A sportsbook is an establishment that accepts wagers on a wide variety of sporting events. The industry is highly regulated, with laws and policies in place to ensure responsible gambling and that bettors are not exploited. These laws and policies include limits on the amount that a person may bet per day, a warning system, timers, self-exclusion tools, and other mechanisms. These measures also protect vulnerable populations from exploitation by sportsbooks.
Legalized sports betting has become a fixture of American culture, a remarkable shift for an activity that was banned only a few years ago. Over the past year, US$180.2 billion has been wagered legally on sports in America, according to a study by the American Gaming Association’s research arm.
While considerable effort has been devoted to the analysis of sportsbook odds setting and public betting trends, the principles governing optimal wagering have received less attention. This article introduces a statistical framework by which the astute sports bettor may guide his or her decisions. Wagering is cast in probabilistic terms, with the relevant outcome variable (e.g., the margin of victory) modeled as a probability distribution. Upper and lower bounds on wagering accuracy are derived, and empirical analyses of a large sample of National Football League matches instantiate the resulting propositions.
It is found that a sportsbook’s point spread sR, defined as the difference between the expected win-loss ratio of the home team and that of the away team, may be approximated by the distribution of the true median result m. Moreover, the results suggest that a knowledge of the true median is sufficient to permit the sports bettor to select a bet that yields a positive expected profit.
