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November-14-2006,
It's Time for the Ontario Government to Get Out of the Sports Betting Business...By Hartley Henderson

In October of this year, the Canadian Broadcasting Corporation's TV show "The Fifth Estate" did a story about the theft of a winning ticket from an elderly man in Northern Ontario . Actually it wasn't outright theft. The man won a $250,000 Encore lottery ticket and when he took it to the store and asked the clerk to check it, the clerk told him he had lost. In fact, the ticket won, but the clerk lied about the true status of the ticket and later cashed the ticket herself. The Ontario Lottery Corporation (OLC), refused to consider the man's claim and then went into a series of denials, blame shifting and they eventually settled with the man once the courts ruled the OLC was obligated to ensure their agents (i.e. the store owners) acted appropriately. The OLC refused to apologize and forced the man to sign an agreement not to discuss the case publicly. The story also revealed an astronomical number of large wins by ticket agents which were statistically impossible to have occurred by chance. The OLC again refused to acknowledge the possibility of widespread insider theft and instead suggested the public needed to act more responsibly when purchasing tickets. After public and media backlash following the airing of the story, the OLC finally issued an apology to the man, admitted culpability and made a statement that they would put in some new security measures to stop the theft by agents. Actually, the public apology was more of a backhanded statement to the tune of "we're sorry the public doesn't trust us," but at least they finally owned up to the problem.

With that in mind, and given the OLC's new policy of admitting that it is not perfect, it is about time they apologized for the Sport Select lottery. While the lottery has made some money for the province, there is no doubt it can be run much better, make a lot more profit for Ontario taxpayers, and should be set up in a way to guarantee fair odds for the consumer. For those who aren't familiar with Sport Select in Ontario, there are 3 games that the lottery runs: Proline, Point Spread and Pro Picks which include pools and proposition cards. Proline is the most popular game for ice hockey, which is the OLC's largest sporting event in terms of revenue. NFL football comes close behind, but for that players tend to play Point Spread. Pro Picks has a much smaller following. In Proline, a pick em line for any baseball or hockey game is a 1.7 dividend on either side. That equates to -142 as a money line. So the OLC expects you to bet into an 84 cent line. Plus, because there is a federal law outlawing single game sports betting, the lottery forces you to parlay between 3 and 6 games in Proline. Therefore, when multiplied out, the expected hold on these tickets is 39% for a 3 team parlay, 48% for a 4 team parlay, 56% for a 5 team parlay and 63% for those dumb enough to bet 6 teamers. Point Spread (the same as betting spreads at any sportsbook) is a bit better, but the odds are still terrible. Payouts are even money on a 2 team parlay, 4/1 on a 3 teamer, 9/1 on a 4 teamer and so on. For those who can hit 12 of 12 the OLC honours you with a 999/1 payout. Of course, the true payout for such a bet is 4095/1. Mind you, they do have small consolation prizes for picking 10 of 12 or 11 of 12. Still, as anyone can see, these odds are atrocious. But pointing out the terrible odds is really not the main purpose of this article. The lottery is just that, and needs to be treated as such. It is not sports betting in the true sense of the word. It is a lottery and it's about time the OLC admitted as much. But listening to the OLC recently trying to defend the advertising ban in Ontario, you would think they are real bookmakers. The organization argued that offshore betting was "dipping into the wagering on Sport Select" and people were gambling offshore because they had the option of wagering on single games. The truth, of course, is that people stopped betting with the Sport Select when they tasted offshore wagering and realized they could get fair odds. And if they want to delve into parlays, the true returns are much higher offshore than what the Ontario lottery is offering them. So, in essence, the OLC is correct that offshore wagering has taken away some of their profits, but only because the public realized that Proline is not real sports betting in the true sense of the words, but rather a rip-off lottery.

