This article originally appeared in the NZ Herald


Sports betting is one of the fastest growing sectors of the gaming industry.


Accurate global statistics are difficult to obtain, mainly because the vast majority of the betting is through non-licensed organisations, but a 2015 United Nations conference was told that annual worldwide sports betting turnover is at least US$1000 billion (NZ$1430 billion). This figure could be as high as US$4000b (NZ$5710 billion).


By comparison, New Zealand’s annual Gross Domestic Product is only $249 billion or US$174 billion.


The massive increase in sports betting has created huge opportunities, as well as problems, for sporting bodies. Sporting organisations are becoming more reliant on betting-related income and sponsorship, but this is creating massive integrity and match-fixing problems. Soccer, cricket, tennis, rugby league and many other sports have been affected by match-fixing.


The investment industry is also taking advantage of this sports betting craze and a number of sports betting funds have been launched, particularly since the state of Nevada relaxed some of its sports betting regulations.


These funds are reporting impressive returns.


Sports betting has grown dramatically in recent years because of technological advances, widespread live television coverage and the availability of more and more individual game statistics.


Individuals can bet on their smartphones, and the plethora of statistics allows them to bet on individual aspects of a game as well as the final score.


For example, gamblers can bet on the score spread, the first scorer, the highest scorer, the individual who covers the most metres during a game as well as many more features of a sporting event.


Overseas reports indicate that a number of online, unlicensed betting agencies give individuals the ability to bet on every single move in a game.


Peter Jay, a British independent betting expert, estimates that Soccer attracts 65 per cent of total global sports betting, with cricket and tennis attracting 12 per cent each.


Soccer is attracting more and more betting interest. For example, seven of the 20 English Premier League teams had sports betting companies as their principal shirt sponsors last season. These were Bournemouth, Crystal Palace, Sunderland, Stoke City, Watford, West Bromwich Albion and West Ham United.


The next largest shirt sponsors were from the banking/finance/insurance sector, with five, followed by airlines and manufacturing, with two each. Beverage/brewing, duty free, electronics and the software sectors had one principal shirt sponsorship each.


King Power, Thailand’s leading duty free operator, hit the jackpot when Leicester City was the surprise winner of the Premier League.


Betting organisations argue that their sponsorship money has a positive impact on sports but it also creates huge potential match-fixing problems. Young, impressionable athletes are vulnerable to unscrupulous bookies, particularly if they are in debt to those bookies.


There have been a number of major soccer match-fixing scandals including:


  • In June 2014, two Asian businessmen were jailed for five years in the UK, and a player for 16 months, for attempting to fix lower league games
  • Thirteen payer were banned in July 2013 for widespread manipulation of Turkish football games
  • A large number of prominent Italian footballers were arrested in relation to match-fixing in 2011 and 2012
  • In 2013 a number of club officials, referees and players were given criminal convictions in Greece for widespread match-fixing.


Soccer is not the only sport to be tarnished by betting.


The others include T20 cricket in Bangladesh, Russian tennis, Danish ice hockey, snooker, Pakistani cricket and Australian rugby league.


Unlicensed sports betting is the dominant form of betting in Asia, particularly India and China. By comparison, it is estimated that regulated Nevada betting accounts for nearly 90 per cent of total US sports betting.


In New Zealand, regulated sports betting is mainly through the TAB.


The TAB’s sports betting has soared from $206 million, or 13 per cent of total betting, in the July 2010 year to $405m, or 20 per cent of betting activity, in the July 2015 year. Racing betting has fallen from 87 per cent to 80 per cent of TAB betting over the same period. This is consistent with global trends.


TAB sports betting revenue of $405m for the July 2015 year comprised the following: basketball $81m; soccer $69m; rugby $57m; cricket $53m; league $49m; tennis $44m; and other sports $52 million.


Sports betting increased 53.3 per cent in the first half of the July 2016 year because of the Rugby World Cup and a massive increase in in-play sports betting. The latter is betting on aspects of a game rather than the overall result.


The New Zealand Government, which is concerned about the level of unregulated offshore sports betting, established a Working Group last year to look at offshore racing & sports betting.


The Working Group, which released its final report last October, said offshore betting “is a rapidly growing problem”. It stated: “In 2010 there were around 23,000 New Zealanders betting offshore. Today, an estimated 40,000 people bet offshore. The problem will continue to grow. New Zealanders betting offshore resulted in turnover totalling $285 million a year in 2010. Today, betting turnover by New Zealanders with offshore gambling operators is estimated to be $518 million a year.”


There are two main problems with offshore betting.


First, sports codes receive less income from betting organisations when New Zealanders bet offshore through unlicensed agencies. In addition, it is much more difficult to catch match-fixers if they bet through unlicensed offshore organisations because these organisations are reluctant to release betting information to NZ police.


This is a problem faced by Australian authorities in their current investigation into alleged match-fixing by the Manly rugby league team. There are no signs of irregular betting patterns on Manly games through licensed Australian operators, but there may have been big bets placed on the suspect matches through offshore unlicensed betting organisations. It is extremely difficult to trace these offshore bets.


Meanwhile, the investment sector has taken advantage of the sports betting craze.


The Cloney Multi-Sport Fund, which was established in Australia in January 2010, bets on Australian horse racing, European soccer, cricket, tennis and golf. The fund, which has a minimum investment of A$500,000, had a 200.6 per cent return between January 1, 2010 and March 31, 2016 compared with a 7.6 per cent return by the ASX 200 Index over the same period.


Recent changes to Nevada’s gaming laws will encourage more sports betting funds because out-of-state residents are now allowed to access Nevada’s sports betting facilities through these funds for the first time.


Las Vegas based Contrarian Investments LLC, which established a sports betting fund in March, mainly bets on NBA basketball and has reported a year to date return of 19.5 per cent.


The Nevada Sports Investment Group, LP, which is also based in Las Vegas, established a sports betting fund in March that has achieved an annualised return of 89.6 per cent in its first three and a half months. The minimum investment is US$25,000 and investors will receive a 70 per cent share of the gross profits generated by investment activities. The fund bets mainly on baseball and basketball.


The huge increase in sports betting, and the strong performance of sports betting funds, will encourage more and more betting. This is a positive development for betting organisations, and for sports betting funds, but it increases the potential for match-fixing.


The increasing popularity of unlicensed offshore betting options also reduces the potential payouts to New Zealand sporting organisations.


Brian Gaynor

Portfolio Manager


Disclaimer: This article originally appeared in the NZ Herald and is intended to provide general information only. It does not take into account your investment needs or personal circumstances and so is not intended to be viewed as investment or financial advice. Should you require financial advice you should always speak to an Authorised Financial Adviser.