09-23-2018, 02:53 AM
![[Image: Online_Sportsbook_Business.png]](https://preview.ibb.co/dhKEK9/Online_Sportsbook_Business.png)
According to estimates, the worldwide sports betting market is worth $3 trillion. And over $150 billion of this amount is wagered in the US alone.
That said, running your own sportsbook is an alluring prospect. I myself have been interested in this very subject, pouring hours into researching the possibilities.
I’d like to share with you what I’ve learned about opening and running a sportsbook – without going to jail.
That being said, keep reading to find out the different options, what type of sportsbook you should open, general considerations, and tips on profiting and staying out of jail.
What Options Do You Have for Starting a Sports Book?
When running a sports betting operation, you have four main options:
Open a land-based sportsbook in a country where it’s legal to do so.
Become an illegal bookie and serve your local neighborhood.
Open an online sportsbook or betting shop in a licensed market.
Launch an online sportsbook in an offshore market.
Use a Price Per Head service.
Ideally, you’d open either a legal land-based or online sportsbook. But this is a huge undertaking when considering the costs, licensing, and taxes involved.
Becoming a local bookie is the cheapest option. But this is also illegal and can land you in prison in many states.
An offshore sportsbook offers the best of both worlds.
It’s a grey area in most countries, and launching an offshore betting site doesn’t cost as much as a licensed version.But even offshore sites have their downsides.
Here’s a quick overview of the pros and cons to each sportsbook option.
1. Land-based Sports Book or Betting Shop
Pros
– Legal
– Nice atmosphere for customers
– Reputability
Cons
– Confined to specific area
– Legal land-based sportsbooks make up small part of market
– No online bets
– Lots of background work and fees to enter this space
Where are Land-based Sports Books Legal?
Countries/territories that offer legal and regulated sportsbooks – or betting shops in the UK, Australia, and Ireland – include the following:
Aruba Australia Bahamas Belgium Canada China Costa Rica Dominican Republic Ecuador France Guatemala Honduras Hong Kong Indonesia Ireland Italy Japan Macau Malaysia Mexico Netherlands Nicaragua Panama Portugal Spain South Korea Switzerland Taiwan Thailand US Turkey UK United Arab Emirates
This is only a short list, and there are many other countries and territories that have legal sports betting. But this gives you an idea of how many different nations offer the opportunity to open a sportsbook.
Keep in mind, though, that some of these places have monopolies and/or heavy restrictions.
The Netherlands has a sports betting monopoly because the Holland Casino controls all legal betting activity.
The US features heavy restrictions on sports betting because only four states – Delaware, Montana, Nevada, and Oregon – have legal sports gambling.
Of these, only Nevada can operate fully functional sportsbooks with lines on all sports.
What to Expect
Opening a land-based sportsbook in many countries is a daunting task.
First off, you have to compete against established giants. The UK is a perfect example because they feature Bet365, Betfair, Coral, Ladbrokes, Paddy Power, and William Hill.
The US is another example because most Nevada-based sportsbooks are run by major casino companies, like Boyd Gaming, Caesars, MGM, Westgate, and Wynn.
This isn’t to say that you can’t open a betting shop or sportsbook. But note that you need the right market and business sense to be successful.
The benefit to opening a land-based sportsbook is that you’ll be legal, licensed, and trustworthy. Illegal bookies and offshore sportsbooks can’t tout the same qualities.
2. Becoming an Illegal Bookie
Pros
– Small startup costs
– Recruit customers quickly (word of mouth)
– Less management Cons
– Illegal
– Bookmaking is a felony in many places
– No legal means to collect losses
Where is being a Bookie Legal?
I don’t know of any country where unlicensed bookmaking is legal.
Countries with licensed markets like the UK treat bookmaking as a serious offense because they want to protect their sports betting industry.
Most states in the US deem bookmaking as a felony. This has to do with fears stemming from the Chicago Black Sox Scandal, where certain Chicago White Sox players accepted bribes to throw the 1919 World Series.
What to Expect
You may have read stories about college and neighborhood bookies, who create lines and take action from people they know.
This was a lucrative proposition up until 15-20 years ago. But offshore sportsbooks have cut into the bookie business, making it a less-attractive venture these days.
Another problem is that you’re taking a substantial legal risk because many countries deem bookmaking a felony.
