Leverage and sports betting

6 min readOct 5, 2022


Over the past few days, there has been discussion in the crypto x gambling space about sports betting with leverage. I believe the original source of this was this tweet from GCR:

There are many ways the idea of “leveraged sports betting” could be interpreted. Let us assume all of them go along with the idea of “gambling with more money than you have in your account” since this is what a majority of leverage trading is. Of course good traders can use leverage trading to run long/short strategies or basis trades but that is not what the average degen wants to do.

For the first type of leveraged sports betting, let’s take an example. Imagine a platform exists which allows leverage trading on the World Cup winner market and you take out a position on Brazil with 5x leverage. You have $100 in your account so your position is worth $500 ($100 of your money and $400 of the platform’s money). It is the quarter finals and Brazil is drawing 0–0. The odds on Brazil begin to drift as the game progresses and become longer than when you placed your bet, but you have not reached your liquidation price yet. In the 80th minute they concede a goal. The (decimal) odds of them winning the World Cup jump from 12 to 40 since they need to score a goal in 10 minutes or they are knocked out. Your position is well past the liquidation price. The platform begins to liquidate your position, but the only liquidity exists around odds of 35, rather than your liquidation price of 10. Even once 100% of your position has been sold, the platform has not recovered the $400 it extended to you as leverage.

This is the problem of “gap risk”. In sports, events can occur which drastically move the odds a huge percentage or even many multiples. We can see sudden moves in crypto but the extent is much smaller and the liquidity is much greater than what is offered in sports markets. Imagine the above scenario happening to many people at once. The platform would be insolvent immediately.

To avoid gap risk, the platform must close trading before the event begins. In this case, the bettor is purely trading on the pre-match odds movements. This is something that is common (with no leverage) on Betfair Exchange on horse racing. The liquidity is reasonably thick on UK horse racing to trade positions in the hundreds or thousands of GBP range, scalping quick moves for a few ones or tens of GBP. There is no automatic closing of positions once the race begins on Betfair so traders must manage their position and time carefully or they will be holding a large bet on a specific horse. If there was an automatic closing of positions, leverage trading in this scenario would be possible (if extending credit to gamblers wasn’t illegal in the UK).

Despite what I have said previously, there does exist leverage trading in sports market. It is offered by an Asian broker. (More on types of venues in my next article but a quick summary is that this is a platform which aggregates the offerings of a number of Asian bookmakers into one place so your order executes at the best odds for your size — the exact same as Purebet does for web3 sportsbooks.) They offer trading on pre-match odds, on leverage, with the position automatically closing out as the match approaches kick off. This means that there is no risk of odds jumping a huge margin and there will always be sufficient liquidity to close or liquidate a position.

One thing to note with what is mentioned above: the outcome of the event has no effect on your profit and loss — only the movement of the odds before the start does. There is no thrill of watching your team score a last minute winner or the heartbreak of a missed field goal. This is truly what degenerates want — not predicting if a team’s odds will move 2% and closing out for a small profit.

Ok, so what if we don’t want to close out before the event starts, but we also don’t want the gap risk of the live odds? Well we take the position before the game and get paid out after the game. For this, you need to find your nearest loan shark. The collateral is your knee caps. Maybe you live in the USA and know a “bookie” that you call up and he takes your bets and you settle with him your profit/loss at the end of the week. This is another example of gambling on leverage — you are betting with money you don’t actually have.

Could this work online somehow? Not really unless you go through rigorous KYC and that turns from Know Your Customer to Kneecap Your Customer once you refuse to settle your debts.
Even if a platform tried this, optimistic of getting paid, a customer with $100 in their account bets on a team at odds of 2.0 on 5x leverage. The bet will return $500 x 2 = $1000, the house gets back the $400 extended as leverage so the customer profits $500 + their $100 initial stake. They risked $100 to return $600. That is equivalent to taking a bet with odds of 6.0. The platform just offered the customer odds of 6.0 on a bet with a ~50% probability. The platform would go bankrupt very quickly.

The following paragraph is a LATE ADDITION after I talked more about this to people:
The real leverage in sports betting comes from time. It is only 90 minutes or a few hours between placing your bet until you are paid out (if you win). Within a few hours you can double or triple or even 10x your initial funds. This is impossible to do in financial markets — unless you are on huge leverage in a highly volatile market, and even then it is basically pure luck that you won. Time. Time is the leverage.

So there are lots of problems but are there any solutions if you want to gamble on sports with more money than you have? Well, if you just want a thrill, you could try an accumulator/parlay and hope the first few selections win so that you are waiting on only 1 or 2 more correct results for a big payout. If you are serious about gambling, bet with what you have, practice proper bankroll management, record your bets and closing line value (if you are betting pregame). If you really are profitable, you will quickly see your bankroll grow. There is no shortcut.

Where does Purebet come in? Well nowhere really. We do not have a solution to an impossible problem.
Once we are live, Purebet will be the most liquid on-chain sports betting venue so if someone thought they could design a system which extended leverage to gamblers, building on top of Purebet would be the best place to do it (but we won’t be responsible for you blowing up).
If you are an up and coming sports quant but don’t have a big enough bankroll, you could form an on-chain investment DAO to bankroll your strategies and place your bets with Purebet to ensure you are getting the best odds on the whole market.
If you fancy yourself as a trader or market maker, you could use your main crypto holdings as collateral and withdraw some USDC to market make on Purebet, undercutting the odds of existing on-chain venues and making sure you are guaranteed action.

We have an on-chain fantasy trading game in the early stages of design to quench the thirst of some degens in the future but for now we are sticking to the goal of having the best odds and deepest liquidity for betting of any on-chain venue so maybe that we help the people referenced in this tweet:

(But also, GCR, if you read this, DM me and I will set them up with places that will take their action right now. It really isn’t as hard as flying to Vegas.)

Discord: https://discord.gg/stPns8uA43.

Twitter: https://twitter.com/Purebet_io.

Website: https://www.purebet.io.




A decentralised sports betting exchange, liquidity aggregator, and degam ecosystem.