Limits and High Holds: Taking The Good With The Bad

Gambling Twitter can be a divisive place. However, most people agree on one thing. They hate sportsbooks and many of their practices. Two of the most common complaints I see related to sportsbooks in my bubble are:

  • 1.       Anger related to sportsbooks limiting profitable customers.
  • 2.       Shaming sportsbooks that offer markets with too high of hold.

This article will discuss why these things are features, not bugs, for almost everyone in the current betting system.

Limits

Being limited at a sportsbook has become a badge of honor for many bettors. Proudly, they head to Twitter with a screenshot of an image that shows someone cutting down their limits to an unreasonable level. This is often accompanied by a message implying the sportsbook is inept, scumbags, or cowards. Or that this game is stacked against you in some way. The sportsbook is happy to take money from losing players but not you. Un-American.

Let’s instead imagine a better future. In it, all sportsbooks must take a “reasonable” bet on all bets from all customers. This means we’d all be rich right? Right?

Not likely. Let’s consider what would happen to one of the many “recreational” sportsbooks if they could not limit individual customers anymore.

Patch the Holes: The first option that a sportsbook could take if it was facing mandatory limits would be to invest and improve the quality of their odds setting and trading teams. This is the route “sharp” books tend to employ for the product they offer. This would mean:

  1. Pricing that becomes much tougher to beat
  2. Better and more automated trading.

This would mean less money in the pockets of almost all bettors. Say goodbye to the derivative market that prices 30 cents off the market. Say goodbye to steam chasing NBA injury news unless you are the fastest of the fast. Think you are still going to win using publicly available services/products? Doubtful. Very few bettors can beat “sharp” sportsbooks. The sportsbooks have much more advanced software and more talented people. This outcome would certainly be a net negative for bettors.

Reduce the Offering: The second option would be to offer fewer bet types. A huge focus for recreational sportsbooks is to offer as much product as possible. Most sportsbooks would be unable to offer niche markets and products profitably if they could no longer limit certain customers. If the way you win money is to bet on smaller markets or props, this would be bad news for you. The reason the sportsbooks offer these props is because they can limit. Without those limits, the sportsbook would have to cut the amount of products. More options are always better so this outcome would also be a net negative for bettors.

Exit the Market. This would happen if the sportsbook couldn’t use the first two options well. It is not reasonable to say, “The sportsbooks are making so much money off the recreational bettors. Why can’t they let me get a reasonable bet in?” These are money making corporations like any other business. Companies that can’t offer profitable products will go out of business. Gambling is no different. Limiting is what makes many of these products profitable.

Hopefully by now, you’re convinced. The only reason many betting opportunities exist is that sportsbooks can limit people. If we lived in a fictional world where limiting individual customers didn’t exist we would have

  • 1.       Fewer sportsbooks
  • 2.       Fewer product from those existing sportsbooks
  • 3.       Better priced products from those fewer products we still have

This is all bad news for bettors. Next time you face limits, remember that it is very likely that the fact those limits exist is what allowed you win money in the first place.

Higher Hold … Maybe a Good Thing?

The second most common complaint I see on gambling Twitter is sites having too high of holds. The Tweeter complains that the sportsbook are scumbags trying to rip customers off. That specific conversation is not worth having. But, it is worth discussing how the hold percentage sportsbooks offer is tied to how beatable a market is.

For example, let’s say I will allow you to bet on one of the prop bets on the SuperBowl at a specific sportsbook.

  • 1.       A 2-way prop bet with 2.5% hold.
  • 2.       A 15-way prop bet with a 20% hold.

Which one would you rather bet on? Most “sharp” betting content advocates for bettors to look for lower hold markets. This makes sense intuitively. However, let’s define the above two bets and see if your answer changes.

  • 1.       Result of the SuperBowl coin toss (i.e. heads or tails)
  • 2.       The first song Usher plays at his halftime show

This is a silly example. But, it makes the point that a lower hold isn’t necessarily better. Most people would agree. The first halftime song is a much easier market to beat than the coin toss. Sure, if you are a recreational bettor or not a winner, it is good to bet on markets with the lowest hold. But, that advice does not necessarily apply to winning bettors.

The reason is that the market hold is proportional to how uncertain the sportsbook is in their pricing. As discussed, sportsbooks want to offer a lot of products. The problem is that it’s hard to keep offering many products at good prices in sports betting. In an imaginary world where sportsbooks couldn’t offer a market at less than 5% hold, sportsbooks would either of have to:

  • 1.       Improve pricing of products to offer more competitive prices.
  • 2.  Remove products that could not be priced profitably at a 10% hold.

Both of these outcomes are bad for any bettor who is trying to win.

This is why most bettors who win today should not be dreaming for future with tighter holds. Tighter holds mean that the pricing is getting better at market makers. For an extreme example, imagine a world where all sportsbooks could offer all markets at a 2% hold. This would be very bad for almost all bettors who are profitable today. Why? Because if sportsbook could profitably offer markets at that low of a hold it means they are extremely confident in their pricing.

As an imperfect comparison, the difference between the bid and ask price (i.e. the hold) in the stock market is extremely small. This is possible because the stock market is very liquid and efficient. This is unlike sports betting markets. There are far more people who can win betting sports than in the stock market even though the “hold” is orders of magnitude higher in sports betting.

This is what many winning bettors miss. They laud the betting exchanges or “sharp” model of sports betting. Having these types of betting options in addition to softer books is great for a variety of reasons. However, if they were the only options and the entire sports betting market was this sharp, it would be much worse off for almost all bettors.  

So next time you get limited or see a huge sportsbook hold, realize that is the opposite side of the coin that allows you to win. Instead of seeing these as a hindrance, use them to identify the weakest points in the market.

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