This makes collecting losses hard because you can’t legally enforce bettors to pay up. Some bookies hire enforcers to collect the debts for them, which opens you up to more legal problems.
The upside is that you can get started relatively easy, and you don’t have to worry about any regulations. But despite how easy it is to get started, I don’t recommend becoming a bookie due to the legal risks and hassles you’ll face.
3. Launching a Licensed Online Sports Book
Pros
– Legal
– Mainstream advertising
– Room for growth in other markets Cons
– Licensing, fees and taxes are expensive
– Must get separate license for every jurisdiction
– Competing against giants (i.e. William Hill, Ladbrokes, Paddy Power)
Where are Licensed Online Sports Books Legal?
Below you can see countries where online sportsbooks are legal and regulated:
Albania
Austria
Belgium
Bermuda
Bosnia and Herzegovina
Bulgaria
Channel Islands
Croatia
Cyprus
Czech Republic
Denmark
Estonia
Finland
France
Georgia
Germany
Gibraltar
Greece
Hungary
Iceland
Ireland
Italy
Lithuania
Malta
Montenegro
Netherlands
Norway
Poland
Portugal
Romania
Russia
Serbia
Slovakia
Spain
Sweden
Switzerland
Turkey
UK
What to Expect
The great thing about running a licensed online sportsbook is that you are legal and can advertise through mainstream channels. This is especially nice in large markets like the UK and France, where you can reach over 60 million residents.
The downside is that you must pay heavy taxes and licensing fees. Spain is a perfect example because they tax online gaming operators at a 25% rate.
Another drawback is that you need to obtain licensing for every country where you want to operate. This makes sense for larger countries like the UK, France, Italy, and Spain. But it becomes a hassle when looking at smaller nations like Albania, Estonia, and Lithuania.
4. Opening an Offshore Online Sports Book
Pros
– Serve many US states and Canadian provinces
– Avoid state regulations
– Light licensing requirements Cons
– Either illegal or a grey area in many countries
– Bad reputation due to nefarious sportsbooks
– Licenses aren’t always reputable
– Prosecution is a possibility
Where are Offshore Sportsbooks Legal?
Offshore sportsbooks aren’t technically legal anywhere. They operate in a grey area, serving countries and territories that don’t have regulated markets or strict online gambling laws.
Most offshore sportsbooks operate in Central America and Caribbean countries. Antigua, Costa Rica, Curacao, and Panama serve as popular licensing jurisdictions for offshore operations.
Canada and the US are popular targets for offshore sportsbooks. The reason why is because both countries are largely unregulated and don’t take much legal action against offshore operators.
But most sports betting sites avoid the following American states:
Delaware – Regulated online gaming market. Kentucky – Has taken legal action against gaming sites. Maryland – Has taken legal action against gaming sites. New Jersey – Regulated online gaming market. New York – Has taken legal action against gaming sites. Nevada – Regulated online gaming market. Washington – Felony laws against online gamblers& operators.
What to Expect
Offshore sportsbooks are a good way for non-established companies and individuals to break into the market.
Most offshore betting sites obtain licensing from and base themselves in the aforementioned jurisdictions.
The good news is that this licensing isn’t as expensive as what you’d pay in the UK or Malta. The bad news is that offshore jurisdictions have little oversight over their clients and don’t inspire much trust.
This has led to terrible incidents, where sportsbooks treat players poorly, refuse to pay out certain wins, and/or close down without repaying player funds.
World Sports Exchange (WSEX) and Wager506 are two examples of offshore sportsbooks that closed without honoring player funds
These black marks have hurt the offshore betting industry’s image. Nevertheless, Americans, Canadians, and others with no other regulated options continue to make online wagers.
5. Running a Price Per Head Operation
Pros
– Easy way to start offshore site for an individual or small group
– Most of the work is handled for you
– You can operate offshore book from onshore (not legally, though) Cons
– You pay a set fee on customers, even if they don’t bet much
– You can’t customize all aspects of your site/operation
– Illegal
What is Price Per Head Bookmaking?
Price per head (PPH) is another way to get into offshore bookmaking.
But rather than launching your own sportsbook, a PPH companymanages most aspects of your sports betting business.
In exchange, you pay the PPH business a set fee for each customer. The fee is usually $10, although it can be higher or lower depending upon the company.
