Why do sportsbooks ban or limit people? (And an introduction to web3 sports betting.)

Men in suits happy that they are making money. (Made using Stable Diffusion)
Men in suits happy that they are making money. (Made using Stable Diffusion)

To make more money. That’s the short answer. The long answer goes a bit like this:

For 99% of readers, every single bookmaker or sportsbook you know bans customers. On top of that, they probably only accept users from a limited number of jurisdictions. This usually relates to their licence conditions or the laws of other countries. For example, a UK bookmaker will not let someone from the USA sign up on their website. New users to most traditional online gambling websites must complete KYC (know your customer) checks before being allowed to bet. Again, this relates to their licence condition and the laws of the country in which they operate. In recent years, some “cryptocurrency bookmakers/casinos” have become popular. These generally also have limits on their jurisdictions but these can be easily avoided with the use of VPNs since they do not need to use traditional banking rails to accept deposits and pay out winnings. But do not be fooled: these venues are not the saviour of a free and open global sports betting scene. They are still private companies with complete control over user funds who prefer to make money rather than lose it.

Pick any traditional or “cryptocurrency” bookmaker and look up reviews for them. In almost all cases you will find a story of someone who claims to have had their withdrawal request rejected and have had their funds seized. However, legal, licenced bookmakers have a regulator whose rules they must abide by and questions they must answer. Unlicensed (or Curacao licenced — but that’s for another time) “cryptocurrency” bookmakers have almost no one to answer to. They are much more likely to withhold funds.

In almost every country in the world, it is completely legal for bookmakers to refuse to take bets from whoever they want. The modern way of doing this is not to close user accounts (god forbid that they prevent you from playing slots or roulette), but to reduce the maximum stake you can place on a bet. This is known as getting limited. Bookmakers do this to users who they think will be in profit over the long term by winning more than they lose — meaning they are unprofitable to take bets from. While this might seem almost impossible, or purely luck to some bettors, there is a worldwide community of highly skilled and/or professional sports bettors who know methods and tactics to beating the bookmakers at their own game. If you want to learn some things, join the Purebet discord: https://discord.gg/stPns8uA43.

If bookmakers only limited accounts which were in profit, they might accidentally limit many users who won a few bets on some Premier League or NFL games they were watching or got lucky and won a nice accumulator/parlay. Over the long term, these accounts are likely to give back their winnings and some more. To weed out the users which are likely to make profit over the long time, there are a number of methods used.

  • The first, and easiest, is identifying users who consistently place pregame bets which then go on to become shorter odds (higher implied probability) by the time the event kicks off. This is known as getting closing line value (CLV). General gambling theory suggests that if you do this over a long period of time, you will be in profit since markets should be generally efficient in evaluating the true implied probabilities of an event by the time the odds close, since all the information is priced in, and everyone has had their chance to make their bets. When you get CLV, the probability of your bet winning is greater than the implied probability of your odds, you will win more than you lose. Of course, there are many caveats to this technique for betting which I will happily discuss in our discord but overall, it is a good way for bookmakers to differentiate good bettors from the average long-term loser.

Now you know why bookmakers, including “cryptocurrency” bookmakers, limit you (if you can even sign up to start with), what can you do about it? Since, with on-chain betting, a winning bettor could just create a new wallet address, on-chain bookmakers must think smarter than traditional bookmakers who just encourage losers to lose more and prevent winners from playing. We are currently seeing something of a web3/on-chain sports betting Cambrian explosion. New protocols are popping up every month to try to make their mark on the scene. For the purposes of further discussion, this does not include the likes of stake.com, Rollbit, or any similar websites where you are just sending BTC or USDT or any other cryptocurrency to their wallet and being credited on the website which is run like any other traditional bookmaker. The key element of being considered an on-chain bookmaker is that user funds are in a self-custody wallet (to which the user holds the private key) at all times except when a bet is pending.

