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July-22-2007,
Referee Point Fixing Scandal Illustrates Why Online Sports Gambling is Necessary...By Hartley Henderson

The sports world was rocked by revelations on Friday that long time NBA referee Tim Donaghy was involved in gambling on league games. According to news sources, Donaghy, a heavy gambler, bet on all sports including NBA games in which he officiated. At some point prior to 2006 , Donaghy became mixed up with mobsters who threatened to expose his gambling habit unless he cooperated with them which included giving inside information on who would be refereeing certain games ahead of time and also for helping shave points on games in which he was the on court official. It should be noted that there is no indication that he actually helped manipulate the game outcomes themselves, just the point spreads. It is almost certain that Donaghy would have only agreed to be involved in point shaving on games where the winner was more or less assured and bad calls or suspicious fouls would go unnoticed by the league. If a team is a 2 point favorite and loses the game because of bad calls, the league would take notice. If a team is favoured by 16 and only wins by 10 due to some questionable fouls, only gamblers would be concerned.

The apparent point shaving occurred during the 2005-2006 and 2006-2007 NBA seasons, and Las Vegas reported no unusual action on NBA games during that time. Similarly, conversations with 3 major offshore sportsbook managers indicated there was nothing unusual in NBA betting with them either. The only logical conclusion, therefore, is that Donaghy and "his associates" made their money by betting underground with illegal bookmakers. That would not be surprising. While the DOJ and The American Gaming Association which represents Nevada casinos would like to paint offshore sportsbooks as the single biggest culprit with regards to these incidents (in 2000 the American Gaming Association stated that offshore gambling was single biggest danger to the legitimacy of college games), the truth is that both offshore bookmakers and Nevada sportsbooks represent a very small fraction of gambling that occurs in the United States. Estimates indicate that Nevada and offshore gaming represents less than 2% of what is bet with illegal bookmakers. As well, to make the risk worthwhile Donaghy and his partners would have to wager far more money than would be available in Vegas or offshore. In Las Vegas and at offshore sportsbooks, very large non NFL action would be identified immediately and flagged. Underground, on the other hand, money can be spread among hundreds of illegal bookmakers which would probably go unnoticed.

More importantly while underground bookmakers are likely still in the dark technologically, the same can't be said about Las Vegas casinos and offshore sportsbooks. All legal wagers in Vegas are either placed via computer or entered into a computer once the bet is taken by phone. Once the data is in a computer, programs exist that can identify unusual betting patterns and alert the sportsbook that something untoward may be happening. Offshore, the ability to track and identify unusual betting patterns is even greater. Every offshore sports bettor must have an account and provide a name, address, telephone number and email address. Their betting patterns are constantly monitored by the offshore books and consequently, offshore bookmakers can highlight not only unusual betting patterns but also collusion when it is clear that a group of people are wagering together on the same games. In fact, in the European Union, online bookmakers are often working with authorities and sports leagues to help identify possible shenanigans. In 2005, UEFA signed an exclusive contract with Betfair to monitor betting on games in an effort to try and catch anyone who may be involved with game fixing, particularly soccer. This was UEFA CEO Lars-Christer Olsson's comments upon inking the agreement:

"We are happy that we have reached this agreement with Betfair, as it is an important step forward in ensuring the continued integrity of our competitions. This is in line with our permanent efforts to protect the game from match-fixing and will facilitate the gathering of information in case of suspicious results".

Betfair's CEO Stephen Hill, added:

"We are delighted to be able to add this agreement to those we already have with the governing bodies of sport. Working closely with sporting regulators, and allowing them access to the information we have, is the best way to ensure that sport is kept free of crime."

What an incredible difference in attitude compared to that in America. The reason, of course, is that Europe and particularly the UK understand that people will bet on sports. Whether it is legal or not, sports betting has been around since games were played and antiquated laws have not changed that. If someone has the desire to bet on games they will do so one way or the other. If they can't bet with a legal entity, they'll do so with an illegal one. Consequently, UEFA has decided to work with sportsbooks to help them solve the problem of game fixing. In the United States, the solution of its sports leagues when there are signs of problems is to bury its head in the sand. After the big 1994 Arizona State scandal where various players were charged in a points shaving scheme, instead of trying to address the issue and work with Vegas to determine what could have been done to identify the activity ahead of time so it could be stopped in the future, the NCAA's solution was to approach the Feds in hopes of having sports betting made illegal in the state of Nevada. The American Gaming Association rightly pointed out in a 2000 meeting on the issue that it was only as a result of Las Vegas sportsbooks identifying the unusual betting activity that the scandal was caught in the first place. If Las Vegas and/or offshore sports wagering were to shut down for Americans, the only thing that would happen is that it would drive betting even more underground and play right into the hands of those that are instrumental in fixing the games in the first place. It is also telling that in Australia online gambling on casinos and poker was made illegal, but sports and horse betting was not criminalized because the country understood that sportsbooks were crucial in the fight to keep the criminal element at bay. In the United States, on the other hand, there is a large push to legalize betting on poker, but keep sports a criminal activity. The logic is mind boggling.

There is one other reason why online sports betting is necessary to maintain the integrity of games, and that is to provide an "out" for students and for other American adults as well. As mentioned, people, including university students, will gamble if they are so inclined. In the 1950s, before Bill Gates was even born, there were a series of point shaving scandals, the most famous being at the University of Kentucky. The allure of money is great for students, particularly since they have so little, and if they believe they can make a few easy bucks they will try do to so. As such in the past, students, including players, often got mixed up with the wrong type of bookmaker (many of which hang out on campus and solicit students exclusively) and when the students lost they had to pay the bookie one way or another. It is a safe assumption that the bookmakers were only too happy to give the students substantial action on credit and weren't willing to take installments when the students lost. Consequently, when life and limb were on the line these students did what they had to in order to save face (literally). This happened with Donaghy and it likely happened with students in Kentucky as well. With offshore bookmaking, however, the students have an opportunity to wager amounts they can afford and with operators who demand payment up front. They aren't lured into betting amounts they can never repay and subsequently aren't entrapped in a situation where they have to do things they wouldn't usually do. Of course this not only applies to students, but to American adults also. There are hundreds of millions of dollars bet by Americans with offshore bookmakers each year. Most, if not all of these adults who bet sports offshore know an illegal bookmaker and it is quite conceivable that they were betting with them prior to the onset of offshore sportsbooks. If these sportsbooks were taken away from them now, it is almost certain they would return to underground sports betting, losing far more than what they wager offshore. And with that the number of scandals and broken legs would almost certainly increase.

After losing its attempt to have college sports gambling made illegal in Nevada, the NCAA started a campaign at universities titled "don't bet on it." The message was a combination of pleas and threats aimed at convincing students not to wager on games. The campaign was a failure. Recent studies show that sports betting on university campuses is higher than ever. The DOJ has pleaded with Americans not to wager online and introduced a law to stop it. Their campaign hasn't worked either as Americans continue to gamble online. At some point or another both the authorities and leagues have to understand that their actions are not helping the situation, but rather hindering it. If they truly want to ensure the integrity of the leagues they should take a cue from the UK and work with the sportsbooks to help identify illegal activity so they can stop it. Unfortunately, those at the helm seem afraid of technology and would prefer to believe that simply requesting people not to bet will stop them from doing so. If that is the path they are determined to take indefinitely, the integrity of games both at the pro and college level will always be in question.

07-22-2007
Hartley Henderson
MajorWager.com
henderson@majorwager.com

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