You only have to pay a fee if the customer actually makes a bet that week. Here’s an example:
You have 20 total customers, and 15 of them make bets in a week.
Your PPH fee is $10 per customer.
You pay the company $150 for the week (15 x 10).
What to Expect
This is the most realistic option if you want to start a sportsbook because you don’t have to invest a significant amount of money upfront.
The PPH company offers a website, customer service, and betting tools. The bookmaker merely assigns the players an online username and password, sets betting limits, and handles winnings/losses.
This sounds like the perfect setup because you don’t have to pay a fortune for employees, office, space, a website, and software maintenance.
Another benefit is that you don’t have to pay the PPH company anything beyond a flat fee. This is nice for when people lose hundreds of even thousands of dollars at your sportsbook.
One big drawback is that you’re paying a flat rate on some customers who won’t cover your fees. Here’s an example:
You pay $10 if Customer A makes a bet.
Customer Amakes two $22 wagers in a week at -110 vigorish (a.k.a. juice).
They win one wager and lose one; you make a $2 profit off their one loss [22 – (22/1.10)].
Adding up the $10 fee and $2 profit, you’ve lost $8 on Customer A for the week.
If Customer A continues betting $44 total each week, they become a long-term losing proposition.
People who use PPH services are essentially illegal bookmakers.
They may turn to PPH services because they want to take heat off themselves, or to expand their business thanks to the PPH company’s larger range of lines.
In either scenario, bookies don’t refer many low-volume bettors to a PPH site. But it’s worth covering this potential downside just in case.
What Type of Sportsbook should You Open?
Based on what we’ve covered, I have three recommendations for what type of sportsbook you should open:
Price Per Head operation
Offshore sportsbook
Licensed betting shop
The option you choose will depend upon your financial situation, if you have partners, and your opinion on legal matters.
You can keep reading to see why I’ve singled out these choices, along with why I’ve tossed out the other ideas.
1. Price Per Head
Why You should Open a PPH Company
Again, this is the easiest way to get started for an individual or small group because you’re provided with the tools of a bigger operation.
Think how much it would cost to pay for employees in customer service, accounting, and marketing. You’ll also have to pay rent, utilities, and other overhead costs when starting a land-based or online sportsbook.
But these heavy upfront and operational costs are eliminated when you use a PPH service.
What’s more is that the PPH company has their own customers – plus bettors from other PPH bookies – allowing them to offer a wide range of lines that you can’t match.
In my situation, I have a modest amount of savings and a few investors willing to put several thousand dollars towards a sportsbook.
This isn’t nearly enough money to start a decent offshore operation. But it is enough to pay per-customer fees and cover bets if I suffer a bad week.
What You Need to Worry About
As covered before, PPH operations can take heat off of a local bookie. Given that everything is done online, you don’t have to physically meet with clients and send/receive payouts through the mail.
But the problem is that a PPH business is still illegal, even though you’re not technically doing the bookmaking. The PPH model falls under the Interstate Wire Act of 1961, which states:
“Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, shall be fined under this title or imprisoned not more than two years, or both.”
Anybody running a PPH business is assisting in the placing of bets on sporting contests. Many of these operators also avoid paying taxes on their illegitimate profits.
The good news is that authorities don’t raid PPH operations on a weekly basis. After all, there are literally hundreds of these businesses in Costa Rica alone.
But as some high-profile legal incidents show, you do have to worry about being busted – especially if you’re dealing with a PPH operating while living in the US.
Here are a few arrests that involve PPH operations:
Poker player Jay Sharon and eight other men from New York City were busted for running a PPH-style betting ring. Newsday.com notes that bettors would make “wagers either online or by calling a toll-free number, using prearranged codes and passwords,” via a Costa Rican website or 1-800 number.
In 2016, Rhode Island State Police carried out “Operation Free Roll” and busted 17 men in connection with an illegal gambling business.WPRI.com notes that the betting ring, which ran out of a Rhode Island restaurant, used BetCapri.com (Panama) and VIPBettors.com (Costa Rica) to run the betting operation. The 17-man ring also had $1.5 million worth of marijuana at the scene.
In 2016, New Jersey authorities busted a 46-person betting ring run by Robert “Elvis” D’Alessio. According to NJ.com, D’Alessio’s ring used “50 gambling agents who raked in tens of millions of dollars in wagers using 1-800 numbers and a wire-room in Costa Rica, authorities said Wednesday.”
