Apr

16

The threat to football from betting-related corruption.


British gambling prevalence survey 2010. Reliable and consistent data on the global market are hard to obtain because much activity is illegal and much is channelled through jurisdictions with weak reporting requirements imposed on operators (Eadington, 2004). Erosions of margins in Europe will have contributed disproportionately to the quoted global figures because they began the period much higher than in Asia.

The answers to these questions lie in the changes in the betting market that have occurred over the last decade. This has, to date, been achieved in Italy, Portugal, Spain, Turkey, and the United Kingdom.

(13) Similarly, FIFA employs the ‘Early Warning System’ for use in World Cup and international fixtures. Therefore, understanding the threat to sport is most appropriately furthered by analyzing it as a financial crime, where knowledge of how the relevant financial markets operate is a prerequisite to informed debate on how best to tackle the issue in terms of policy.

Strumpf, K. All rights reserved.

A cursory Internet search will reveal other cases from football in the past but show also that there is no precedent for the number of cases that have become public in a short space of time over the last few years. The issue of corruption to achieve sporting goals is beyond the scope of the present paper but it may be noted that clubs that act illegally in this way may seek to fund their bribes from parallel activity on betting markets.

Author’s Note

(11) Roughly 1% of the stake is payable to the sport governing body in recognition of its property right over the event.

University of Salford, UK

In addition to reliance on the public authorities, football must also help itself. Historically, instigators of a fix have included athletes betting on their own account, local betting syndicates, and bookmakers hoping to escape heavy pay-outs. Ownership opens up several avenues to ensuring the results of matches since corrupt personnel can be recruited and existing players intimidated, for example by arguments that payment of their wages requires raising funds on the betting market. In other places, for example, most of America and Asia, sports betting has been or is prohibited and some entirely new consumers will be added to the global market as the latent demand finds a channel through which to be expressed. Probably, though, gangs prefer to rely on players since the actions that referees can take to exert a large and predictable impact on the probability of a given result or on total goals scored are somewhat dramatic decisions that may themselves draw suspicion if matched with unusual activity in betting markets. Again, the innovation clearly generated additional value for the economy.

As with earlier breakthroughs in transport or communications technology, such as the birth of the railways or the telephone, the most obvious general economic impact of the Internet was to lower prices for consumers. This has hampered police investigations in, for example, France, and it would be progress if the specific offense of corrupting sport were to be included in penal codes. 12-13).

(ii) During 2011, legal proceedings were instituted in Belgium against a Chinese national and 30 other persons in connection with alleged fixing of 10 matches involving Saint-Trond, FC Brussels, and other clubs in 2005 and 2006. Over a run of matches, this will permit a profit to be made.

This is not to say that criminals will not sometimes seek to manipulate one aspect or one phase of a match. There was another round of allegations and arrests in December. For instance, American college sport has generated an exceptionally large number of cases ending in prosecution and it indeed appears to meet all the criteria for high risk: the players receive no income from playing, the fact that bets are on the margin of victory rather than simply who wins implies that a successful fix need not require losing the match, and detection is unlikely given that strong teams may ease up for other reasons than not wanting to win by as much as the handicap announced by the bookmaker suggests that they should.

Live betting raises integrity risk for another reason. The equivalent of e-Bay in betting is Betfair, an exchange that brings together those who would offer or take a bet that a named outcome will occur. Thus they require that a proportion of the risk is born by the agent. For example, individuals may already be aware of the harm drugs can do and in this case providing information will not change their assessment that the potential pleasures outweigh the risks. A detailed report (IRIS, 2012) was published following a year of gathering evidence from sportsmen, regulators, and stakeholders in many countries. London: Central Council for Physical Recreation.

A weak system of governance makes football vulnerable to infiltration by organized crime. Moreover, the extent to which the market has been globalized gives substantial scope for risks to be hedged to operators in other parts of the world.

Forrest, D., McHale, I., McAuuley, K. In European football, Sportradar is a contractor which, on behalf of UEFA, and in respect of both UEFA competitions and matches in European domestic leagues, monitors some 300 betting websites for irregular odds movements. (8)

In addition to these direct measures, the defense of football against fixing is also related to weaknesses in sports governance that blight the European game. Manchester United, likely reached 1b [euro]. Next, the apparent growth in fixing is linked to how gambling markets have developed since the millennium and the emergence of Internet and mobile telephone betting. In relatively recent history, two cases emerged in England during the 1990s. Both sorts of restriction are already embedded in French regulation.

The major Asian operators no doubt have risk management processes in place and indeed have withdrawn from accepting bets on some competitions, such as the Russian second division, where they believe corruption is endemic. In Strumpf’s study of American illegal bookmakers, most had sufficient capital to bear risk themselves rather than hedge (lay off) to the legal Nevada market. (iv) In May 2011, revelations surfaced in Italy regarding fixing of domestic matches, mainly in the lower divisions. Control of the football federation itself, as seems to have occurred in the Chinese League, would also be useful for criminals through an ability to access club chairmen and to discourage serious investigation of fixing issues.

A number of other football cases are cited in IRIS (2012) and some are mentioned below in a discussion of how match fixes are implemented. For this reason alone, match fixing should be regarded from one point of view as a cultural crime, where there is a societal stake in first understanding it and then resisting it.

The matches in Turkey were fixed by using referees. The authors adopting this framework argue that it is validated by the pattern of known cases in the history of sport. In many countries, it is not transparent who owns and controls clubs and whether they are ‘fit and proper persons.’ Further, in many leagues, clubs are financially insecure to the point that payment of player wages is delayed or fails to take place at all. The set of odds on a match implicitly sets the price of betting, and it is obvious from the data that this is much below what it was before the Internet impacted the industry.

