When Sports Betting Is Legal, the Value of Game Data Soars
Tue, Jul 3, 2018
Every weekend during soccer season in Britain, security personnel find them in stadiums, tapping furiously at their phones or talking nonstop into a mic — mysterious customers often wearing hoodies to conceal earpieces and their identity. While focused with unwavering intensity on the action of the game, they show none of the engagement and excitement of the ordinary fans around them.
The unofficial data scouts — or data thieves, depending on who is describing them — are quickly ejected once they are discovered.
The fleeting data they are collecting — the minutia of what is happening in the game — is the lifeblood of sports betting, perhaps the most crucial and valuable element of the entire industry. If gambling operators are to monetize sports betting fully, they have to offer wagers on far more than the outcomes of games. Data on the second-by-second action — exactly when a goal is scored, where it landed in the net, who had the assist — creates manifold betting opportunities.
In Britain, this so-called in-play betting market is robust. In the United States, it may be the greatest hope for betting operators after the Supreme Court struck down a federal ban on sports betting and as states scramble to accept wagers. That means accurate and reliable data must get to betting operators like casinos, websites and phone apps fast, usually in a second or two — well ahead of the roughly five-to-10-second delay baked into television broadcasts.
“For betting, it’s the difference between having value and having no value at all,” Steven Burton, a veteran lawyer in the rarefied field of collecting, using and protecting sports data, said about the necessity of rapid data distribution.
The sudden premium on sports data is likely to set up an array of conflicts in the betting industry that have been mostly unknown in the United States. Adrian Ford, general manager of Football DataCo, the official handler of data for the English Premier League and others in Britain, said that in dozens of stadiums each weekend, the hooded scouts show up for companies aiming to collect the data and sell it to betting operators without buying rights to the league-approved stream originating in the press box.
“It goes to the heart of this issue, the data debate,” Mr. Ford said. “Clearly the data from the source, a stadium, it’s valuable. Some people believe it’s appropriate to cheat.”
That shadowy cat-and-mouse game in Britain gives a small preview of battles to come in the United States over how the data should be collected and whether the gambling industry should be required to use “official data,” a league-approved tabulation of what happened in a sports competition.
The debate over official data is one facet of a still broader set of questions: How should sports data from any source, official or unofficial, be regulated, monitored and purchased? Who should settle a dispute over whether an in-play bet was won or lost? Does real-time data from a sporting event, like the sounds of a musical performance, have a claim to royalties and copyright protection for those who produce it? By creating a sort of monopoly, could a mandate for official data actually do more harm than good?
Feeding Betting Sites
Like electricity in a city, oxygen in a submarine or rubber at a tire factory, whoever controls the crucial element determines how the entire system works. Decades after the days of corner bookies and betting odds in the afternoon paper, data has taken on that dominant role in betting.
“When I started, it was loose-leaf notebooks and colored pens,” said Roxy Roxborough, a legendary bookmaker who began working in Las Vegas in the 1970s.
Computers began showing up in his betting shop in the early 1980s, Mr. Roxborough said. By the late 1990s, the speed and quantities of data in the operation had reached formerly unimaginable levels.
“I looked around the room and we had more guys in the tech department than making odds,” Mr. Roxborough said, “and I knew it was over for me.”
Because sports betting has been illegal in most states, wagering money has flowed offshore — fueling an illicit industry estimated to generate $150 billion a year. Some kind of data distribution system has to feed those offshore betting sites. They couldn’t exist without it. As sports betting moves out of the shadows in the United States, strange bedfellows might be exposed.
Some of the companies that have supplied data to sites at the center of multiple federal gambling investigations now would like to become part of the new, regulated United States market.
One of those companies, Sportradar, is already working — legally — with several major sports leagues and is seen as well positioned to purchase rights as a provider of official data, should it decide to do so. Dissonances like that draw warnings from both critics and supporters of official data.
“You have this completely unbelievable, upside-down situation,” said Carl Mergele, chief executive of Stats, a sports data and technology company that was founded in 1981. The company has been at the forefront of the statistical revolution in sports and, by its own measure, collects more than 30 million data points a year. (Stats provides live scores and statistics to The New York Times.)
Mr. Mergele said that while he was not referring to any specific competitor, if official data is mandated, it would likely be controlled by companies that fuel illicit markets. It would be affordable, he said, only to “those that monetize that data in the global betting market, often in unregulated, offshore, gray, illegal markets.”
For that reason, Mr. Mergele said, requiring the use of official data in sports betting would be “enabling the very people and companies that have been circumventing U.S. law.”
