You're Limited. Be Happy. (Sort of.)

Ben and Jerry's had a rule when they started out. The top executives couldn't make more than five times what the folks who churned out all that chunky monkey made. They had a few reasons for it, but it came down to one big thing. They thought it was fair. Sports betting goes the other way. There's a lot of unfairness baked in. Casual bettors don't notice it at first, but it drives sharps crazy. It's how sports books limit their Sharp customers.

But are the sharps wrong? Is there upside to limiting? There might be. And there are some very smart people in the betting world who would swear limiting can help sharp bettors. Today, I'm going to look at the pros and cons of four arguments around limiting. And I'm going to tap in a formidable debate partner, myself. That's right. It's Jack versus Jack. It's a jack off. Uh here's why limiting is necessary and good for sports betting. If liquidity, the amount of money that's in any betting market, is what helps shape an efficient number, what are the sports books supposed to do in less liquid markets like props? If books didn't limit here, those markets wouldn't exist at all.

If the first grocery store you ever went to sold one banana for $10, you might not understand how bad a price that is until you checked in on several stores and saw them for sale for 65 cents a pound. I mean, it's one banana, Michael. What could it cost? $10? It's the same principle with sports books. 65 cents a pound might be closer to a fair price, but sports books aren't sure. And if they're worth more than that, they don't want to get cleaned out by customers who might be prop specialists with better domain knowledge than their own traders.

So what they do is they put in limits for bettors. Sometimes even if they've only made what appear to be sharp bets. This they think protects them from getting over their skis in a market where they're not confident. The upside is they keep offering these markets. They're available to satisfy the demand and turn a profit from recreational players without the risk of getting beat up too bad by the sharps. If they couldn't protect themselves, they wouldn't be able to offer those markets. You can see that in action on sharp books like Circa that don't offer much in the way of props. Can you prove that though, Jack?

The reason lots of sharp books don't offer as many markets is because by nature, those books actively trade the markets they make. And more markets means they need more traders on staff to actively monitor those markets. Sharp books work on thinner margins than recreational books. You know this. That means most of them can't staff a trader to babysit every single market on the board. Most of them, but not all. Pinnacle offers markets on everything from Welsh women's soccer to League of Legends head-to-heads. Whatever League of Legends is, the last video game I played had pixels the size of cinder blocks. And that's just the sharp books. The recreational books are extremely competitive.

If Caesars reduces the number of markets they offer, you can bet that DraftKings, MGM, and FanDuel will run 100 commercials a day with Kevin Hart yelling at LeBron about how they've got all the prop markets the competition doesn't have. That's because there's always demand for new and innovative products, and the sports books are all too willing to expand their surface area to meet it. It's capitalism. Fine, but what happens when big bankrolled sharps can shovel money at every thin edge they spot? How many bad bettors with 10 and $20 bets does it take to offset the best in the world betting tens of thousands?

When these recreational books don't have the in-house talent to book like Bob Martin, they're going to get carved up by sharp bettors if they can't throttle the risk. If limits disappear, so might some sports books. So, you're saying that Darwin shouldn't enter this chat? What happened to Survival of the Sharpest, Jack? But forgive me if I don't shed a tear at the idea of a sports book taking it on the chin from sharp bettors. Not while their primary driver of revenue is still same game parlays where they hold 20 to 30% of the handle. As long as the recreational bettor has an insatiable appetite for a sports flavored lottery, the sports books don't have to sweat too hard.

They'll be fine. All right, but what about this? When sports books feel like they're not on solid ground, one of their first lines of defense is often to increase the hold in a market. If the recreational books continue operating the way they currently do and you take away their ability to limit, they're going to fall back on their other natural defense, which is holding more per bet. Get ready to say hello to minus 115 on each side of main markets. We've already seen that in casino gaming. Triple0 roulette, 65 blackjack, they're spreading like a disease on casino floors. Higher hold is how the house protects itself when it can't beat the player. And once that door opens, it never closes.

A and who's going to keep betting into minus 115 in the most liquid efficient markets? You can argue that the recreational bettors aren't price sensitive, that they think any price is fine as long as they can pick winners. And when you think like that, you know what happens, Jack? They lose faster. They sour on betting sooner. And they go bust quicker. Books can't help themselves. They'd rather skin the sheep once instead of shearing it many times. Which means as players drop out and they're not immediately replaced, demand will drop for this now inferior product. That leaves them in a race to the bottom.

I'll also note that this is the same damage they inflict on themselves when they limit recreational beds that they profile incorrectly as sharps. It removes their money from the ecosystem. The one thing we haven't talked about is what sharp bettors love about recreational sports books. They're slower moving, they're softer, and they have beatable lines. If you force recreational books to become sharp books, all that goes away. It'd be like having a dozen circus and bookmakers out there.

But with limits, sharp bettors still find a way to get down on those lines. That might mean they have to jump through hoops that don't necessarily comply with a book's terms and conditions, maybe using beards or opening multiple accounts, but that's the cost of doing business. And for bettors working at higher limits, it's the devil. You know, they've scaled up enough to understand how to navigate the art of sports betting. Oh, sure. The system works now for some bettor until it doesn't. And when it breaks, it breaks on the better, not the books. Especially not when you have the state of New Jersey making proxy betting a crime.

Your choice shouldn't be between making good bets or having a felony on your record. The thing about the devil, you know, is when you say that's preferable, it sounds like you're fine with the devil. I'm Mephosophilles, Prince of Darkness. When I start harassing you, you'll know it. Just because you don't want to have to figure out how to beat new counter measures doesn't mean a new system wouldn't be better. And besides, no one is saying all of this means unlimited action for everyone. It doesn't even mean every single better should have the same exact limits.

But it does mean that bettors should get a fair shake at limits, knowing for starters what they're allowed to bet and how much runway they have. Transparent posted limits. Hey guys, I had an idea for that. Remember Ben and Jerry's? What if sports books had to follow the same rule, the salary scaling rule? If the books want to let recreational bettors bet more, what if it was only, say, 10 times the lowest limit the sharpest bettors get? That way, the books get to book that sweet recreational action, and sharp bettors know exactly how much they can get, and the system is fair, clean, and transparent. I like it. That could work.

Hey, but is this something we'll even need to worry about all that much in the future? With prediction markets making headway, one of the defining features is you don't have to worry about limits because it's peer-to-peer. Well, uh, sort of peer-to-peer. There are still in-house market makers you have to worry about. Plus, institutional market makers won't be involved if the courts or Congress take prediction markets off the table. Then prediction markets have to go back offshore and a lot of that liquidity drops out. All right. All right. That's that's enough. Get out of here. If I keep this up, they're going to start calling me Captain Civil.