Nevertheless, given these usurious odds and the fact people must bets parlays, any person that can do basic arithmetic would state that the lottery must be laughing as they run to the bank. But apparently that isn't the case. The first faux pas for Sport Select occurred in the early years of the lottery. The company clearly hired overzealous line makers and offered 3 way odds on many games with odds of 1.1 on the favourite (1/9 odds), 9.0 on the dog (8/1) and 5.0 (4/1) on a tie. Savvy Ontarians realized that as bad as any team is, 8/1 on a dog for a single hockey game is insane-- and in fact, on a particular Saturday night, every single underdog won, including Ottawa over Montreal and Tampa Bay over Philadelphia both at those juicy 8/1 odds. Every other online sportsbook offered the Ottawa vs. Montreal game with Ottawa as a 5/2 underdog. When the OLC opened its prize office door the following Monday they had to hire security due to the "wall to wall lottery winners", as The Toronto Sun newspaper headline called it. The biggest winner parlayed the 6 biggest dogs for $15 and collected $95,000. The OLC, in its usual posture of denial of blame, said it was a good thing that Ontarians could see the value of the lottery and were happy there were so many winners. Reports claimed they lost between $2.5 million and $4 million on that night. But that feeling of good will lasted only until the following week when they put a $100,000 liability on any given ticket combination and also capped the largest stake on any ticket to $100. Needless to say, anyone who played in the morning were generally able to bet their tickets, but those who preferred to wait until the evening were shut out with the lottery terminal stating that the ticket combination exceeded OLC set liability limits. This action obviously resulted in a huge outcry from the public and poor PR for the OLC due to the incompetence by the corporation.

A few years later, in 2000, the OLC decided to delve into U.S. College Football. The OLC, thinking the public loved dogs, put up a game between Nebraska and Akron where Nebraska was a 53 point favourite. On the Proline game sheet, the OLC had an article titled "dog of the week" where they were telling the public what great odds they were getting (8/1) on taking Akron to win by 4 points or more. Of course the public had none of it and 98% of the tickets that wagered on that game took Nebraska to win by 4 or more points at odds of 1/9. Taking Nebraska -4 was not only a sure thing for the ticket bettor, but it also allowed the bettor to reduce their ticket from a 3 team parlay to a 2 team parlay. The OLC seemed stunned that bettors wanted the fav, and by the fact that any time they offered a game where the true spread was over 20 points the public happily took the favourite at 1.1 odds to win by more than 4 points. Eventually they stopped offering Proline on any game where the spread was too high, and this year also stopped offering Proline on any NFL game where the spread is 11 points or more. The corporation also ventured into golf matchups and nascar matchups, but stopped offering them when they found they were losing with those sports on a regular basis. In its early years, the OLC used to put up odds at the beginning of the week for the entire week's slate of games. A few years later they started waiting until the day before the games to put up lines due to bettors beating them on bad lines. And in the area of Point Spread, some blogs by insiders on the internet have stated that the corporation is "getting killed recently" on Point Spread due to bad lines. In fact the last couple of weeks, the corporation closed out betting on Point Spread early. They claim it was a mix up due to the shift from Daylight Savings Time to Standard Time, but players were able to bet on Pro Picks and Proline on those days, so the argument doesn't hold water. The OLC doesn't actually list profits for individual lotteries in its annual report. But, clearly it is not doing as well as it should be, given the statements by the Government who asked for the media ban on offshore gaming to combat declining profits and interest for Sport Select.

So the question has to be asked: If the lottery corporation is inept in the area of sports betting, then why are they running it? The lottery is very good at offering things that require no skill on their part, e.g. real lotteries such as Lotto 6/49, racetrack slots and taking a percentage from casinos. But in the area of sports they are useless. Clearly, if a sportsbook like The Greek, Bowmans or WSEX was given the opportunity to force everyone to bet 3-6 team parlays at 84 cent lines, the province would be rolling in money from sports betting. So the province should indeed look at that option. Obviously, the first thing that would be needed in order to allow real sportsbook operators to take over sports betting in the province would be to change the federal law that prohibits betting on a single game. This is actually a fairly easy fix. There was a federal law up until 5 years ago that forbade dice games at casinos (something which went back 200 years, as a law adopted from England ). It was up to the provinces to agree to change federal law, and with little opposition from the provinces the law was quickly repealed. So, clearly, if all provinces are on board they can repeal the sports betting law also. The industry can then be run as it is in Australia. Individual operators can be allowed to offer sports betting to the public and the government can still offer their sports lottery for those who are inclined to bet it. However, the government would strictly act as an agent and take a percentage of profits and an administration fee from the sportsbook operators who would actually run the show and assume the risk. As well, the operators would be required to pay taxes on their profits - another bonus to the government and citizens of Canada.

A recent report by "Canadian Capitalist" showed that if the government of Ontario privatized certain areas they could do much better. The organization particularly looked at the LCBO, which is the only store licensed to sell liquor in the province, and showed that, if privatized, it could triple profits due to ineptitude by government operators. Certainly if they privatized sports betting and acted as an agent they could increase profits for the province by far more than 3 times and do so while offering better odds to the public. It's about time the government realized this, and for the sake of Ontario taxpayers, the sooner the better.

11/14/06
Hartley Henderson
MajorWager.com



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