Even supporters of official data recognize offshore books as the dominant player. “The reality is, legalized betting is going to be a late entrant in this market,” said Mr. Burton, who is now managing director of Genius Sports, which provides data collection technology and other services to sports leagues. Without agreement on a fast, common source of data among the leagues, betting houses and legislators, Mr. Burton said, the legal product risks being less than compelling and “won’t make much of a dent.”
“The idea of building the U.S. sports betting industry on unofficial data, it’s kind of putting it on a par with pirated DVDs and sidewalk hustlers and illicit streaming sites,” Mr. Burton said. “It’s all that grubby underworld.”
Mr. Burton added that “as the world moves into this in-play betting market, I think official data becomes even more important.”
The United States affiliate of Switzerland-based Sportradar has raised its profile considerably by populating its advisory board with prominent team owners like Michael Jordan, Ted Leonsis and Mark Cuban. The company has announced data deals of various kinds with the National Basketball Association, the National Football League, the National Hockey League and Nascar.
Laila Mintas, deputy president of Sportradar U.S., said in a statement that among those deals are agreements with the NBA and the NHL “to distribute sports data around the world for betting purposes.” Distribution of data in the NBA deal is strictly limited to legal bookmakers overseas, the league says; the deal does not include United States sports betting outlets. The NHL did not respond to a request for comment.
Sportradar said in a statement that it provides data and betting services only to licensed bookmakers. A 2015 investigation by The Times showed how the offshore gambling websites serve a United States audience, and found that Sportradar works with one that has been identified in multiple federal gambling investigations. (Sports gambling with offshore books has long been illegal in the United States, and is likely to remain so, even after the Supreme Court ruling.)
A website called BetCris is among those linked to offshore betting operations. A recent examination of the underlying code that powers the BetCris website revealed that Betradar, the arm of Sportradar that works with gambling companies, is still providing live game statistics to BetCris.
In response to questions from The Times, a Sportradar spokesman said, “We confirmed with senior management at BetCris today that they stopped servicing the U.S. in early 2007.”
Still, the site has frequently been named in federal indictments before and after that date. For example, BetCris was described in a 2015 Justice Department news conference on a major gambling conviction as a conduit for illegal bets in the United States. In wiretaps for a sprawling federal indictment in 2013, bookies were caught repeatedly referring to BetCris as one of their tools for making large bets.
In a $178 million case in 2010, among the 38 people indicted was Michael Flynn III, a.k.a. Mickey Richardson, described as a fugitive in Central America who essentially ran BetCris, which is thought to be based in Costa Rica. Mr. Flynn is still at large, according to the district attorney’s office in Queens, whose organized crime and rackets bureau was involved in the case.
In a statement to The Times, BetCris stood by the assertion that it stopped accepting customers in the United States in 2007, and said it has “maintained diligent efforts since then to ensure only customers in lawful jurisdictions place bets through the site.”
The company also said it does not believe that “the reference to BetCris in indictments is of any moment,” in part because, the company claimed, the indictments contain “a notable lack of detail as to how and to what extent BetCris actually — and knowingly — accepted U.S.-based customers.”
“Unfortunately, because most of the U.S. continues to prohibit a recreational activity that customers enjoy, many Americans seek out different ways to access offshore sites,” the company said. It added that “BetCris strives to stay one-step ahead of such attempts.”
The company also pointed out that, in most indictments involving BetCris, that is not the only website mentioned by prosecutors. In those instances, the company said, it “sees general statements in which the Government has merely lumped all offshore sites together as the same bad actors, without specifying the actual culpability of any single site, let alone BetCris.”
When presented with the recent federal record involving BetCris, a Sportradar spokesman said, “We obviously cannot comment on another company’s legal matters of which we’re uninvolved, and simply put, it is not our place.”
“All businesses evolve over time, and it’s shortsighted to assess a partner only on past issues,” the spokesman added. “The converse is true as well: It would be reckless to automatically approve those with ‘spotless’ history, as there is no guarantee of current or future behavior.”
Official Data Monopolistic?
In regard to the data scouts being ejected from soccer stadiums in Britain, the Sportradar spokesman said that the company “has always been transparent that we collect data from venues in the U.K. and elsewhere,” and that the company believes that the British soccer leagues’ “attempts to prevent us from collecting data” are in violation of British and European antitrust law. Sportradar previously lost a landmark case in Europe when it was found to be improperly copying DataCo’s feeds to sports websites and selling them to betting operators.