Borenstein, S., Saloner, G. (3) After the millennium, German soccer was shaken by the Hoyzer affair, where the referee had manipulated several fixtures by awarding debatable penalties and red cards. Relatively low sensitivity may be an intrinsic problem because even large bets in a very liquid market may not induce strong odds movements.

(5) http://www.bbc.co.uk/news/world-europe-117896721

The credibility of fears that fixing is as widespread as this was raised by the results of a survey in early 2012 by FIFPro, the federation of national players’ unions. Over the course of the year, two tennis players on the World Tour received life bans; in October 2011, an Australian rugby league player was sentenced for having deliberately conceded a penalty; in February 2012, an English cricketer was jailed for having accepted 6,000 [pounds sterling] for bowling badly in a minor domestic match (which was nevertheless televised in India, with heavy betting activity on Asian markets). Divided across the principal pan-Asian operators, it was suggested that 200,000-300,000 [euro] could be bet. The loss at Ladbrokes’ odds would have been 11.13% of stakes. American Economic Review, 96(2), 279-283.

The probability of being caught is an obvious factor if a player is evaluating an offer for a fix. Illegal sports bookmakers. This effect was through two channels. The disgraced German referee, Robert Hoyzer, was in the pay of a gang and his exposure followed a match in which he had ensured Paderborn’s win over Hamburg only by awarding two penalties and a red card, all decisions so outrageous that an inquiry was quickly ordered. But even the most rigorous face difficulty in proving a fix to the degree of proof required by a court. When it becomes tainted by the suspicion that events on the field may not be ‘real’ but rather ‘arranged’ for private gain, some of the magic must surely be lost. Rome: MAG Consulenti Associati.

The remarkable surge in the popularity of online betting does not appear by any means to have been always at the expense of the volume of business transacted by traditional bookmakers. H2 Gambling Capital estimates, quoted by RGA (2010), suggest an increase in the size of the global e-betting market from stakes of 16.4b [euro] in 2004 to 32.6b [euro] in 2008, with projection to 50.7b [euro] by 2012. An English player imprisoned in 2012 had been paid to concede runs in the first over of a match. Sport and gambling. This would not have shifted result odds by very much and so the fix probably related to the session runs market where a high score in the first over would raise markedly the number of runs forecast for the two-hour session. The gang then coerced him into corrupting more and more important matches by threatening exposure of earlier fixes, and it culminated in fixing at the peak of his career and at the very highest level of the sport. His paymasters were Croatian criminals. The offer to participate in a fix is accepted if the bribe exceeds the expected cost.

(iii) In 2011, a Singapore national received a prison sentence from a Finnish court for fixing league matches in Finland. The immediate victims of fixers are the other bettors/ bookmakers from whom money has been defrauded on the betting market. (6)

Person-to-person betting is a further innovation of the online era. (2010). This appears unlikely to change. The promoter had appointed the six members of the referee teams from Hungary and Bosnia. Their motive is simply to make money by using specialized insider information (advance knowledge of how events on the field will unfold) to make gains on specialized financial (sports betting) markets. (1) On the other hand, casual observation of the trajectory of leagues where widespread corruption has taken hold suggests that there is a business as well as a sporting and an ethical case for football to prioritize measures to mitigate integrity risk. But H2 Gambling Capital attempts estimates across all countries and these are employed for analysis by, for example, European Commission (2011) and Remote Gambling Association (RGA) (2010). Study of gambling services in the internal market of the European Union. He had corrupted nine players, seven of them Zambian. (2006). Working paper, Lancaster University.

The ingenuity of criminal interests targeting football is illustrated by a further development–criminals putting on matches themselves. This suppressed demand could now express itself through Internet access to operators that were licensed in other jurisdictions.

As an illustration of this distinction, suppose football wished to guard against corrupt manipulation by referees. Further, young sportsmen may be innocent of the process of ‘grooming,’ by which a single decision taken now may tie them to long-term involvement in crime. Industry statistics 2009/10. In football, China is the leading source of bets and in cricket it is Indian money that dominates.

RGA. To illustrate changes in the implicit price of betting services in this high-profile market, I examined individual match closing-odds data from a major UK bookmaker, Ladbrokes, as archived on www.football-data.co.uk. Both FIFA and UEFA have initiated awareness-raising sessions during their age-group competitions.

(4) Another example of fortuitous discovery of a football fix is related to the Italian match between Poganese and Cremonese in November 2010. (Strumpf, 2003), street bookmakers emerge and operate on a large scale, despite illegality, because demand is high. Point shaving: Corruption in NCAA basketball. As in any asset market, a profit can be made from a combination of trades either side of a movement in odds about which a trader has advance exclusive knowledge: for example, knowledge that a red card is to be issued after about 20 minutes play is valuable in the betting market in much the same way as advance knowledge of a profit warning is in the stock market since, just as in the stock market, a trader can lock into profit by buy and sell trades appropriately timed to be at different prices. (5) This implies that betting-related manipulation may affect about 300 European matches each season.

There are, then, limits to the role of national regulators where the market is global and the major threat comes from international organized crime. Journal of Economic Perspectives, 15(1), 3-12.

The Economic Impact of E-commerce: General Considerations

The history of football (as of other sports including baseball, boxing, and cricket) is scattered with cases of proven or alleged match fixing. For example, there was scope for some impact in the case of manufactured goods because the new mode of supplying buyers directly from a central warehouse permitted lower inventories to be carried; but it was limited because there was no direct effect on the cost of the production process itself. Regulation in terms of requiring licensed betting operators to monitor transactions for suspicious patterns of activity and to report them to both the regulator and the relevant sports governing body is therefore still worthwhile and embedded in, for example, British legislation passed in 2005. FIFA has since given life suspensions to the six referees and the promoter is currently ‘wanted’ by the police.

