Sports betting or sports arbitrage involves gambling on the outcome of sport events. Promoters encourage people to join their sports betting schemes by making them sound like a financial investment with guaranteed returns. It’s important to realise these systems aren’t investments.
Horse races and other sporting events are not financial products or services. At best sports arbitrage is gambling and at worst, it may be a scam.
How sports arbitrage works
The operators of these schemes gamble on the outcome of sporting events on your behalf. Multiple wagers are placed on the same sporting events, but with different bookmakers offering different odds so that money is (allegedly) won, regardless of the outcome.
You usually have to pay an upfront fee or a ‘licence fee’ that could be thousands of dollars. Then you have to pay an additional investment amount, which the promoters will use to ‘trade”.
What to watch out for…….
The operators try to lure you in with professional websites and glossy brochures and by saying that your returns are ‘guaranteed’. They also sell software that, they claim, can accurately predict the outcomes of horse races, or other sporting events, based on weather conditions, the form of the players or the draw.
Such claims of being able to accurately predict the future should be a warning sign of a scam. It’s impossible for a person or a machine to predict the result of a sporting event, where pure luck or chance are always involved.
The operators create the impression of certainty by using investing jargon such as ‘trading’, ‘arbitrage trading’ and ‘strategic investment’. They make it sound like a reasonably certain investment with very high returns, when in fact, it’s nothing more than gambling. In some cases, there isn’t even any gambling involved. The operators are simply taking your money.
James lost $27,000
Here’s a recent case study based on actual events. James received a ‘phone call from Steve, an operator of a sports betting system who promised him a 50% return on his investment. James decided to purchase a betting program for $17,000 and has since lost $10,000 using the program. After reading some horror stories on internet forums about the same system, he now realises it was a scam and he doubts he will ever get his money back.
What to do if you are approached
- Always do your homework before investing your money in anything, especially if the offer comes ‘out of the blue’.
- Be sceptical of reports of past performance or graphs showing high returns – it’s impossible to predict the future and scammers simply lie!
- If you can’t afford to lose the money then don’t invest or gamble with it.
Where to get help if you’ve been scammed
If you think you’ve been caught up in a sports betting scam you should report it to your state or territory office of fair trading or consumer affairs, or your state police service.
Stay between the flags
Don’t gamble your money away in risky sports betting systems.
You’ll be on the right track towards making safer and wiser money decisions, if you:
- identify your individual goals and timeframe;
- understand your money management style and tolerance for risk;
- be aware of the trade-off between risk and return; and
- only spend money on things you understand.
If you’re serious about starting to invest, as opposed to gambling with sports betting systems, download a copy of Investing between the flags at www.fido.gov.au/publications.
See www.fido.gov.au for more information on scams and frauds. The Australian Competition and Consumer Commission website www.scamwatch.gov.au also has useful information and warnings about various scams.
Tony D’Aloisio BA LLB (Hons)
Australian Securities and Investments Commission