As to the specific issue of whether United States law should mandate the exclusive use of official data, Ms. Mintas came straight down the middle. “Sportradar uses both unofficial and official data as market dynamics dictate, and we are fully transparent about the way we do business,” she said.
Some legal experts, like Ryan Rodenberg, an associate professor of sports law at Florida State University, believe that, as with musical recordings and other copyrighted material, courts will find that real-time sports data is owned by those who produce it: the leagues and their players.
Others dismiss that view. Marc Edelman, a professor of law at Baruch College, said he believed that only “pre-scripted” events were subject to copyright — meaning that while professional wrestling performances might qualify, football, basketball and other true competitions would not.
There is little question that the leagues riled the gambling industry with their initial proposal for requiring the use of official data and royalty fees, which could have added up to around 20 percent of revenues, said Joe Asher, chief executive of the United States arm of William Hill, an international sports betting book. Mr. Asher said he learned to count cards in blackjack at age 10, was working at a racetrack in Delaware, where he grew up, at 16, and, after practicing law in New York, left the profession and opened his own sports book; he later sold it to William Hill.
Several of the leagues initially cast the royalties as an “integrity fee” that would help them pay for things like policing match fixing and point shaving. In addition to those royalties, betting houses could also be limited in where they buy sports data. A legislative mandate for official data “sets up monopoly pricing power,” Mr. Asher said. “This whole thing of official league data is like a smoke screen.”
Over the past year, at least 17 states have considered new laws on sports betting, including at least six where official data is in play, said James Kilsby, managing director of Gambling Compliance, an independent research service. Of those 17 states, roughly a half-dozen, including New Jersey and Rhode Island, have passed laws legalizing sports betting, or are close to doing so, Mr. Kilsby said.
For proponents of official data, New York and Pennsylvania are potential bellwethers, Mr. Kilsby said.
The proposed New York law would require official data for in-play betting, and mandate what the bill calls a “commercially reasonable” subscription fee for the data. There would also be a royalty fee that all sports betting operators would pay to the leagues.
Mr. Kilsby said the proposal in New York may be more palatable from an economic standpoint, with a royalty fee that rough calculations suggest might amount to something closer to 4 percent of revenues.
New York’s law did not pass before the legislative session expired last month, but could be revisited in January. State regulators are working out details of a law passed in Pennsylvania. Comments sent to those regulators by Major League Baseball, the NBA and the PGA Tour push for official data and raise concerns about the data scouts, also called courtsiders, who could soon be as common in the United States as they are in Britain.
Unofficial data “is often collected by ‘courtsiders,’ who covertly collect data in arenas and stadiums,” the leagues said. “These courtsiders and scrapers operate in the shadows, compromise the legal market, fuel the illegal market and have no vested interest in the integrity of sports.”
The huge scale of the expected markets in New York and Pennsylvania would make a victory for the leagues here “an influential precedent,” Mr. Kilsby said. “I don’t think those states will give us a definitive answer to this question either way,” he said. But he added that “a lobbying victory for the leagues would put them on the board.”
Scott Kaufman-Ross, an NBA vice president, said: “For sports betting, official data should be the data that’s used. People are putting money on the line. It’s a real problem if they’re not getting the most accurate, up-to-date information.” Others, like Mr. Mergele of Stats, dismiss that notion, asserting what would amount to a league monopoly on data would be neither workable nor particularly accurate.
Lost in the legislative contests are the elaborate technical measures leagues have already put together to collect data they would like to see feeding betting sites across the United States.
During the most recent NBA season and the finals, at least four people assigned by the teams sat courtside or at the top of the lower bowl of seats tapping on touch screens as the action proceeded in the games. Using a system developed by Genius Sports, three of those people entered the second-by-second statistics — Steph Curry shooting a 3-pointer from a certain distance, a cross-court assist by LeBron James — while the fourth acted as an initial quality-control spotter.
The data sped across the Hudson River to a room in Secaucus, N.J., next to the “replay center” that appeared occasionally on television during the finals. There, an NBA monitoring group did a last check, and Sportradar sent the data to media outlets like television broadcasts and — only outside the United States — betting operators. The NBA says that its deal with Sportradar strictly requires the data to be distributed only to licensed bookmakers abroad. Perhaps, though, the data will soon go to bookmakers in the United States.
“I think that we have taken the time, the effort and the money to construct the best statistical system for the NBA in the world,” said Steve Hellmuth, NBA executive vice president for media operations and technology, who has been instrumental in the creation of the league’s statistics and player-tracking systems.
“We didn’t really construct this for betting,” Mr. Hellmuth said, “because when we constructed it, betting didn’t exist. And then here comes gambling.”