The narrative above is presented to illustrate why football administrators and international police organizations believe that the incidence of match fixing has grown substantially since the millennium and is now an outlet for the activity of international organized crime. Had FK Pobeda progressed to the next round, it would almost certainly have been knocked out because clubs from stronger countries join the competition at that point; and its profit from the one extra round would have been a fraction of 300,000 [euro]. In late 2011, BBC News referred to a further case that took this line of fraud to the limit when criminals created an entirely fictitious match and fed live news feeds about it for the benefit of betting markets on which they themselves then placed large wagers.

At the football-wide level, policy to date has focused on player education (to reduce the willingness to accept bribes) and intelligence gathering, including monitoring of betting markets (to deter players by making it more likely that they will be caught). But recently, criminal elements have gone further by acquiring clubs specifically to use them as vehicles for match fixing. Odds move throughout in predictable directions and by predictable amounts in response to incidents such as goals and red cards. It appears unlikely that he would have been aware of the long-run involvement in crime that would follow from his first acceptance of a bribe. The information that FK Pobeda would lose was sold to criminals for 300,000 [euro] and very exceptional sums were subsequently observed to be staked in Asia on the Armenians winning. Issues of governance and ownership also stand in need of address.

IRIS. Plainly, this reduces the extent to which regulation in Europe itself can make a difference to the amount of corruption in European sport.

The Case of Sports Betting

The Modus Operandi of Fixers

David Forrest

The greater size of the overall market has allowed bookmakers to offer many more subjects for betting, and for most football matches they will normally accept bets on more than 30 features of a match, apart from the result (for example, number of red cards, number of corners, identity of first scorer, and so on). Services such as stockbroking, travel planning, and the selling of insurance were indeed among the earliest sectors to experience falls in real prices and the closure of some bricks-and-mortar operations that were unable to improve efficiency to compete in the new environment.

While having predictive power in terms of where corruption is most likely to occur, the approach may be too restrictive for it to account for the time series of fixing if it does not focus on the demand for fixes (from criminals who place bets) as well as the supply of fixes (from unscrupulous sportsmen who will fix if the payment is high enough). The bookmaker win fell from 10% in 2004 to 9% in 2008 and was projected to fall further, to 8% in 2012. First, the new technology lowered costs of supplying goods and services, putting downward pressure on price. Criminal proceedings are ongoing at the time of writing, but the football authorities have already imposed sanctions on 15 clubs and 18 individuals, numbers reflecting how widespread the corruption was alleged to be.

Betting in Asia

Things actually improved for the bettor even more than these raw figures suggest. It funds this to the extent of some 1m [euro] per year.

The betting market in Asia in particular appears to play a central role in the way fixing has evolved to become a threat to football and other sports. Football administrators expressed concern to IRIS researchers that organized crime was infiltrating the sport through the purchase of ailing clubs. The Bochum trial revealed the case of the Belgian second division club, UR Namur, where the criminals invested in a club facing financial crisis and installed their own ‘management company’ as part of the agreement. (2008b). If effective, this would moderate the flow of offers made by fixers to sports players and officials. (7) However, of more concern in the context of the integrity issue is the smaller but still substantial volumes of trading in markets on matches in much lower-status competition. An inquiry found that he had been in the pay of criminals since very early in his career when he had accepted a payment in return for a highly inconsequential action in a relatively minor match. IRIS researchers asked traders with experience in Asia how much an agent could bet on the outcome of a Belgian second division match. The bettor who placed each of his bets at the best odds quoted on the website I used (which lists only highly reputable international betting brands) would have lost only 0.7% of his stakes over the final season (i.e., not far from break-even). The extent to which the market is now globalized is evident in football, where odds movements in Asia tend to be mirrored in Europe within one minute (Asia is the leader and Europe the follower, consistent with the fact that Asian markets are larger, even for matches taking place in Europe).

A further source of growth in volume is that consumers in many national markets will previously have been deterred because sports betting was locally available only through illegal operators. college basketball and he claimed that about 1% of U.S. (12) In Europe, associations of state lottery betting operators and private sector betting firms have also each coordinated surveillance systems for monitoring and reporting evidence of unusual betting activity.

Copyright 2012 Gale, Cengage Learning. The RGA Report cited estimates of the total bookmaker win, across the global market, as a proportion of stakes for each year from 2004, with projections to 2012. Presumably, they played unusually well since they lost by only 3-0 to the genuine Bahrain national team! The fraud was revealed only later when officials of the Togo football federation were surprised to read the result of a match supposedly involving their team. International Journal of Sport Finance, 3(3), 156-166.

So, value has improved from the perspective of consumers, just as would be expected in any sector of the economy into which e-commerce has made inroads. Combined with the taxes extracted by the state and by sport itself, (11) the effect is to hold down the pay-out rate in France to 79%, well below the international norm. Football in some countries has invested significantly in internal investigatory machinery, and UEFA funds surveillance of betting markets by Sportradar. Where there is still ground for suspicion, an alert is issued to UEFA or to the national federation responsible for the match. It is important to ask why there may have been an increase in the demand for fixes and why organized crime appears to have been drawn as a new entrant on the demand side of the market for fixes.

An emphasis on education in combating illegal or undesirable activities has often proven misplaced as, for example, in public policy to depress the market for recreational drugs. The winners in this process were clearly consumers, whether they bought online or remained customers of traditional outlets. Together, it is plausible that they will have raised the demand for fixes and the quantity of fixes carried out.

