An Introduction to Proposition and Matched Betting
According to an old proverb, a bet always involves a fool and a thief. In spite of the perpetually long odds associated with gambling, it remains a cherished pastime of many. One of the fastest rising types of wagering is the proposition bet. Unlike traditional gambling which is often imagined as the realm of degenerates hunched over spreadsheets while sitting in smoke filled rooms, proposition bets have managed to capture the popular imagination and attract even demographics not usually associated with gambling. Another less publicized method of wagering is matched betting. In recent years, the popularity of matched betting has risen significantly due to the perception that it is essentially a risk free endeavor. This paper examines the specifics of proposition bets as well as their history and general strategy approaches before looking at the mechanics of matched betting and the various approaches bettors take when engaging in the activity.
The term proposition bet – or prop bets as they are commonly known – usually refers to a wager on an aspect of an event unrelated to the event’s outcome (Barnwell January 30, 2012). While proposition bets can be made about virtually anything, common proposition bets involve sporting events, entertainment and political events, and even craps games. Proposition bets in sports are differentiated from the general bets for or against a particular team or regarding the total number of points scored (Barnwell January 30, 2012). Traditionally, proposition bets can be made on outcomes such as the number of strikeouts a pitcher will accumulate in a baseball game, whether a non-offensive player will score in an American football game, or which team will score the first points of the game (Maddux Sports 2013). Some less traditional proposition bets – also known as exotic bets – allowing wagering on the color of the Gatorade dumped on a coach at the end of a game, how long the singing of the national anthem before the Super Bowl will last, and even the length of the customary post-game handshake (Brinson January 27, 2013).
Non-sports prop bets are less common but would include items like the location of a satellite’s eventual crash or the ending of a popular television show (McIntire January 31, 2013). Other than sports betting, the most common venue for proposition bets may be craps. Some casinos allow gamblers to wager on specific combinations of the dice within the broader game of craps (Pulcini 2013). These bets can take the form of a single proposition in which a wager is laid on the appearance of specific number or a multiple proposition which involves rolling two or more numbers (Pulcini 2013). Another type of proposition bet in craps is a hardaway in which a gambler bets that a specific double – 8 (double fours), 6 (double threes), or 4 (double twos) – will be rolled before either a seven or a non-double variation of the number (Hick 2013). The craps proposition bets with the highest payout are one roll bets (Hick 2013). Unlike hardaways, in a one roll bet the desired number combination must be rolled in a single turn rather than any time before a seven or non-double combination (Pulcini 2013).
There is also a secondary usage in which a proposition bet is essentially a dare which the party that accepts the wager must complete in order to win the bet (Bradley 2007). A legendary example of this type of prop bet is a wager made between the wealthy Englishman Harry Bensley and a financier from New York – John Pierpont Morgan (Rennell January 2, 2008). According to popular accounts, Morgan bet Bensley $100,000 that it was not possible to walk around the world without being identified (Rennell January 2, 2008). Bensley accepted and took off on a journey to circumnavigate the globe while wearing a knight’s helmet. After nearly seven years, Morgan died and Bensley called off the bet after reaching a settlement with his estate for $20,000 (Rennell January 2, 2008). A famous literary example of this type of proposition bet can be found in Jules Verne’s classic Around the World in Eighty Days. More recently, professional poker player Phil Ivey and others bet a fellow player – Erick Lindgren – that he could not complete four rounds of golf in a single day while playing from the professional tees and carrying his own clubs (Bradley 2007). Despite the bet taking place in Las Vegas during the middle of summer, Lindgren completed all four rounds with a score of less than 100 and collected the $340,000 (Bradley 2007).