Another big thing you need to consider is how PPH businesses allow bettors to wager based on credit. This contrasts offshore sportsbooks, which force you to make a deposit before you can wager on anything.
Allowing credit betting is a necessary evil because if you don’t do this, then there’s nothing differentiating your PPH service from an offshore sportsbook.
But then you also must worry about collecting the money when you allow credit betting.
2. Offshore Sportsbook
Why You should Open an Offshore Sportsbook
If you don’t have the backing of a well-established company, yet you have lots of money, then an offshore sportsbook is a good option.
Sites like Bovada, BetOnline, GTBets, SportsBetting.ag, and TopBets have made a fortune serving American players.
The biggest reason for their successes is that they serve US players in an unregulated market. Going further, they don’t have to deal with massive regulatory fees, red tape, and heavy taxes.
The thought of running a successful online sportsbook in a tropical environment is intriguing. And if your operation goes well, you’ll make more money than with PPH or a single betting shop.
What You Need to Worry About
The majority of offshore sportsbooks go unchecked. Even still, the US government is notorious for prosecuting offshore sportsbooks and other gaming sites.
This means that if you do become successful, you must worry about being busted. You especially don’t want to operate an offshore site while you’re living in the US.
Poker pro Bryan Micon found this out the hard way when he was arrested while living in Las Vegas.
Micon operated the poker site Seals with Clubs out of Antigua. But the mistake he made was having a residence in Nevada, which has their own legal online gaming market.
Another drawback is that it costs far more than many expect to fund a legitimate offshore sportsbook. Here’s an example of what you’ll pay for just to get started:
$15,000 – Costs Rica license (one of the cheapest and least invasive)
$10,000 – Quarterly fees to Costa Rica ($2,500 per quarter)
$8,000 – Building website
$10,000 – Banking fees (i.e. credit cards, bank wire, eWallets)
$15,000 – Annual office rent
$8,000 – Utilities
$1,000 – Dedicated server
$100,000 – Costa Rican employees (customer service, IT, marketing)
Total for First Year = $167,000
Remember, these are just operational costs, and they don’t include the funds you need to back bets when you take a bath for a couple weeks.
I wouldn’t recommend starting an offshore sportsbook with anything less than $300,000 to $500,000. A safer estimate is $1 million, which gets you off the ground and backs bets.
Unfortunately, I don’t have this kind of money or substantial investors. But this would be my ultimate option if I did and were serious enough to move to a Caribbean or Central American country.
3. Legal Betting Shop
Why You should Open a Betting Shop
If you want to operate in a legal market without spending a fortune, then you should consider opening a betting shop in the UK, Australia, or Ireland.
You can actually open a shop in any country that doesn’t have a sports betting monopoly. But I speak English, which is why I personally consider these three countries.
You need to obtain the proper licensing to run a betting shop, which will cost you several thousand euros/pounds.
But the upside is that you don’t have to worry about authorities arresting you, or keeping your business activities underground.
Another nice thing is that you can purchase a betting shop, rather than opening one yourself. I see several UK-based shops listed for sale online, with prices ranging from £54,900 to £99,950.
The one listed at £54,900 is a solid deal since the shop already has a betting turnover of £1.2 million annually.
What You Need to Worry About
The UK and Ireland are both suffering from gambling saturation because they have so many betting shops, casinos, racetracks, and online gaming options.
This is one reason why it’s easy to find a betting shop for sale online. You’ll also face heavy competition from the big companies like Ladbrokes, Paddy Power, and William Hill.
I’m not saying that you can’t make a nice profit with betting shops. But you’ll need a clear plan, strong marketing, and bookmaking experience to succeed.
The other concern is that you need to take care of multiple licenses and fees before launching. This is a good reason to buy a shop from an experienced owner because they can walk you through the licensing process.
4. Avoid Land-based Sports Books, Licensed Online Sportsbooks, and Becoming an Illegal Bookie
Why Avoid Becoming an Illegal Bookie?
As I covered in the price per head section, there’s not much distinction between an illegal bookie and running your service through a PPH company.
But one big difference is that a PPH business sees action run through an offshore sportsbook. In contrast, a bookie runs their action out of a storefront or their home.