The emergence and popularisation of the Internet as a medium of commerce since the late 1990s has transformed the size and nature of the betting industry. Experienced traders review anomalies, comparing betting activity with on-field events and checking whether there are ‘sporting’ explanations for incidents observed. Such programs have been mandated on football and other sports by the United Kingdom government, and SportAccord has developed an e-learning program for use by young footballers across Europe. They may be especially vulnerable to influence by senior players and coaches, and there is evidence that criminal gangs tend to approach young players through such channels. Sports betting: Legal, commercial and integrity issues. Bearing in mind that the emergence of the e-sector was likely already to have eroded bookmaker margins before 2004, bettors worldwide have clearly enjoyed much better value-for-money since the emergence of e-betting. The FIFPro survey of players in Eastern and Southern Europe found a clear correlation between players who reported having been approached to participate in a fix and those who reported non-payment of salaries. Often such crime could be termed ‘petty;’ but recent cases involving organized crime have involved extensive corruption of the sport and very large sums of money. The perpetrator had fled but has subsequently been imprisoned for fixing games in Finland. However, some local crime related to manipulation of sport is likely to be present, as it always has been in the past. But it is already a sorry litany of incidents. Suspicious betting activity combined with events on the field may be convincing but can still be argued by defense lawyers to be circumstantial. These three cases already illustrate the international dimension of the crime and the ability of fixers to identify agents with the influence to arrange results.

The first effect of e-commerce in the economy, particularly in the case of services, was therefore to reduce prices and it would be expected, as a consequence, that consumption of the products affected would have increased, the extent of that increase depending on just how price sensitive consumers proved to be. Of course, a referee is a better investment for a gang when his services are procured over the long term. (4)

(9) They have, in fact, also entered the European market. Green paper on on-line gambling in the internal market. In the majority of the cases of known fixing outlined above, the corrupt bets have been placed with Asian operators regardless of the geographical location of the criminal interests and regardless of where the sports event takes place.

But the technology of the Internet did not just enable consumers to benefit from purchasing existing products at a cheaper price. In fact, perhaps the two most prominent known instances of fixing sport for betting gain in the last 10 years–the Bochum conspiracy and the referee corruption scandal in the National Basketball Association, which resulted in a prison sentence in 2007–both came to light during police investigations of other activities of organized crime (prostitution rings in the Bochum case). At the national level, the law has to be capable of being used to prosecute offenders, but it is not always clear under what law a fixer can be charged. Another restriction was a maximum limit placed on the proportion of stakes that could be returned to bettors as winnings. These bets are sometimes termed ‘proposition bets.’ The ability to automate odds setting by installing appropriate software has also lead to the routine availability of ‘live’ (in-play) betting, and this has been embraced by clients to such an extent that 70% of stakes on football are now placed during a match.

Eadington, W. Law-abiding French bettors are made worse off by the restrictions, but it is not obvious that much is achieved in protecting French sports since bets related to large scale fraud will be channeled through more liquid international markets offering much better odds.

Introduction

Sport possesses a magic. It allows criminal money to be fed into the market slowly. Twentyfour percent reported that they were aware of fixes that had taken place in their league and 12% that they personally had been approached to participate. On the other hand, the volume of proven cases in the past year (this paper was written in March 2012) is so suggestive as, arguably, to constitute sufficient grounds for policy formulation to proceed as if this were a known fact. (2001). This was an additional factor in disciplining retail prices. They now have licenses in the Isle of Man, from where, of course, their European business is conducted under an effective regulatory regime.

(6) http://www.howtofixasoccergame.com

On the other hand, there is perhaps more plausibility in the context of sport in the proposition that individuals make poor decisions because they lack awareness of consequences. At that very last stage, the money bet becomes ‘legal’ since the operators are licensed, albeit by jurisdictions with somewhat weak regulatory requirements, such as the special economic zone of Cagayan in the Philippines.

If fixing is a financial crime, it is also one with potentially serious financial consequences for football. Second, in the new competitive environment, bettors could ‘shop around’ for best odds on the Internet for the particular wager they wished to make, rather than rely on a local retailer. However, the views expressed are his and should not be interpreted as endorsed by IRIS.

(10) This principle followed from the precedent set by the state of Victoria in Australia. Second, it made the business environment more competitive because it gave consumers access to more suppliers and made it easier for them to compare price offers, again putting downward pressure on price.

But for those who instigate the crime, the motive is not, of course, to inflict damage on our culture for the sake of it. On the basis of its experience, Sportradar estimates that 1% of European matches are fixed. Betting by French residents using foreign websites is technically illegal but, in a liberal society, there is unlikely to be sufficient public support for the draconian measures that would be necessary to make such activity impossible. For each match, Asian betting markets accepted millions of Euros of stakes that total goals would be three or more. (2011). By contrast, three members of the Pakistan national team were jailed in 2011 after being paid by journalists posing as fixers to bowl no balls at pre-determined points in the play. The future of online gambling in the United States and elsewhere. But this does not appear to be the case in Asia where street bookmakers’ revenue is typically passed upwards through a series of agents, to be placed ultimately with one of four supra-national operators (IRIS, 2012). Then, in 1997, two games were abandoned when the floodlights failed and it emerged that technicians had been bribed by an Asian betting syndicate. If bookmaker margins fall across the board, given more competitive conditions, bricks-and-mortar customers will respond as well. Paris: l’Institut de Relations Internationales et Strategiques.

(2) Legitimate gamblers may also become disillusioned when betting crime is revealed. Sports betting and corruption: How to preserve the integrity of sport. European basketball and handball are among other sectors where the governing bodies have had to instigate inquiries into corruption or attempted corruption of players.

As noted above, betting-related corruption is by no means new to sport. This scandal has become known as ‘Scommessopoli.’ Newspapers pointed to Mafia links on the part of former footballers who had paid individual players 400,000, [euro] 120,000, [euro] and 50,000 [euro] for arranging the outcomes of fixtures in the first, second, and third divisions, respectively. First, customers at the very start of the period were still prohibited from betting on single matches; only combination bets on three or more were available, thereby putting an obstacle in the way of would-be match fixers but also permitting bookmakers to earn multiple commissions (such restrictions disappeared because new, Internet competitors did not impose them). This appears to be a dangerous development from the perspective of sport because liquidity may be termed the friend of the fixer. (2003). R. Thus, much of the world market is accounted for by effectively unregulated betting with a structure where self-regulation is also necessarily weak. High liquidity permits criminals to place large bets without attracting undue attention and without driving prices against themselves. (No doubt an additional contribution to this rapid rate of increase was that the market was developed at just the time when income growth in Asia, an area with strong interest in sports betting, reached historically high levels.)

