All oak trees evolve from little acorns. And after all, it took twenty years for cable television to catch on and The Beatles struggled in little clubs quite a while before anybody really noticed. So why am I so worried about the potential rapid rise of Entity Wagering and it's potential to dramatically change the game? The sports wagering game, that is.
I'll get to the definition of entity wagering in a moment, but first simplify why we bet sports. Bettors confidently believe we have some personal advantage "over the house" in making a decision on a team or a player at specific odds or a line. An individual choice that our own SKILL or LUCK or perhaps both will give us an edge to succeed. Wagering within responsible means is intended to be fun and give us a personal satisfaction that our own judgement be rewarded. We keep score at the end of the day by the money won or lost. Basically, that's the thrill.
For some it's a harmless diversion from their job, their daily life and a pastime means as an escape while they watch their favorite team or to help enhance viewing any individual sport. Unfortunately for others, their gambling passion runs out of control and they run the risk of developing a pathological illness. But one thing all types have in common: a person is strictly in control and responsible for deciding each and every bet they make.
Which brings us to "Entity Wagering" and why I am so opposed to the spirit and definition of it.
Entity Wagering 101
Entity wagering can most simply be described as a sports betting "mutual fund". Investors (bettors) buy into the fund and the entity manager subsequently invests money in preferred sports wagers instead of traditional businesses or companies as in a mutual fund.
To legalize this the Nevada state legislature in June 2015 passed Senate Bill 443 permitting entity wagering. The bill allows Nevada sportsbooks to accept wagers from a large pool of investors called "entities". The pools are open to U.S. residents, regardless of where they live, but the entity itself must be operated by someone located in the state of Nevada.
Similar to a mutual fund, the sellers will be retaining "experts" in handicapping and analyzing different sports. MBA types in college basketball, NFL, baseball, etc. could start a fund that focuses on their special area of handicapping wisdom. All wagers that are available to the public by the sportsbook operator may be wagered on by the entity. As an example, an entity focused on the NFL could take a position on futures, wager on sides, totals or props for games each week and wager during the game with in-play wagering.
The plan is for entities to work like any other legal Nevada business undergoing a comprehensive background check. The entity will keep original copies of records of the wagers and any records that are required by Nevada's general business laws. All profits and losses will be done electronically by the entity and the sportsbook operator. In keeping with Nevada gaming laws, you will have to prove you're 21 to take part in the fund. In all, very corporate.
Even though each entity is operated as a business you will still have to do your own research on the entity/fund to see if it's a fit for you similar to a traditional mutual fund. In the future I expect reputations developing for NFL experts vs. baseball authority mavens. Although a giant like Fidelity Investments has multiple funds managed by dozens of individuals, we're too early in the game for entity wagering yet. It's so new you might be cynically worried, as trusting a new handicapper or group of handicappers joined together on an 800 telephone line.
A Typical NFL Sunday
Let's say your fund which we'll call JL Sports has decided upon investing one specific Sunday in the Jacksonville Jaguars. They will attempt to secure the best line possible at one of the larger Nevada sportsbooks capable of accepting a very substantial wager (CG Technology sports books are accepting and lobbied for these types of bets). With a large amount of investors this could be in the six-figure range or possibly higher in the future. The network of Nevada books has the capability of then analyzing that wager and seeing if they can potentially "lay-off" part or most of that wager at their discretion. Something in comparison the preferred offshore sportsbooks now do not have the ability to do nor or are expected to do.
Is this situation something that will affect you and the wagering line? YOU BET!! Especially as this could be possible to do in the waning seconds before the kickoff of a football game, or tap-off of a basketball game, etc. Huge wagers will have the potential to change the line dramatically similar to how a large bet changes the odds in a pari-mutuel horse race. In the space of 5 seconds it's possible you may be offered the Jaguars at +2.5 instead of +4.
And what if you had faith in JL Sports and their Jaguars pick. You are disappointed the Jags did not cover and lost or other bets within the fund that day defeated. The fund suffered as you might have suggested playing the Steelers -3 instead. The fund manager has many legitimate, sound reasons why not every play (like every company) will have a successful outcome. Is this how you want to spend your NFL Sundays?
Part II Next Week
In Part II we will examine the many ways Entity Wagering could affect the current landscape of sports wagering including the hot topic of Daily Fantasy Sports (DFS). Believe it or not they are intertwined in a weird way and were part of the motivation coming up with this new concept. Also more about the spirit of sports wagering and the impact on offshore wagering and preferred offshore sportsbooks like Bovada, BetOnline and Diamond Sports. Proponents of entity wagering believe success could be a surprise boost for more U.S. legalization.
Two things are already a sure bet: I am deeply concerned for the little guy, the weekend warrior or casual bettor out to make a few bucks and not get hurt. The other is the sales pitch of "you are not gambling, but INVESTING".
Read part II of this report here.
Glenn Greene covers the games from a betting angle every week exclusively at OSGA.com. For weekly betting insights, inlcuding previews and picks from Glenn, click here.