The history of proposition betting is somewhat murky. According to Sonny Reizner – a pioneer of Vegas’s involvement with prop betting – the practice was born during baseball games at Fenway Park (Mendelsohn 2007). Despite signs explicitly prohibiting gambling, spectators would exchange bets over whether the next pitch would be a strike or a ball, whether the batter would get a hit, or whether the batter would receive a walk (McIntire January 31, 2013). While proposition betting may have been born in Boston, it was popularized by Vegas. For decades, legal sports betting centered around the results based on the money line, the points spread and the total number of points scored in a game (McIntire January 31, 2013). When Reizner came to Vegas in the 1970s, he worked to convince casinos that these new prop bets represented a potential source of profit (McIntire January 31, 2013). In a famous early example, Reizner’s sports-book created a proposition bet around the season finale of the popular television show “Dallas” allowing bettors to wager on who they believed killed J.R. – a central character in the show (McIntire January 31, 2013). While the wagers were eventually canceled by the Nevada Gaming Commission, the event highlighted the appeal of proposition bets to casual gamblers who otherwise would not engage in gambling (McIntire January 31, 2013).
Reizner was involved in other notorious proposition bets, including a bet that allowed gamblers to pick where they thought the Skylab satellite would crash land, but the idea did not truly take off until Super Bowl XX in 1986 (Rovell January 26, 2009). Before the game, public attention centered around the Chicago Bears’ rookie defensive star – William “Refrigerator” Perry. Capitalizing on that fact, several casinos began accepting bets on whether Perry would score a touchdown during the game (Vaccaro December 26, 2012). Word about the novel proposition bet spread rapidly and soon the casinos were inundated with action on both sides of the bet (McIntire January 31, 2013). When Perry scored a touchdown in the third quarter of the blowout win by the Bears, casinos lost hundreds of thousand of dollars (Vaccaro December 26, 2012). However, the phenomenon demonstrated once and for all that proposition bets meant big money. The amount of money wagered on proposition bets during the Super Bowl has increased dramatically since then. Now, sports books offer over 350 possible prop bets every year (Vaccaro December 26, 2012). In 2012, approximately $45 million of the total $94 million wagered on the Super Bowl involved prop bets (McIntire January 31, 2013). Proposition bets are also commonly associated with events like the annual NCAA “March Madness” basketball tournament, but the Super Bowl remains the undisputed focus of the industry (Wittenstein January 29, 2008).
There are varying strategy approaches to proposition bets. Casinos have observed general tendencies such as betting yes on a yes/no bet and betting the over on an over/under proposition, but recently the wealth of information available to bettors has reduced those trends (Kornegay 2013). Some professional handicappers seek to identify lines for which Vegas may have made a mistake when setting the odds (McIntire January 31, 2013). According to some, obscure proposition bets represent a much more lucrative opportunity than the usual line and total bets (Kulesa 2013). These bettors typically rely on statistics programs which measure the historical probability of an even and compare that to the actual odds offered by a casino (Kulesa 2013). Such efforts are unlikely to deter casinos from offering prop bets in any case. Like any other bet, the casino makes its profit off the commission it charges for handling a bet (McIntire January 31, 2013). By balancing the amount of money bet on both sides, the casino receives a substantial cut regardless of the actual outcome proving the old adage that the house always wins.
Matched betting, or lay betting as it is sometimes referred to, is a method of attempting to remove the risk from gambling by placing wagers on both sides of a possible outcome (Burek May 21, 2013). For example, a gambler might wager equal amounts that England would both win and lose its soccer match against France. In order to achieve a profit, this technique relies on free bet offers from sports books. Many sports books offer free bets to gamblers in order to attract new business (Murray-West December 6, 2010). Sports books are willing to make a relatively significant initial investment in order to cultivate a longer term relationship with a gambler in the hopes of recouping their loss. According to industry sources, some books are willing to spend nearly $500 to attract a new customer (Murray-West December 6, 2010). Most free bets require an initial bet – $20 for example – in order to receive a free bet of the same amount (Guardian June 4, 2010). By using this free bet to offset the initial bet, a gambler could theoretically wager $20 on both sides of a match. If the initial bet wins, the gambler receives their original $20 plus the added winnings. If the initial bet loses, the gambler receives the payout from the free lay bet minus the original $20. In either case, the gambler makes at least a marginal profit (Guardian June 4, 2010). While the idea sounds relatively simple, the reality is much more complex as the subsequent wager will have to be placed on a separate betting exchange which allows bettors to set their own odds (Murray-West December 6, 2010).