In this review, the next section documents the recent known history of fixing in European football, then outlines what the various cases show about the modus operandi of those who seek to manipulate what happens on the field. But, largely, lobbying for restrictions is based on a false premise that restrictions on betting within any individual European country, or even within the whole European Economic Area, can address anything other than petty crime (such as sportsmen betting on their own account with local bookmakers). Sports governing bodies have proposed prohibition of live betting. Economics and electronic commerce. The exchange itself has no stake in the outcome, because its income is a percentage commission, which appears to remove one source of integrity risk. It questioned some 3,000 players in 12 countries in Eastern and Southern Europe. The author was a member of the research team and benefited especially from discussions with Sarah Lacarriere and Pim Vershuuren. Further, it facilitated trade in very niche products (such as specific rare books), where it would previously have been prohibitively costly for the market to bring together (perhaps very geographically scattered) willing buyers and willing sellers. (2012). Brussels: European Commission.

In still other matches, the Bochum gang targeted referees. This makes large-scale fraud more feasible and the erosion of bookmaker margins makes it more profitable.

The degree of liquidity reaches its zenith for the most important events. The defense from Betfair is that all bets on the exchange are traceable in the event of suspicious activity and that Betfair itself has uncovered and reported several cases of alleged fixing through automated monitoring of all its markets.

David Forrest, PhD, is a professor of economics in the Salford Business School. It is the level of liquidity in the betting market relative to the level of wages paid to players that makes lower-tier competitions in Europe so evidently open to corruption. There is no physical product. That sports corruption was discovered, in a sense, ‘accidentally’ is worrying to the extent that it reinforces suspicions that the cases we know about may be the tip of a large iceberg. Many consumers will have no reason to prefer retail outlets over Internet suppliers: in most countries there are therefore likely to be sufficient footloose customers to force land-based retailers to match prices offered by the online sector, and competition will also be intense within the latter, given that bettors can use price comparison websites to check odds available at suppliers based all around the world. Similar patterns of events can be observed in the leagues of Malaysia, Singapore, and Albania (IRIS, 2012). Wolfers (2005) was the first to attempt to use a statistical approach in the context of fixing for betting gain. The concern appears justified. The largest operators are reputable in terms of probity, but they fail one of the most important requirements of European regulation: ‘know your customer.’ The illegality of retail betting in most of Asia leads to institutional arrangements that effectively anonymize bets. This is possible because the bulk of trading, thanks to the Internet, now takes place during a match. The increase in the size of the global betting market, the lower bookmaker commissions to be deducted from the criminals’ expected profit, and the technical ability of criminals to access the high-volume Asian market all follow from the changes wrought by the Internet on the betting environment. His subject was U.S. (2005). The demand for fixes is a derived demand, derived from the gains that are available to criminals from betting market activity. It is unlikely a real fixer would have offered the large sums concerned because bookmakers would not accept big bets on whether a particular ball would be a no ball, and no balls are too inconsequential to shift odds in the core markets on result and session runs.

Any bookmaker has an incentive not to accept wagers that are likely to win, and some precaution is indeed taken by Asian websites to discourage agents from bringing them money staked by customers who are liable to be successful. On the basis of this evidence, significant growth in betting volumes should have occurred as e-commerce drove down bookmaker margins.

The four major operators are much larger than betting firms in Europe (9) and receive wagers which have been aggregated by agents, as the illegal money from the bottom of the Asian betting pyramid is channeled upwards. Additional games appear also to have been targeted since 13 players reported approaches (which they had rejected), where bribes offered for underperformance had been up to 300,000 [euro].

What is clear is that e-commerce has considerably increased demand for sports betting and made betting markets more liquid. In January 2011, a bogus promoter invited four national football federations to participate in a pair of exhibition matches staged in Turkey. One of the Cremonese team was involved in a road accident after the game and hospital blood tests discovered the presence of a sedative. The individual is represented as comparing the value of the bribe with the expected cost of participation, which in turn depends on the probability of detection, the penalty (including lost earnings from a ban) if detected, and the loss of sporting glory and prize money from under-performance. This has indeed happened in betting as in other service sectors.

Forrest, D., Simmons, R. A journalist, Declan Hill, who has written extensively on fixing, noted in February 2012 that one third of countries covered by FIFA had current police investigations into fixing. On the face of it, these markets are dangerous because some of the subjects of bets are easier for one or a small number of individuals to manipulate (compared to manufacturing the result). Demand will not be shifted.

The principal impacts of e-commerce in the economy and especially on services were therefore: (i) to drive down prices, (ii) to increase consumption, (iii) to stimulate product innovation, and (iv) to promote new modes of trading, such as person-to-person selling.

It is the lack of effective regulation in a very substantial market that has made Asian betting a real threat to European football and other sports. First, it is disproportionately large and provides the level of liquidity in the global market that allows organized crime to place large bets to make large sums of money and pay large bribes. The Macedonian club FK Pobeda is currently excluded from UEFA competitions for eight years following a fix which it instigated but where the betting was by a criminal organization. These general problems are likely to lead to more manipulation of matches, and reform would represent an important step toward limiting the activities of fixers.