The original implementation of on-chain betting was simply as an exchange, where the protocol would create markets and allow users to match bets against each other at the odds they chose. The main issue with this is that the average user would be turning up to almost no liquidity if no market maker was active. It is especially impossible to find liquidity on the first generation of these protocols since they were launched on Ethereum mainnet and the gas fees to place a bet could be higher than your profit. The only usable protocol of this design (and probably the oldest that will get mentioned here) is SX Bet (previously sportX.bet). They were on low-cost EVM chains and recently moved to their own Polygon Supernet (similar to Avalanche subnets but this isn’t a blockchain technology discussion. Just know it is their own separate blockchain, only used for their betting exchange). They seem to have an active market making community so there is always liquidity available to casual users to bet against.

Men shaking hands after agreeing a deal, illustrating how betting exchanges require two parties to make a deal. (Made using Stable Diffusion)
Men shaking hands after agreeing a deal, illustrating how betting exchanges require two parties to make a deal. (Made using Stable Diffusion)

To build on this idea, there are new sports betting exchanges launching on Solana, for its low transaction cost and high speed. Aver Exchange launched a few months ago and is trying to find its footing in the market. They are currently only offering a few upcoming events to try to concentrate the liquidity and betting in action in a few places rather than being spread across many events. This is good if you want to bet on those events but limits the choice of what to bet on.

BetDEX is another exchange on Solana. They are still in closed beta but will be entering open beta soon. They appeared on the scene with an announcement that they raised $21m before the public had even heard their name. With this funding and the team’s industry pedigree (previously worked at FanDuel), it is to be expected that BetDEX will have active market makers, probably with off-chain agreements. However, their time spent in beta, and going forward, staying in testnet open beta, means that it could be a while before you can place a bet worth real money with them.

More interestingly, blockchain and smart contract technology has allowed a new type of bookmaker to appear. This could be broadly categorised as a virtual automated market maker (VAMM). Within this category, there are small differences (and hopefully more will be developed with further innovation). The first in this category I will mention is Azuro. They are a relatively new protocol on the Gnosis blockchain. They are purely an on-chain protocol but there is a frontend which accesses their contracts at Bookmaker.XYZ. Azuro markets are set using Chainlink oracles of industry average odds for the events and are only adjusted by user bets. This is similar to how old-school bookmaking was done — where the goal was to balance the “book” by having equal risk on all outcomes so that the bookmaker won no matter the outcome of the event. Similar to Azuro is Overtime Markets, built upon the Thales binary options markets on Optimism. It is not designed specifically for sports betting like Azuro, so things work differently on the backend, but to the average user, the experience is similar. With both of these protocols, there is always liquidity available to bet into since you are betting against the VAMM and not a person setting bets on an exchange. Azuro currently has a focus on soccer with a wide range of leagues, as well as some major CSGO and DOTA2 events with lots more coming soon. Overtime is more focused on American sports with MLS, NFL, NCAA football, MMA, baseball and motorsports. Between the two, it’s unlikely most bettors would ever have to sign up to a traditional bookmaker ever again.

Man shaking hands with a robot, illustrating how a VAMM-style on-chain bookmaker has automated liquidity available for users to bet against. (Made using Stable Diffusion)

If you reached this far, I hope you learned something or found it interesting, but you might be wondering why this was published by Purebet. Purebet is the next step in on-chain sports betting. Based on custom programs on the Solana blockchain, Purebet’s base layer is a sports betting exchange similar to BetDEX or Aver (but placing an order requires 10% of the rent exemption compared to them and taker orders require none. (Sorry for bragging.)). However, for our mainnet launch, building on top of the exchange, we will be aggregating the odds and liquidity from a number of on-chain betting protocols. This means there is no need to check 3 or 4 venues for the event you want or to see who has the best odds. Purebet will always offer the best odds and deepest liquidity since it is every protocol combined. So if you bet big or just want to know you are getting the best returns, Purebet is the place to be.

This article is the opinion of one person based on their personal experience. If I have made a mistake, you think I have missed anything, or you have any questions, you can reach me in the Purebet discord server: https://discord.gg/stPns8uA43.

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

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

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

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Purebet

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