Recent Read: “The Economics of Sports Gambling”

Don’t miss this interesting analysis by Stephen J. Dubner of the economics of sports and sports gambling. Some highlights:

Fantasy sports are wildly popular in the United States and Canada, but the fever has spread. India has 100 million players, with cricket being the most popular sport. Here, the most popular sport is football, but you can also play fantasy baseball, basketball, hockey, soccer, cycling, tennis, golf, e-sports, and so on. Fantasy revenues in the United States alone are around $8 billion a year.

What’s more, in 2018, the big fantasy-sports companies got the gift of a lifetime, courtesy of the U.S. Supreme Court, a ruling that paves the way for legalizing straight-up sports betting throughout the United States rather than just a few select places. That’s right: Legalized sports betting is coming to America.

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“The one that is the top end of the skill spectrum is bicycle racing. Which makes sense because if you’re fast, you’re fast,” Hosoi says. “Sometimes you have bad luck in a bicycle race. But for the most part, whoever is going to put out the most power is going to win. So now we come to the interesting chunk of the spectrum: Basketball rewards skill the most, hockey rewards skill the least. Because basketball has a large number of scoring opportunities in each game and a large number of games in the season. So that means that one lucky shot in basketball doesn’t matter very much, whereas one lucky shot in hockey can matter a lot. And football and baseball are somewhere in the middle.”

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“Think of all those sports fans who say, ‘You know, I would never buy a lottery ticket. That’s just luck. But I know everything about sports. I should be able to win this,’” Matheson says. “And guess what? You can’t beat the casino. These amateurs who think they’re experts don’t stand a chance, but do stand a chance of really getting sucked in. And the question is how quickly can they extricate themselves and realize that ‘Yeah, I’m actually not any good at this.’”

For now, one clear winner is DraftKings. “In a few years,” says Robins, “I think there could be a $100-billion-plus company… in this space. So, we’re going after that kind of size opportunity.”

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Carlos Alvarenga

Founder and CEO at KatalystNet and Adjunct Professor in the Logistics, Business and Public Policy Department at the University of Maryland’s Robert E. Smith School of Business.

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