Monitoring of betting activity appears to be a useful plank of anti-corruption policy even though the information it can gather is limited; in the dominant Asian market, it can observe only price movements (whereas European surveillance has traditionally depended on observing quantity of transactions). college basketball games over 16 seasons had been subject to betting-related manipulation. But the profit from doing so is likely to be taken not in the subsidiary proposition markets, which lack liquidity, but in the core and highly liquid markets on the final result and on the total numbers of goals. (2011). On the other hand, sensitivity appears to be low (i.e., there appear to be many false negatives–only six of nearly 200 matches covered by monitoring and identified as fixed according to the Bochum trial had triggered alerts). This trade is based on gangs having specialist expertise in the practicalities of placing large sums of corrupt money into betting markets with-out attracting suspicion. Corruption does not pay: An analysis of consumer response to Italy’s Calciopoli scandal. Further, it has integrated formerly regionalized markets since the technology of the Internet permits bettors to place bets in any part of the world and operators to hedge by laying off rapidly to operators based in other jurisdictions (this improves their ability to manage risk and permits them to accept larger bets). But in the longer term, if the belief that corruption is endemic gains credibility, the sport itself may be liable to be a heavy loser: all its important revenue streams are threatened since a competition that is perceived to be a charade may be shunned by attendees at the stadium, by broadcasters, and by sponsors. Given the contemporary betting environment, it would then not be surprising if ownership of clubs were not used to facilitate match fixing for betting gain, as the Bochum case illustrated in the case of UR Namur. This is particularly true for betting for two reasons.

Other agents fixers may use coaches (who can choose a weak team), medical staff (who can slow players down with incorrectly dosed injections) and even, as noted above, stadium technicians (who can turn the lights off). (2012) provide analysis to show sharp falls in attendance at Italian clubs exposed as having fixed matches to improve their league positions. The conditions in Internet betting appear to be not far from those of perfect competition. Jeux en ligne in the French market. It could lower the temptation of referees to accept bribes by paying them good, full-time salaries (as has been implemented in the EPL). The strategy enabled large sums to be won on the betting market.

Asian betting is at the heart of the problem of integrity for two reasons. It is appropriate first to ask in general terms how e-commerce affected economic life.

Sports governing bodies have shown considerable concern over the threat to integrity from the availability of proposition bets. Based on interviews with players, IRIS (2012) notes that triggering a penalty or having oneself sent off is risky because it is too obvious; but more routine defensive errors are easy to commit, with a good chance of a goal opportunity being successfully taken by the opposing team and a low chance of this attracting suspicion. When a criminal organized a friendly match between Bahrain and Togo in 2010, the fraud employed was even bolder. Thus, in a report for the European Commission, the Swiss Institute of Comparative Law (2006) presented a survey of evidence in 15 articles in peer-reviewed journals, and 14 of them evaluated demand as ‘elastic,’ mostly strongly so. Raising standards of governance and financial management are therefore not only important for the general health of football in Europe but also necessary adjuncts to any campaign against corruption of events on the field.

Suppose, in season 2000-2001, the bettor had wagered on all three outcomes, home win, draw, and away win, in each of the 380 matches in the EPL. They are therefore accustomed to receiving very large bets from agents that may have come from many small bettors but may, on occasion, contain a large bet from a criminal syndicate.

Football, along with other sports, also seeks to protect itself by lobbying legislators and regulators to restrict betting activity. This is because it depends on the often false premise that individuals’ behavior would be different if only they had full information. In the Bochum trial, the list of bets placed by the accused included a 36,000 [euro] wager on the outcome of a fourth division fixture in Turkey. As in the U.S. Ironically, corruption in Asia has induced a switch to Asians betting on European leagues. (2004). In many jurisdictions in Europe, betting has traditionally been offered by a state-owned or state-sanctioned monopoly and there was therefore great scope for prices to fall as residents gained access to extra-territorial supply. The United Kingdom is a relatively open market in that residents have the right to place bets with extra-territorial suppliers. (2011). All seven goals in the two matches were from penalties. It needs practical support from legislators and from the judicial system. (2003). Expected loss per unit stake therefore nearly halved.

The structure of the betting industry in Asia follows from the illegality of betting activity in the majority of countries, including the largest, China and India. Three hundred-twenty matches in 10 European countries were identified as having been rigged including 74 in Turkey, 53 in Germany, 35 in Switzerland, and 33 club or country internationals (one of which was a World Cup qualifier). However, the way in which it has been transformed is not unique, but rather follows a similar pattern to that observed in other sectors. Other European countries are considering enacting similar legislation.

(7) Similar stakes are observed in the case of the highest profile one day cricket internationals. Despite this, monitoring has gained increasing credibility in terms of an alert being acknowledged as a strong pointer to a fix (i.e., specificity is believed to be high); thus, evidence from the CEO of Sportradar was admitted at the Bochum trial. In football, the highest volume betting markets are on the result of the match and on the total number of goals scored. In the Bochum case, the gang sometimes recruited individual players, sometimes a whole team or even both teams.

MAG. The argument below is that bribes available to sportsmen have increased because a new betting environment permits larger gains than in the past to be made by criminals who fix sports events.. For example, online photo shops allowed personalized photo albums and photo stationery to be created and, subsequently, retail firms found that they had to offer the same service to compete. Oxford Review of Economic Policy, 19(4), 598-611.

So how widespread is fixing of football matches? Forensic statistics may have the potential to yield an informed estimate. However, apart from the impracticality of prohibition in a global market, it should be borne in mind that the popularity of live betting reflects the preferences of consumers who presumably find it rewarding to consume a live game by television or Internet and bet on it as a complementary activity that adds to excitement and interest.

Forrest, D., McHale, I., McAuley, K. They also benefited from its ability to enable the creation of entirely new versions of the product and new types of market. Say it ain’t so: Betting related malpractice in sport. Cricket provides a famous example of ‘grooming.’ In 2000, Hansie Cronje executed the highest-level known sports fix since the 1919 baseball World Series when he used his captaincy decisions to lose a test match for South Africa against England. Birmingham: Gambling Commission.

