Horse Racing stats man, Andy has contributed to OLBG for 18 years - An Ipswich fan and F1 fanatic, he also contributes EFL football and Motor Sport opinion.
Much has been written about the closure of accounts by bookmakers recently, a good example is Jim Brown's excellent blog on this site.
The OLBG betting school also covered this with some helpful advice on how to avoid your bookmaker account being closed.
The issue was also covered on the radio by Five Live Investigates recently and is discussed at length in the final furlong podcast (which, by the way, is always worth a listen).
The balance of opinion seems to be firmly rooted in the camp that the bookmakers are in the wrong.
Most people agree that while it is clear a bookmaker shouldn't be expected to just lay any bet at all regardless of the liability, it should be rare for a bookmaker to refuse to accept a bet.
It seems most people feel that account closures and restrictions are something that is happening too often and affecting more people than need to be affected.
In this blog, I am going to play devil's advocate and consider the opposite view, which I think does have its merits.
My starting point is to look at the stated aims of bookmakers, the following is how William Hill sums up their business model in their annual report.
I am in no way trying to single out William Hill, other big bookmakers have similar statements in their annual reports as well:
- Our objective is to deliver superior shareholder returns
- Betting and gaming activities are the core of our business model
- We offer a vast range of different betting and gaming products … within responsible gambling, framework to drive sustainable value for our shareholders.
- Source: Report and Accounts 2014
Bookmaker Honesty
William Hill is being quite honest here and telling us that it is their plan to “deliver superior returns” and to “drive sustainable value” for their shareholders.
They are offering us the chance to bet with them and to play their fixed odds games, but this is not for our benefit, at least not in a financial sense.
The whole raison d'etre of the organisation is to make money for their shareholders in the short term (and to build the opportunity to do so in the long term as well).
They want us to keep coming back in the future, so they want our experience to be enjoyable, and they don't want to make it impossible to ever win.
Of course, customers have to win some of the time.
But the aim of the exercise, in the long run, is to make money from the punter's pocket and put it into the pockets of shareholders.
If you are someone who enjoys a bet, wins sometimes but loses more than you win, without causing yourself financial hardship, and are happy to keep doing what you are doing in the long term, then you are the sort of person who bookmakers want as a customer.
If you are someone who is so good at betting that you are able to do so profitably in the long run, then you aren't the sort of customer they want.
Can Bookmakers Refuse To Take Your Bet?
In the same way that your local publican is perfectly within his rights to refuse to serve a customer, regardless of whether they have done anything wrong or not, so is a local bookmaker.
This is the first point I wanted to make, bookmakers are perfectly within their rights to refuse to lay bets for anybody, whether they are winning or not.
The crux of many people's arguments is not that bookmakers aren't, or even shouldn't be allowed to close people's accounts.
The main argument is that bookmakers are within their rights to close accounts, but are closing accounts which would otherwise have made them money.
In his blog, Jim gave the example of a bookmaker he used to work for who agreed to take horse racing bets from someone who he knew to be a shrewd punter who often won.
He made the point very well that when a bookmaker takes a bet from such a punter he can use it as an opportunity to make money.
He can limit the bets to a certain stake or liability, then create a situation where he is more likely to make money on the market as a whole than he would have been if he didn't take the bet.
This would usually be done by shortening the price on the shrewd selection and lengthening the prices of the other runners.
Taking this view is good, not only for the bookmaker (because overall he makes more money despite taking the winning bet) but also for the racing industry, in whose interests it is for more money to be wagered on racing.
Obviously not everyone who has had their accounts closed will be a shrewd punter, some of them will have had accounts closed that they would otherwise have used to make losing bets.
Taking bets from them is also good for the bookie and for the horse racing industry.
On that logic the question of whether to take a bet seems to be a complete no brainer, it is never worth a bookmaker not taking a bet.
If you take a bet from a losing punter, you win, if you take a bet from a shrewd punter you will lose on that bet but will gain information that will allow you to make money on the market as a whole, despite taking a winning bet.
