Sports business reporter Darren Rovell recently debated Tom Sosnoff, options trader and co-founder of Thinkorswim and tastytrade, on the pros and cons of sports betting versus trading stocks.
When most professional sporting events were canceled earlier this year, many sports gamblers turned to the stock market to get the thrill of the action.
Clear Outcomes: Rovell made the case that sports gambling is more fair in that there is a clearly defined set of parameters that define a win or a loss for every sport, making the outcome very black-and-white. He said every stock trader understands the frustrations of a company reporting an earnings beat and the stock trading down anyway.
“I think when sports gambling happens, first of all, you have more information. You barely know information about companies versus sports stars and sports teams. And I also think that when you win, you win. If you cover the spread, if you do whatever bet you made, it is declared as a win. In the market, you have this maybe, maybe not, I don’t know,” Rovell said.
Sosnoff said the size and liquidity of the stock market dwarfs the U.S. sports betting market, which creates advantages for stock traders over sports gamblers.
“It’s not just the fact that it’s small. It is very inefficient. So the problem I have with sports gambling on a serious note is there’s at least 10% in juice or vig. If it’s a moneyline, I can't even figure it out,” Sosnoff said.
Future Of Sports Gambling: Sosnoff said the average cost to make a $1,000 bet in the stock market is $1 to get in and $1 to get out based on the bid-ask spread.
“In the world of gambling, a $1,000 bet, it’s going to cost you to get in and out 10%,” Sosnoff said.
“One of the issues I have is it’s mathematically hard to make back the $2….It’s mathematically impossible to make back that $98 difference between a sports bet and a financial bet.”
Sosnoff predicted investment banks and other high-frequency trading firms will eventually improve the efficiency of the sports betting market and lower costs for sports gamblers. Rovell agreed.
“Just like the high-frequency game, I do think there’s going to be some sort of options game essentially where you can express that if a line hits something here or if hits something here than you want to buy into it. And if a sportsbook knows that, there’s efficiency,” Rovell said.
Benzinga’s Take: In theory, both stock trading and sports betting are less of a gamble than casino games like roulette and craps because both day trading and sports betting involve some degree of knowledge and skill, whereas placing a bet on the spin of a roulette wheel or a dice roll is pure chance.
Stock traders can improve their odds of success by extending their time horizon and diversifying their bets given the S&P 500 has consistently risen throughout over extremely long-term periods.
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