the intricacies of each type of wager in order to avoid significant losses. The most basic difference between these two form of wagering is that the payout for a successful parlay is determined by the wager’s odds while the payout in a picket pool is dictated by the total amount wagered by all participants. Both types of wagers are bound by a strict legal framework in the United States which has centralized legal sports betting in just a few states. In spite of this, the unsanctioned market for picket pools in particular has remained robust especially for events like the Super Bowl and the NCAA Basketball Tournament. For many Americans, the allure of the payout is simply too strong to resist.

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