While both a PPH business and land-based bookmaking are illegal, the latter makes you a bigger target. After all, it’s easier for authorities to track your activities when everything is done offline.
Why Avoid Opening a Land-based Sportsbook?
The key distinction between a land-based sportsbook (Nevada) and betting shop is that sportsbooks require a much-more significant investment.
Look at the following list of Vegas sportsbooks:
Aria
Arizona Charlie’s Boulder
Bally’s
Bellagio
Boulder Station
Caesars Palace
Circus Circus
Cosmopolitan
D Las Vegas
Excalibur
Fiesta Rancho
Golden Nugget
Hard Rock
Harrah’s
Luxor
Mandalay Bay
MGM Grand
New York-New York
Palms
Planet Hollywood
Red Rock
Sam’s Town
While this doesn’t represent all of the Las Vegas sportsbooks, it shows you that established casinos run this industry in Sin City
Your best chance in this situation is to become an investor in a casino/sportsbook.
Why Avoid Opening a Licensed Online Sportsbook?
Primary reasons why include heavy taxes, and the need to obtain new licensing whenever you enter a new market.
Here’s an example of what you’d expect to pay for running an online sportsbook in the UK:
£2,933 – Application fee for a sports betting site making between £500,000 and £2 million.
£2,933 – Annual fee for the same perimeters.
£75,000 to £300,000 – Tax rate of 15% on betting profits.
Variable costs on attorney fees.
The good thing here is that the UK Gambling Commission (UKGC) charges a relatively low licensing fee. But the 15% tax rate is high in comparison to most online gaming jurisdictions.
Another annoying thing about the UK is that you have to apply for separate licenses for each sector (i.e. casino, poker, sportsbook). In many jurisdictions, one license qualifies you for all gaming verticals.
This isn’t to pick on the UKGC’s requirements, but rather show the costs of operating in a top-tier iGaming jurisdiction. If you don’t have millions of dollars to bankroll such an operation, then this isn’t for you.
General Considerations for Running a Sports Book Business
While we’ve discussed several topics related to starting your own sportsbook, I want go in depth on general aspects that deal with betting shops, offshore sites, and price per head businesses.
How to Get Your Online Sportsbook Software – Turnkey vs. Building Your Own
If you want to run an offshore sports betting site, you’ll obviously need software. And when doing this, you have two main options:
Build the software yourself.
Pay for a turnkey site.
Unless you have an extensive programming background and/or a team of programmers in place, the turnkey option is a nice choice.
Turnkey betting sites are like price per head operations, except that you run the site.
You’d be surprised at how many companies are willing to build and support the site for you. In exchange, you either pay them a flat fee, license their software, or pay a fee + commission on revenue.
Some of the aspects that you want to look for in a turnkey provider include:
Customizable website
Customer support (email, live chat and phone)
Online gaming license
Large variety of lines and sports
Live betting
Means to track customer data/tendencies
Fraud controls and data encryption
Plenty of banking options
Casino games and/or poker (if running multi-operation)
If you’re interested in a certain provider, ask them questions to get exactly what you’re looking for.
Know how Much You’ll Earn with Price Per Head
PPH is a risky business model due to laws in the US. But it can also be a lucrative model if you have the right players.
Odds are that you’ve gained your customer base through previous bookmaking and can identify which players will be lucrative for you.
If you already have a bookmaking operation (college, friends, neighborhood, work, etc.), then you should do some math on the current action that you’re getting.
Here’s part 1 of an example:
You have 25 customers.
You add up all their bets over a month-long period.
You find that the average wager size is $110
Your average line is set at -110.
If you make an average of 5% juice, your profit is $5 per bet.
Here’s part 2 of the example:
Your PPH fee is $10 for each customer who bets during the week.
Given your $5 average profit, you’d need to make two bets per customer to break even.
Three bets or more per customer would earn you a profit.
The hope is that you get a combination of high weekly betting volume combined with large wagers so you can make a profit after PPH fees are taken.
Obtaining Licensing
One of the primary reasons to get an online gaming license is to have some reputability. Another reason is so that you have a country to operate out of, which is important for both licensed and offshore sportsbooks.
Some licensing jurisdictions are more reputable than others, based on their screening process and commitment to solving player/operator disputes.
The most-reputable jurisdictions are the UK Gambling Commission, Gibraltar, and Malta. They adhere to strict licensing requirements to screen out potentially bad operators.
