Parlay betting is the story of NJ sports gambling in June. Parlays accounted for 43% of total revenue ($31 million) on just 21%. It’s a similar 15+ year trend with parlays making up 47%, while straights have had an average 4.
Is it just me, or is there something about parlays that seems like a golden goose for US sportsbooks? But they also pose potential “atom bombs” to industry. Joe Brennan says so too on Twitter:
“One thing real bookmakers all say they fear is massive exposure from one big winner in each match,” he said – meaning if favorites win everything before 9pm EST tonight then tomorrow’s races could be deadly! It sounds scary because we’ve seen how highly anticipated winners can turn into bomb situations at anytime (think Frankie Dettori). And over seas last year jockey rode home 4 out 5 horses up until Ascot racecourse where he set up potentially company ending liabilities when racing ended with 2 remaining runners.”
When it comes to managing risk, bettors are often left in an impossible position. The sportswear company Sky Bet had restrictions imposed on them by bet365 for allowing customers attempt parlays with all Dettori races remaining during their subsequent meetings – noting that if these bets won then they wouldn’t be able pay out as much money due the large numbers of wagers being placed at once by many people using horse racing sites like this one!
The most obvious risk stateside is NFL betting. When favorites start winning and covering on Sunday, it begins to look hairy for bookmakers who don’t have an effective way of hedging their bets or converting them into cash if they’re short-sided in one game during any given weekend event like Monday Night Football (MNF). The largest US sportsbooks can easily incur liabilities up $10 million when that happens; however there’s no room under the table because other operators will take all our money! And should underdog teams win both sides of every wager throughout an entire football season – which has happened before–you’ll find out about these bankruptcies soon enough: companies sometimes go belly up after running through all available credit just trying not get shut down.
The liabilities are not enough to bankrupt a FanDuel or DraftKings, but two or three weeks in a row could ruin your quarter and potentially spook investors.
A parlay-based business owner is describing his experience with these sites: “It’s tough for any one day when you have so much on the line because there isn’t margin room.”
The smaller-cap companies taking only recreational action – a couple of weeks of this can wipe them out,” said Adam Bjorn. “A lot of smaller books don’t have the systems showing them their true exposure.”
It is another way that big operators like Draftkings may have an advantage: they’re able to withstand bad months and then return money back into more parlays as those losses accumulate over time thanks in part because they’ve got so much on hand from past wins (plenty for even “fortress” betting).
For risk to be truly existential, it usually needs to come out of nowhere. Most books will have some kind of plan in place for an NFL gut-buster (Black swan event). “If smaller companies need offsetting their risks , the larger ones can provide that service as was once common across Europe” says Mark Israney Partner at gaming consultancy Propus Partners.” Obviously small bookies wouldn’t buy low but rather hedged themselves so they could take advantage if something goes wrong.”
The themed parlay is a risk because it links several selections with different odds. For example, if you bet on underdogs to win in the UFC card then your liability could quickly add up to nine figures and Dettori style bets are usually larger than these fixed-odds horse racing wagers which have been more successful so far but they may grow less popular eventually due US regulated gambling laws where people want fast payouts rather than high ROI rates like what happens when betting at racetracks for instance who take much longer time frames.
The US$150 billion sports betting industry is insulated from parlay risk, though the idiosyncrasies in our country make it a little less susceptible. Fixed odds racing isn’t yet a thing and most popular wagers are picks at -110 or large favorites which makes them easy to see coming. Makes sense right?
Is it better to have a smaller sportsbook?
As ever in the US, it is tough for small firms. They can least afford an expensive seven-figure hit but also need parlays more than anyone else – at least they’re into that business! At this point I’m sure most people will say no without thinking about their industry first…