Betting exchanges like Betfair.com and others have become popular in recent years largely because they facilitate this independent type of betting which does not rely on official odds-makers (Shearer July 23, 2010). Users simply choose the odds they wish to offer on a particular outcome and wait for another gambler to accept them (Shearer July 23, 2010). This ability proves useful when engaging in matched betting as a gambler can choose the exact odds needed to offset the original bet. In order to maximize profits from matched betting, experts recommend that gamblers should withdraw any money won as a result of the wagers rather than reinvesting it in subsequent bets (Burek May 21, 2013). In order to combat that tendency, some sports books require bettors to make multiple bets before their winnings can be cashed out (Shearer July 23, 2010). However, such requirements are not an indication that sports books view matched betting as illegitimate or illegal. Partially this may be due to the fact that the free bet is viewed as an investment designed to attract future business and the sports book is willing to accept some level of loss in that pursuit (Murray-West December 6, 2010). Additionally all sports books and betting exchanges charge a commission on every transaction which reduces winnings from matched bets and ensures continued profitability (Shearer July 23, 2010).
There are several common strategy approaches to matched betting. Some gamblers prefer to find free bet offers and calculate payoffs manually (Guardian June 4, 2010). However, this method presents a definite element of risk as any errors in the calculation process can turn a matched bet from a sure thing into an ordinary, risky gamble (Shearer July 23, 2010). For that reason, many websites have opened advertising themselves as a clearinghouse of sorts for matched betting (Murray-West December 6, 2010). Websites like Fixtheodds maintain a list of all available free bets along with their terms and conditions (Shearer July 23, 2010). Once a particular offer is chosen, the software walks the user through the process of placing the original bet and laying the matching bet on an exchange (Murray-West December 6, 2010). Typically, screenshots and detailed instructions are provided, however it is important to note that such services do not accept any liability for losses incurred as a result of user errors during the process (Murray-West December 6, 2010). Some services charge a commission while other have advertising arrangements with other companies which allow them to serve customers free of charge (Murray-West December 6, 2010). Even with companies making the calculations for the average gambler, customers would be wise to exercise caution and avoid disreputable exchanges (Murray-West December 6, 2010).
While there is little to no academic research demonstrating the profitability of matched betting, anecdotal evidence does suggest that at least some individuals have turned it into a source of income. Some members of online gambling forums in the United Kingdoms claim to have made the equivalent of £30 per hour – about $48 USD (Burek May 21, 2013). The author of a Huffington Post article alleges that he made roughly £800 – $1200 USD – in a relatively short period of time (Burek May 21, 2013). Another journalist from The Guardian made £770 in less than a month by taking advantage of free matched betting offers (Shearer July 23, 2010). These winning are made even more lucrative due to their tax-free status in the UK (Shearer July 23, 2010). While not enough to serve as the sole source of income, they are attractive to many -particularly university students – as a source of supplemental income (Burek May 21, 2013). Rajeev Shah, managing director of Sports Arbitrage World, went so far as to describe matched betting as “money out of thin air” (Burek May 21, 2013). Such descriptions minimize the very real risk that matched betting could lure otherwise non-gamblers into more risky gambling behaviors. In fact, this is the entire premise behind sports books’ offer of free matched betting (Burek May 21, 2013).
Another old proverb opines that a fool and his money are soon parted. In spite of a widespread understanding that the odds are against the average bettor, proposition bets have managed to capture the public imagination and attract a significant number of new gamblers willing to wager on seemingly irrelevant and unpredictable events like the coin toss at the Super Bowl (Barnwell January 30, 2012). Prop bets have come a long way from their humble beginnings in the bleachers of Fenway Park, and today they comprise multi-million dollar slice of the overall gambling pie in the United States and around the world. For those looking to beat the system, matched betting has emerged as a potential loophole in the system which may allow bettors to realize a profit without any risk to themselves. However, the complexities of matched betting represent a potential pitfall for any gambler who fails to properly calculate the odds or read the fine print of free bet offers. Even if gamblers turn a profit from matched betting, sports books are betting that they will not be able to resist the urge to continue wagering increasingly large amounts of money. With casinos charging a commission on every transaction, even when the house ostensibly loses the house always wins.
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