Offshore companies that operate in unlicensed markets won’t be accepted by the UKGC, Gibraltar, or Malta. The following are better jurisdictions if you’re thinking or running an offshore company:
Antigua and Barbuda –Antigua is famous for their unfinished dispute with the US over offshore gaming. This island country has upgraded their licensing requirements in recent years. They’ve also upped their fees, charging $15,000 for an application, $75,000 for a wagering license, and $5,000 for annual renewal. Costa Rica –The only thing Costa Rica cares about is that you don’t offer gambling to their residents. Other than this, they provide no checks on their operators, and players have no recourse if they’re cheated. This has tarnished the Costa Rican jurisdiction and reduced its popularity. Curacao – Costa Rica’s loss has become Curacao’s gain since this is now the most-popular destination for offshore operators. Licensing fees are moderate at 60,000 ANG ($33,500) for the license, and 10,000 ANG ($5,500) for the sublicense. But the tax rate is just 2%, which is what operators love about Curacao. Kahnawake Gaming Commission (KGC) – Located on Mohawk Territory in Kahnawake, Quebec, the KGC is another haven for offshore providers. They charge $30,000 in licensing/application fees, plus another $5,000 for every Key Person License required. Panama – Although home to the famed BetOnline, Panama isn’t an esteemed licensing jurisdiction. Their licensing fees are also a bit high, with $40,000 required for a license, $20,000 for a sublicense fee, and $20,000 for annual renewal.
Know how Much Money You’ll Need
I touched on this when discussing how to open an online sportsbook. But knowing how much money you’ll need is worth covering again.
Let’s look at an example using a UK betting shop:
£60,000 – Purchase betting shop with licensing already in place £100,000 – Employees (cashiers, manager) £12,000 – Annual rent for building space £15,000 – Marketing and advertising £8,000 – Utilities Total for First Year = £195,000
The good news is that once you buy an existing betting shop, you don’t have to worry about the purchase cost again.
If we throw this out, the operating costs are £135,000 annually, plus licenses when a renewal is needed.
Assuming you make average vigorish of 4.5% on all bets, this means you need £3 million in total bets to break even (135,000 / 0.045).
Of course, there’ll be hidden costs that arise too, and you need to account for these as well.
Another thing to remember is that you’ll also need enough money to cover bets when the action is lopsided and you take losses.
Here’s a simple example that shows what you need to worry about in terms of exposure to bets:
You offer lines on five games at -110. The action on both sides is as follows:
Game 1: $1,000 on Cleveland, and $900 on Pittsburgh
Game 2: $650 on Seattle, and $750 on Arizona
Game 3: $700 on Chicago, and $650 on Green Bay
Game 4: $2,100 on Miami, and $1,750 on San Diego
Game 5: $1,500 on Houston, and $1,250 on Indianapolis
Here’s how much risk you take with each contest:
Game 1: $100
Game 2: $100
Game 3: $50
Game 4: $350
Game 5: $250
Your risk is $850 on $5,950 in combined bets. The likely scenario is that you’ll win 2-3 games and be near break-even (before vigorish).
But you also have to prepare for the event that you’ll lose all five games and be on the hook for $850.
The good news, though, is that you’ll collect vig from the losing side, which lowers your risk.
Set Up Your Banking Options for an Offshore Sportsbook
The more banking methods you have, the less hassle your customers need to worry about when depositing.
The most-popular options for betting sites include Bitcoin, credit cards, debit cards, and eWallets. Of course, some of these options require deposit and/or withdrawal fees.
You can front these fees as a service for your customers, split the fees, or push them all on the customer.
Of course, this is another area where turnkey solutions help out. These operations normally have different payment options you can choose from when customizing your site.
Tips for Making Big Profits and Avoiding Jail
Tip # 1 –Steal Lines from Major Sportsbooks
When you start your own sportsbook, you may envision yourself creating lines for different bets. And this is perfectly fine if you have bookmaking experience and/or professional bookmakers working for you.
But if you don’t, then I highly suggest that you takes lines from major Vegas and online sportsbooks.
This saves you money on hiring professional bookmakers. It also frees you up to work on other aspects of the business.
Tip # 2 – Make Extra Profits with Line Shading
If you follow the first tip, then you should already have help in this department. But it’s still worth briefly covering how line shading will help your sportsbook make extra profits.