Bookmakers don't say much about this in public, but in private they would argue that in terms of the large bookmakers as they exist today, this is to simplify matters a little bit; the logic only follows if a couple of assumptions hold:
- A bookmaker can cheaply and easily identify the shrewd punters and their bets
- Knowledge of what shrewd punters back will help the bookmaker
- Shrewd punters will act transparently so bookmakers will know their real opinions
Are You A Shrewd Punter?
The first question to ask about the shrewd punter in the example above, is how did the bookmaker come to find out that the punter was shrewd?
Presumably, the customer didn't announce this information to him the first time he came into the shop.
I expect that the way the bookmaker found out was by taking a few bets from him, a large proportion of which were winners and then having to pay out on these bets without getting the benefit of knowing how good the punter was who was making the bets at first.
For a small independent bookmaker, this price was only paid once so it wouldn't break the bank.
But this bookmaker had six shops, which is very different to the big bookmakers nowadays. To take the example of William Hill again, at the end of last year the firm had 2362 licensed betting shops as well as its online business.
The cost of taking the winning bets to find all of the shrewd punters who bet with William Hill would be massive because there would be a lot more of them. And it would not be a one-off expense because some good gamblers would stop betting for various reasons and new ones would come in to take their place.
The firm would have to have to meet a continuous cost of taking bets from new customers who won to establish whether they were shrewd or just benefitting from beginners luck.
Online of course, every customer has an account number so that could be used to track the shrewd customers, but in shops, people do not always announce who they are to the staff.
Unless a firm can persuade people to use some sort of loyalty card, it is relying on staff in the shops recognising the good punters and flagging their bets up.
But this will not always be possible, if there are new staff in the shop or if a punter just uses a different shop to usual.
Admittedly this problem also presents itself when trying to ban the good punters from betting altogether, but the point still stands that it would present a difficulty if the strategy of “getting with” good punters was to be used.
Even if we assume that a bookmaker has a means of recognising who is a shrewd customer, that is not to say that he will be able to use the knowledge of what they bet on to his advantage.
Say for example that Coral has a list of its 200 shrewdest customers and a way of flagging up their bets for special attention.
Obviously not every shrewd customer will bet on every race, so imagine just five of them bet on a given race and they all back the same horse, we'll call the horse “Shrewd Thing”.
This will give Coral the information that Shrewd Thing is likely to win the race, but what if their current position is that a win for Shrewd Thing would result in a substantial loss.
Accepting the bets for the good punters has just made this problem even worse, what can they do?
They can shorten the price of Shrewd Thing to discourage any further liabilities and increase the price of other horses in the race to try and get people to bet on them.
This won't necessarily work; sometimes the price of a horse shortening has the effect of more people backing that horse because they see the shortening as a sign it is likely to win.
Even if this doesn't happen, they might just not take many more bets on the race, meaning the bookmaker stays in a position where he will be losing if Shrewd Thing wins.
He could try and lay off his liabilities by laying other horses on the exchanges or by backing Shrewd Thing. But what if other bookies are also reducing the price of Shrewd Thing, because their own shrewd punters have been backing it?
The price for Shrewd Things goes down on the exchanges, so there is no point backing it there.
Similarly if they have hedging accounts with other bookies, these will be not help.
Even if Coral's good punters back Shrewd Thing before the price goes down elsewhere, there is only a limited amount of liquidity on the exchanges, and using hedging accounts with other bookmakers to back Shrewd Thing at the better price might work in the short term, but other bookies will soon close these accounts if they are being used for this purpose.
As well as not having the ability to get with good punters, Coral may also not have the time.
What if the shrewd punters bet on a race in the last ten minutes before the off?
Information gleaned then cannot help the bookmaker to set his prices previously to then, he has already taken a lot of bets on the horse that the shrewd customers select, with ten minutes to go it might be too late to do anything, or at least too late to do enough to avoid losing money.
In this case the shrewd customers are then just an expensive early warning system that the firm will lose money, without offering a way of avoiding that loss.
This is the first of two blogs on the topic, you can read the second part of the blog here.
Both blogs are written as a response to an excellent blog by Jim Brown which I would encourage everyone to read, and which can be found here.