So, compared with a decade ago, and probably because of the availability of e-betting, liquidity in the sports betting market is now dramatically higher. The lesson from this incident is that clubs themselves may have an incentive to organize a fix, and the danger is, of course, heightened because so many clubs in Europe are in a financially precarious position where an injection of funds from malpractice may be very tempting.

(v) In February 2012, a former World Cup referee received a prison sentence of more than five years from a Chinese court for rigging matches in the domestic league.

The Economics of Corruption

(1) However, Buraimo et al. However, under the terms of the new law, sports bodies were given property rights over events within their jurisdiction (10) and can dictate what bets (defined by competition and by subject of wager) are authorized to be offered by the new operators. Betting experts told IRIS researchers that the total staked on the 2011 European Champions League Final, Barcelona v. They gained consumer surplus because they purchased more units at a lower price. Lausanne: Swiss Institute of Comparative Law.

(12) In practice, there is likely to be room for debate about how unusual or how suspicious patterns have to be to trigger a report.

Wolfers, J. The once-popular Chinese League looks close to non-viability since multiple arrests, including of officials at the highest level of the governing body, for extensive match fixing. Thus, consumers captured most of the value created in the economy by e-commerce.

In terms of new types of market, the most obvious illustration is the emergence of person-to-person selling (the e-Bay phenomenon). Of course, the problem is not exclusive to football. What explains these developments?

(8) In cricket, the corresponding core markets are on the result of the match and on the number of runs to be scored in the current session. But there is an important difference from the American case. The impact should therefore have been greatest where there was no physical good at all (Borenstein Saloner, 2001). Further, major local betting operators will also experience ripples from unusual betting activity originating in the rest of the world. (2012). The fixers can make money from betting even if he is successful in engineering the desired result only much of the time: with a referee in their pay, they possess knowledge about an influence on each match that is not reflected in the odds. London: Remote Gambling Association.

Economic analysis of fixing sports events has focused on the decision of the individual sportsman (or referee) whether or not to accept a bribe (Forrest Simmons, 2003; Forrest et al., 2008b). (2010). In fact, the revolution in the betting landscape proves to have conformed closely to these general economic predictions concerning the impact of e-commerce.

Swiss Institute of Comparative Law. Betting at these orders of magnitude is plainly capable of generating profits that would enable criminals to make offers that are very high relative to the levels of players’ wages in these tiers of competition. It is instructive to note some of the cases that have been covered in newspapers in just the last 12 months.

First, price has certainly fallen. His research interests include sport economics and the behavior of gamblers and gambling markets.

In football, the English Premier League (EPL) attracts substantial betting interest. On the other hand, liquidity is so high that suspicious large bets could still be absorbed, even if they could be identified, without threatening the financial stability of the firm. As in the U.S., bets with illegal bookmakers are typically made by telephone and on credit, with settlements two or three days later. On the other hand, liquidity in most such markets is limited and it appears unlikely that bookmakers would readily accept bets of a size which would make them of interest to organized crime.

Increased volume of e-sports betting over time, as the market developed in response to new availability and value, proves to be exactly what has occurred. Later sections focus on the role of Asian markets and on the policy responses of governments, regulators, and sports governing bodies.

A Growing Problem?

Endnotes

Fragile finances not only make football clubs more vulnerable to takeover by the criminal world but also make individual players more vulnerable to being used in a fix by outside agents or by the club management itself. The payment had to be shared if the corrupt player felt it necessary to recruit teammates to ensure the desired result in the targeted game. The international dimension of many of the conspiracies points to a need for international cooperation in policing, and FIFA has allocated funds to encourage Interpol to have a dedicated unit to combat sports corruption. Large bets can be placed on European football without creating an audit trail that can be followed by investigators. (2008a), Risks to the integrity of sport from betting vorrup tion. The list of possibilities would be long, but all would involve cost to the sport and would therefore be easier to introduce in well-resourced premier leagues rather than in the lower tiers of competition where most fixing appears to be taking place.

Changes in the Architecture of Sports Betting

A successfully executed fraud is not observed and, therefore, we do not have any time series of incidents that would permit us to declare from formal analysis that this is a crime on the increase. The same process in season 2010-2011 would have yielded a loss of 6.10% of stakes (most of this dramatic fall in price occurred after 2007). The club chairman instructed his players to lose a Champions League first qualifying round tie against an Armenian club that was the underdog. (2)

The Challenge Faced by Football Authorities

Faced with the apparently growing threat, what can football do? On its own, what it can do is limited. An inquiry established that the goalkeeper had spiked his teammates’ drinks to make them underperform.

References

Past cases, and especially the Bochum trial, reveal a rich variety of methods by which an external criminal group might seek to manipulate a football match. The bets were won when Latvia beat Bolivia 2-1 and Bulgaria and Estonia drew 2-2. As with other illegal activities, possible measures include those that disrupt the illicit trade and those which deter participation in it.

The Policy Response

Buraimo, B., Migali, G., Simmons, R. This enabled them to bring in new players whom they selected because they were known to be corruptible. Second, the way in which it is structured makes the large bets particularly easy to place and with no traceability of wagers on events suspected subsequently of having been fixed.

This framework proves useful in identifying where integrity risk is likely to be highest, for example where income from playing the sport is low, where underperformance carries little cost in terms of prize money or seasonal ranking, and where lax monitoring makes detection unlikely. It could seek to reduce the ability of referees to influence match outcome by allowing instant reviews of controversial decisions (in cricket this has considerably reduced the utility of umpires to criminal interests). It is in these markets that most money can be made by criminal gangs and the most obvious way of increasing the probability that they will do so is to bribe players, especially goalkeepers and defenders, to concede goals unnecessarily. However, the ability of participants to ‘lay’ (i.e., play the role of a bookmaker without possessing a bookmaker license) is perceived by some critics as raising integrity risk. The narrative of recent events in football suggests that bribes are larger and offered more frequently than in the past. Working paper, University of North Carolina at Chapel Hill.

