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Sports betting as an information market

Sports betting
Sports betting industry is evolving rapidly, creating a rush of new opportunities. FILE PHOTO | NMG 

I am getting more concerned about the illiteracy around sports betting markets in Kenya. Because this market spells huge potential, it has drawn parallel comparison to the financial markets for a long time, but that fact remains very foreign.

As the Kenyan government is making business environment for sports betting punitive and challenging, the US on the other hand is loosening position on legalisation of sports betting and the most recent development is that New York-based stock exchange giant, Nasdaq, has entered into a partnership with a sports betting company and will be coming up with a Football Index that allows its clients to buy and sell shares in professional soccer players to bet on their future success.

David Rothschild, an economist at Microsoft Research, explains the potential of sports betting intertwining with financial markets that "the more legal it becomes, the more legal money that'll flow into the pockets of the people who control the back-end infrastructure, as well as the front end."

And the truth is, the sports betting industry is evolving rapidly, creating a rush of new opportunities where Wall Street companies are now deploying their trading knowledge and technologies to tap into this industry.

One of the most salient feature comparisons between sports gaming market and stock market is the speculative demand economics, where just like in the stock market, investors in the sports gaming market are armed with information and stake money seeking to profit out of a trading event having an uncertain outcome.

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One simply places a bet, and when he wins, plays again and continues the recycling of stake and bets, though the harmful and addictive potential of gambling is well established.

Speaking about the interaction between sports betting and stock markets, one other main aspects is information trading, the gaming market provides useful data to be used for various analytical interpretation.

First is research and the best example is when bwin, one of the largest online sports betting providers and largest publicly traded online gambling company, as a part of its corporate social responsibility programme entered a research project with the Harvard in 2004 to investigate and understand the features of internet gaming, a project that helped inform better deregulation [JK1] of sport betting globally.

Second is the emergence of big data in sports today where data now plays a central role in decision-making process for most professional sports teams. Modern-day sports teams are not only employing technical, performance and conditioning personnel but also analysts who interpret data to help teams assess and minimise weaknesses whilst maximising their strengths; at the same time understand and exploit opponents’ weaknesses.

Now since sports gaming companies are the biggest collectors of sports data, they provide a sort of beta-tested data that sports analysts use to run against their own data for better inferences.

It’s for this reason that in the US, sports leagues and owners of league teams are holding equity stakes in businesses that disseminate gambling data domestically and internationally because of the big business potential in this sector.

This is one potential area sports betting companies can offer in Kenya, building capacity of sports teams to develop their analytics personnel as corporate responsibility in helping professionalize sports.

Lastly about information trading, there are whisper claims that proliferation of sports betting companies in Kenya will lead to frequent match-fixing in our local league games. The fact of the matter is that betting scandals have actually reduced significantly in this information age.

In the many jurisdictions where sports betting has been legalised, betting markets vividly communicate such information.

The best example is in 2007 when British company Betfair noticed irregular betting patterns for a professional tennis match in Europe and prompted a subsequent investigation by the Association of Tennis Professionals.

Although the players were later found innocent, the investigation led to the revelation that match fixing was occurring in professional tennis.

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