The average juice from a -110 line is 4.5%. Here’s an example that explains this:
A bettor lays $110 to win $100, with a standard -110 line in play.
If they lose, you get their $110.
Your long-term expected profit is $10 on this wager (110 – 100).
A $110 bet + your potential $110 win = $220 combined betting action.
Your average vigorish is 4.5% (10 profit /220 combined action).
Most bookmakers would be happy if they could even out action on both sides of every line and make a steady profit. But what if you can earn more than the 4.5% average?
This is where you consider line shading, which involves adding more points to one side in hopes of winning more money.
Let’s look at an example:
The Dallas Cowboys – the most popular NFL team – is playing the Washington Redskins.
A major Vegas sportsbook sets the line at: Washington Redskins +11.5 at Dallas Cowboys -11.5.
Dallas is not only at home, but also an extremely popular team. So they’re draw more betting action than the Redskins.
You shift the line as follows: Washington Redskins +13.5 at Dallas Cowboys -13.5.
At this rate, you still might get too much action on Dallas’ side.
But now, the Cowboys have to cover a greater spread, making it more likely that you win extra profits from the unbalanced side.
Again, if you watch what major sportsbooks do, line shading is often factored into the equation. But you can always shade the line more and hope that you don’t lose too many wagers from bettors who comparison shop.
Tip # 3 – Offer Reduced Vig when You Need More Business
One popular sports betting promotion is reduced vigorish.
Instead of attaching -110 to lines, you can reduce vig to -108 or even -105. This makes your lines far more attractive to bettors because they have a better chance to win.
Of course, the downside is that you’re severely cutting into your profits. That’s why you should only run these promotions when you really need the business.
Good times to offer reduced juice include after the Super Bowl and in mid-summer, when baseball is the only major sport running.
Tip # 4 – Don’t Offer Offshore Betting to Certain US States
If you start an offshore sportsbook, there are certain states that you definitely want to avoid because it might result in prosecution.
I touched on this before, but here goes again:
Avoid Delaware, New Jersey, and Nevada because they have regulated gaming markets and are protective of their online gaming markets.
Avoid New York because they’ve initiated serious legal action through the Southern District of New York Attorney’s office. This includes Black Friday, where the owners of PokerStars, Full Tilt Poker, and the Cereus Network (Absolute/UB Poker) were indicted for bank fraud and money laundering.
Avoid Kentucky because they once seized 141 online gambling related domain names. The Bluegrass State is very protective of their lucrative horseracing industry.
Avoid Maryland because they indicted Bodog founder Calvin Ayre for illegal sports betting in 2012.
Avoid Washington because they have felony laws against both online sports bettors and site operators.
Tip # 5 – Learn Standard Business Principles
The general public mistakenly assumes that everybody in the sports betting business is rolling in money.
This perception was truer in the golden age of online sports betting (early-to-late 2000s), but it’s not true these days.
Sportsbooks are like any other business in that you need sound management principles and financial knowledge to run a successful business.
If you haven’t already operated a successful company, then there are more than enough resources online to help you do so. You can also read books from famous entrepreneurs to learn their philosophies.
Tip # 6 – Become Adept with Social Media Marketing& Newsletters
More people are using social media networks than ever before. And if you want to capture their attention, you need to become good at social media marketing, or hire an expert.
According to SmartInsights.com, Facebook is the most-popular social network with 1.87 billion users worldwide.
WhatsApp and Facebook Messenger are tied for second among networking sites, with 1 billion users a piece. Instagram (600 million), Tumblr (550m), Twitter (317m), and Snapchat (300m) are also popular.
Famed social media guru Gary Vaynerchuk suggests that you pick 1-2 channels and become knowledgeable at their intricacies. Based on the number of worldwide users, Facebook, Instagram, and Twitter are good networks to consider.
But if you’re using Facebook for an unlicensed sportsbook or PPH service, note that they can shut your page down at any moment without any recourse.
Email newsletters are another good way to connect with your customers. Although email marketing isn’t the industry that it once was, you can still reach a lot of customers this way.
Tip # 7 – Keep a Tight Group with a PPH Business
When running a US-based PPH operation, then you need to be careful with the clients you take on.
