How Businesses Can Detect and Prevent Arbitrage Sports Betting

The global online sports gambling market was valued at USD 54.56 billion in 2023 and is expected to reach USD 142.56 billion by 2032, growing at a CAGR of 10.5%. One problem with this growing market is the phenomenon of arbitrage sports betting.

While arbitrage betting is not illegal, it causes losses for the businesses that host these bets and is often a way for bad actors to launder money from illegal sources. This is why it is becoming increasingly important for businesses to be aware of arbitrage betting and find ways to counter it.

What is Arbitrage Betting?

Arbitrage betting is a type of gambling in which bets are placed on every possible outcome of an event to gain irrespective of the actual outcome. Arbitrage betting is known by many other names, like arbing, arbs, or sure bets, and the person who bets is known as an arber. Bets are generally placed on several platforms for promising gains without any worry about the outcome. 

Many arbers automate this process by using bots to place several bets in small lots. How do bots help here? These bots search for favorable odds in different betting applications and place multiple small bets at the same time. Bots minimize the time an individual takes to identify and place the bets, hence maximizing efficiency. 

Generally, arbers try to hide their tracks so they don’t get on the bookmaker’s suspicious list.

How does Sports Betting Arbitrage Work?

Let’s understand the process of sports betting arbitrage through an example.

Suppose there’s a tennis match between two female players, named Sarah and Jonnah. 

Now the bookmakers come into play. Let’s assume a bookmaker is offering probabilities of 2/1 for Sarah to win the match. At the same time, another bookmaker is offering probabilities of 2.5/1 for Joannah winning the game.

Next, the arber assesses the odds to decide how much money they need to put on each bet to ensure that he/she gains no matter who wins the match.

Continuing with the scenario, a gambler X can bet, say, 100 USD on Sarah winning and 80.89 USD on Joannah winning; then his total risk would stand at 180.89 USD.

How would this bet turn out for X in each of the two outcomes?

X would get 200 USD if Sarah wins the tennis match. In this case, his net gain would be 19.11 USD. Alternatively, if Joannah wins the game, X would get 202.22 USD, gaining him 2.22 USD of profit.

As we noticed, gambler X makes a profit regardless of the winner of the game, with his total return exceeding his initial investment.

Arbitrageurs, to make huge profits, place large bets on sports gambling, as the average share of profit is fairly low.

When do Arbitrage Bets Take Place?

Now that we have covered the basics of arbing, let’s look at the situations when these strategic arbitrage bets generally take place. Here, betting at the right time is important, and understanding the situations during the game in which arbitrage bets take place is essential for mastering this complex trade. 

Arbitrage bets generally occur during certain situations, such as significant fluctuations in odds, disparities in bookmakers’ evaluations of likely outcomes, or delays in updates. 

Some of these situations have been discussed below in detail. 

• Market inefficiencies: Differences in the approach of calculation of odds by bookmakers—due to individual judgments and analysis. This can open up opportunities for arbitrage to take place when a bookmaker’s odds for a particular event are significantly different from the others. 
• News and events: Unforeseen incidents, accidents, or related events that influence the perceived chances of outcomes might cause differences in odds between the betting applications, resulting in arbitrage opportunities. 
• Varying odds: Odds can vary due to various reasons, such as changing economic conditions and betting trends. When these changes fail to coordinate among bookmakers, arbitrage opportunities emerge, allowing gamblers to make profits from the gaps.
• Bookmakers errors: Bookmakers may blunders sometimes when fixing the odds for an event. These errors can lead to momentary arbitrage opportunities till the time the bookies resolve the inconsistencies.
• Liquidity differences: Differences in the level of liquidity between different betting applications can have a bearing effect on odds. Lower liquidity markets are more vulnerable to higher differences in odds, resulting in arbitrage possibilities.

Gaining a thorough understanding of the above situations is important to successfully identify and inhibit arbitrage betting opportunities.

Using AML/KYC Tools to Detect Arbers and Avoid Arbitrage Betting

Bookmakers nowadays implement advanced Anti-Money Laundering (AML) and Know Your Customer (KYC) techniques to detect and prohibit arbitrage betting.

In this context, APIs can be of great help in order to secure the reliability of betting applications and ensure their compliance with legal requirements.

Liveness detection uses biometric identification methods to ensure that an actual person is communicating with the device in real-time and not a pre-recorded video or a captured image. This technique is important by refraining the users from creating multiple accounts, a common tactic used by gamblers to disperse their stakes and get away without getting noticed.

Biometric checks include the following methods:

Face recognition: Matching the gambler’s real-time photo with the photo on his/her uploaded documents.

Eye movements monitoring: Natural eye movements are pretty hard to recreate using still photos or recorded videos. 

Voice recognition: Identity verification through patterns of voice during customer service interactions or when employing voice-enabled software.

AML screening involves cross-checking the gambler’s information with third-party databases and checklists to identify individuals who are involved in fraud or criminal offenses. 

This process helps in detecting probable arbers who may also be involved in other illicit activities.

Bank card authentication ensures that gamblers only use pre-authorized and legal payment methods. This technique helps in preventing arbitrage possibilities by varying the legitimacy of payment sources.

We at Signzy provide top-notch quality and technology-driven APIs. These APIs are powered by thousands of AI algorithms that can provide precision and real-time verification results in just a few seconds. 

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