Sports Betting For Profit? The Odds Are Long
The Supreme Court recently ruled that states have the right to regulate sports betting, opening the door for such activity in every state.
Chances are, your state officials are burning the midnight oil developing regulations for sports betting because they want the tax revenue.
After all, Pew Trusts estimates the industry could become a $41 billion industry, contributing $3.4 billion to state and local taxes.
That sounds great, but we have to put it in perspective.
If sports betting contributed that much to tax revenue, it would still be less than half of one percent of tax revenue collected, which doesn’t sound like much of a victory for all the hassle that will go with it.
And who wins at sports betting, anyway? I’ll give you a hint: It’s not you.
Bookies, legal or illegal, are the winners, in much the same way that brokerage firms are the winners in the financial world.
On sports, gambling houses establish the line, or the point spread, that they believe will entice gamblers to place equal bets on both teams.
The bookie then charges a sort of interest or carry cost (think of it as a transaction fee) on losers.
If it works out, the gambling house doesn’t care who wins or loses. It still earns the fee.
As for individual sports gamblers, they have a better chance than people playing the slots, but the odds are still stacked against us. We only win 48% of our sports bets, which makes it a losing proposition.
Maybe it’s because we fall in love with our alma mater, or simply can’t stand an opposing quarterback. Or perhaps we don’t do enough research.
Whatever the reason, we shouldn’t count on the recent Supreme Court ruling as a way to increase our income.
For that we need smarter strategies, with much higher win rates, but recent trends in the financial markets have made this much harder.
For almost nine years you could win the investment game by owning stocks, bonds, or a combination.
Sure, the markets didn’t go straight up (remember the scare of the summer of 2011!), and bond yields didn’t go straight down (taper tantrum, anyone?).
But, in general, equities climbed as yields dipped, so bond prices also moved higher. As fixed income investors we didn’t earn much money, but we made a bit on capital appreciation.
The easy days are over.
The Dow is negative for the year as I write this, and the 10-year Treasury yield is sitting above 3%.
Today the markets feel like we could lose on both fronts as equities waver and bond prices slip. That could make investing harder than sports betting!