If you get too aggressive with expansion efforts, you could be inviting one of the following into your group:
Undercover cop
Bettor who doesn’t pay debts (most PPH operations offer credit betting)
Somebody who can’t pay debts and tells the authorities about your operation
The best scenario as a PPH operator is to live in an offshore destination. This makes it less likely that you’ll be busted for your activities.
Of course, the dilemma here is being profitable enough to justify the move to an offshore country.
Tip # 8 – Shift Lines and Balance Out Action
Although it’s ideal to balance action on both sides of bets, you’ll inevitably have times where you the action becomes unbalanced. Here’s an example:
You set a line at: Los Angeles -3.5 at Colorado +3.5.
$9,700 is wagered on Los Angeles, and only $3,100 is wagered on Colorado.
This leaves you taking on $6,600 in risk. And the vigorish won’t come close to covering this.
The first course of action is to take points from L.A. and give them to Colorado to make the latter more attractive. Your new line could be: Los Angeles -1.5 at Colorado +1.5.
But what if this doesn’t work to the degree you need it?
Another option is to hedge your bets by wagering at another sportsbook. Since your exposure is $6,600, you visit another sportsbook and wager this amount on Colorado.
The problem is that you won’t make any money if the other sportsbook also has -110 attached to the line. The upside is that you avoid losing lots of money if L.A. wins.
The ultimate scenario is if you grow big enough to where you can absorb times when the lines don’t balance out perfectly. And of course, you can make some of this back with the line shading we discussed in tip #2.
Tip # 9 – Set Betting Limits
Another way to reduce your exposure to unbalanced lines and sharp bettors (skilled professionals) is to set wagering limits.
All sportsbooks have these to some degree, but the limits vary based on the sport and type of bet. Here’s a look at some betting limits from Bovada:
NFL Spread – $2,000 NFL Moneyline – $1,000 NFL Totals – $1,000 NCAA Football Spread – $2,000 NCAA Football Moneyline – $500 NCAA Football Totals – $1,000 NBA Totals – $1,000 NBA Moneyline – $500 NBA Totals – $500 NCAA Basketball Spread – $500 NCAA Basketball Moneyline – $500 NCAA Basketball Totals – $500
These limits aren’t very high in relation to some sportsbooks. But this provides a rough guideline on how to set limits.
Tip # 10 – Use Promos and Loyalty to Retain Customers
Unlike online casinos and poker sites, sportsbooks don’t shower their customers with rewards. But you should still offer promotions and loyalty benefits to retain customers.
Some offshore sportsbooks and betting shops give free bets to new depositors. You can also offer a match deposit bonus up to a certain amount (i.e. 50% up to $200).
Other popular promos include live sporting event packages, seasonable offers, and promos that center on big events (i.e. Super Bowl, World Cup).
You can also offer loyalty points for every dollar that a customer bets. When they earn enough points, customers can exchange them for cash, free bets, or merchandise.
Tip # 11 – Hire Legal Representation
Hiring lawyers can make your job much easier when it comes to licensing and knowing the legal stance of every country and legal jurisdiction.
This isn’t to say that lawyers will completely save you from an indictment. But it helps in so many ways if you have professional lawyers on your side.
Here are some of the services they can provide:
Making sure you obtain proper licensing, and reading through paperwork before you sign.
Explaining laws in different countries that you service.
Setting up contracts that your employees sign.
Representing you in legal issues.
Conclusion
As you can see, there’s no clear path when it comes to starting a sportsbook.
You need to put serious thought into what type of sportsbook you want based on legal concerns, licensing requirements, funding, and how big you want to be.
Again, my favorite options including running an offshore sportsbook, opening/purchasing a betting shop, and a PPH service. But each of these choices comes with pros and cons.
PPH businesses are the easiest and cheapest to start. But they also put you at the most legal risk if you’re living in a country with strict gambling laws (i.e. the US).
Offshore sportsbooks involve less legal risk because they’re located offshore, plus they offer room for financial growth. But you also have to spend a significant amount to get started.
Betting shops are legal and the most reputable option. But they too require significant upfront costs, and you must deal with gambling saturation in Australia, Ireland, and the UK.
The biggest thing I’ve learned through research is that you need to have a passion for the industry, and for business in general. Sportsbooks aren’t a get-rich-quick scheme like the general public thinks.
But if you’re willing to put the work in, then you have a strong chance to succeed, just like in any other form of business.