First, empirical studies of betting markets over a long period have indicated that they are characterized by high elasticity of demand (i.e., the number of units of money bet typically responds more than proportionately relative to any variation in the price of a bet, where price is defined by the expected loss on a one unit stake). In one year, the gang had paid bribes of 12m [euro] and had made a net profit of 7.5m [euro] (for a fuller review of the case, see IRIS, 2012, pp. Given such possibilities, the sport’s duty of care to young players at least seems to justify systematic programs to raise awareness of young players concerning the ways in which they might be approached and possible consequences of involvement. It could disrupt criminals by allocating which referees were to officiate at a match only at the last minute (this strategy, pioneered by the National Basketball Association, would deprive criminals of the time needed to organize the placing of their illicit bets). But the extra liquidity in markets on European matches then puts them at greater risk from fixing.

Product Innovation

European Commission. Police sources indicate that organized crime has indeed been extending its portfolio of illicit activities to take in sport. Further, the reservation price of sportsmen faced with a bribe may be low since they are not required overtly to lose the match for their team. However, the database established by the monitoring system can identify individual players and referees who have been participants in a number of matches that have triggered alerts, and on occasion this has led to referees being required to retire by internal decision within the governing body.

(i) In April and May 2011, the “Bochum trial” in Germany resulted in the sentencing of nine defendants, linked to organized crime in the Balkans, who were found to have engaged in fixing on an industrial scale. That some popular bet types are prohibited and that odds offered are hugely uncompetitive relative to world prices presumably explains why the new legal market in France has thus far succeeded in attracting only a fraction of sports betting originating in France (25% according to MAG, 2011). Despite the emergence of the new competition, the participation rate in sports betting with land bookmakers tripled between 1999 and 2010, according to the British Gambling Prevalence Survey, 2010 (Wardle et al., 2011).

Betting sits readily in the set of industries where the general effects of e-commerce are likely to be most strongly felt. The size of this threat is unknown, and to date there has been no econometric evaluation of how demand responds when betting scandals become public. For example, the international governing bodies in football have followed cricket and tennis in setting up credible anti-corruption units staffed by former policemen; but clearly, there are limits to their powers to investigate organized crime; and their powers to impose sanctions within their sport may also be insufficient to deter players and referees from agreeing to fixes. London: The Stationery Office.

Organized crime may also be in the market for purchasing information that a match will be fixed by someone else. The team advertised as Togo was in fact merely a group of amateur players recruited for the purpose. Odds were available for several such international operators and for several European leagues, and I found the same picture across the board as in the case of my specific illustrative example.

(3) Asian betting markets pay out on the basis of the score at the time a match is abandoned.

The extent of the impact of the Internet varied across sectors of the economy. This can allow any bet limits imposed by an operator to be more easily evaded. Specificities of the betting sector reinforce these expectations. But the sheer number of incidents that have come to light recently is striking and so also is the high proportion of cases where organized crime has been implicated. Journal of Public Policy and Marketing, 23(2), 214-219.

The paper draws and reflects on material from an investigation by researchers from l’Institut de Relations Internationales et Strategiques (IRIS), Paris. Young sports players have been reared in a very hothouse environment. Restrictions proposed include prohibition of types of bet and styles of betting (for example, in-play) and limits on the proportion of stakes permitted to be returned as winnings. It is the repository of dreams and a sphere where many of our heroes are made. Improved value, naturally, would be expected to increase volume. Referees are vulnerable to being corrupted because they tend to be relatively low paid, yet can have a strong influence on match outcome and total goals. Attendance has collapsed and both the league sponsor (Pirelli) and the national broadcaster (China Central Television) withdrew from their involvement. He had had a previous conviction for fixing matches in the Singapore League and was also implicated in fixing an international match in 2009 by making payments to the Zimbabwe team.

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Wardle, H., Moody, A., Spence, S., Orford, J., Volberg, R., Jotangia, D., Griffiths, M., Hussey, D., Dobbie, F. (13) This monitoring system triggers alerts that will likely be investigated with different degrees of thoroughness in different member federations. This was an entirely new variation on the traditional product.

Until 2010, legal betting in France was exclusively through a state-sanctioned monopolist; but new legislation then permitted sports betting on the Internet so long as it was with firms licensed by France and operating with an .fr web address. Over the same period, other sports have also come under the spotlight. The case for doing so is reinforced by consideration that an increase in incidence might have been predicted–and indeed was (Forrest, McHale, McAuley, 2008a)–from developments in betting markets over the last decade.

Gambling Commission. Thus, there is an onus on civil authorities to play a role in defending sports integrity against criminals. Nevertheless, referees had been used in several games that featured in the Bochum trial and two referees were given life suspensions as a result. The availability of live betting therefore raises integrity risk by creating new ways of manipulating the sport; but the aspects of the match to be arranged must be important enough to have a significant effect on the odds regarding final result or total goals. In the first, in 1994, the veteran Liverpool goalkeeper, Bruce Grobbellaar, was accused of fixing after being filmed discussing arranging matches with a Malaysian businessman. However, this feature of the commission system for remunerating agents is likely to be negated by the positive incentive for agents to accept bets from suspected fixers: if they have a relationship with fixers, they themselves can benefit by betting on their own account after observing on which outcome the fixers’ money is being placed.

Another prediction from the general model of e-commerce was that the technology would facilitate the emergence of new products and new modes of market. As such, this is an industry where the general predictions noted above should apply strongly. Accordingly, it occupies a special place in our culture and in our affections

Liam Carroll

Liam Carroll

Liam Carroll is the creator of Sportsbook Investing, the premier website for making money with Understanding Sports Betting Odds. He has successfully been beating sportsbooks for years using his proven system and top sports picks based on lines, trends, angles, and years of experience. Learn about his system for FREE at http://markettenola.com
Liam Carroll

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