Paddy Power – Suckering Gamblers, One Early Payout At A Time

They are laughing… at you… all the way to the bank

Recently Irish bookmaker Paddy Power made headlines when it stated that Hillary “is a nailed-on certainty to occupy the Oval Office”, and agreed to pay out over $1 million dollars in bets already placed at the book for her to win.  Of course, they made sure to tell the whole world about what they did, and in a press release, they also stated the following:

However, things haven’t always gone to plan for the trigger happy Paddy Power who were stung by Y.E Yang after paying out early on Tiger Woods winning the 2009 PGA Championship and Manchester United whose late season collapse in 2013 saw their rivals Manchester City pip them to the Premier League title after the bookie had paid out on the Red Devils.

Should Trump upset the odds and become 45th President it will trigger the biggest political payout in bookmaking history and leave Paddy Power with some very expensive pie on the chief’s face.

And if you actually believed that last sentence of theirs that I highlighted, you are just as much of a sucker as everyone else who is now betting on Trump at Paddy Power in the hopes of “sticking it” to the bookmaker.  Paddy Power has been in business since 1988, and as they state in their own press release, this isn’t the first time they’ve paid out early, and it almost certainly won’t be the last.  Do you really think they didn’t know exactly what they were doing when they agreed to pay out Hillary wagers early, and didn’t fully expect all the attention it would garner in the press?  More importantly, do you actually believe they have any real risk by paying out Hillary wagers early?  Even if Trump wins, you realize the bookmaker is still going to make big bucks on the election regardless?

As I’ve stated in the past, the quotes on the Betfair exchange, especially in regard to the Presidential election, are considerably tighter than odds at traditional sportsbooks such as Bovada, GTBets, Sportsbook.ag, and of course Paddy Power, among many others.  Because these sportsbooks are so much wider than the Betfair exchange, if they receive too much action on one side of their book (i.e. if too many people are betting on Trump), they can and almost certainly do hedge the risk on the Betfair exchange, another live sportsbook exchange, or even with another bookmaker who has taken too much action on the other side of the book’s exposure.

Earlier this year, Paddy Power merged with Betfair, whose exchange I’ve touted as an excellent resource to watch and/or place action on the Presidential election, among the many other live markets they offer.  So after their merger, Paddy Power operates in conjunction with Betfair.  They don’t even need to pick up the phone to do their hedging – they can simply take a stroll down the corporate hallway and ask for a size quote, and do the hedging on their own exchange, fee-free. 

Don’t believe me?  Ok, let’s take a closer look.  This screenshot is from Betfair’s exchange, on 11/3/16 at 9AM Eastern:

Take note of the number I’ve circled in the screenshot.  Betfair’s exchange has traded almost $119 million worth of action on their “Next President” event up to this point.  A $1 million dollar payout is a drop in the bucket for Paddy Power to hedge, especially considering when you take a look at the exchange’s chart for Hillary trades…

…Paddy Power is paying out customer bets, done at awful levels, but has almost certainly only done so after hedging on the exchange.  A closer look at the volume overlayed with the odds on the chart shows that the vast majority of the action was taken with Hillary’s odds north of 80%, and nearly all of the action came with the odds above 60%.  Paddy Power can hedge all of its exposure in the market right now for considerably less than the $1 million it will be paying out; with exchange odds for Trump just below 30%, they would only need to put down a touch less than $300,000 of action on Trump to cover a full payout on Hillary.  So not only did the Betfair exchange customers lay high sums for low rewards, the Paddy Power customers laid at least 1-5, probably closer to 1-10 odds to place their bets on Hillary.

Don’t believe that the odds are that much worse?  Take a look at a screenshot from Paddy Power’s election odds ticket, again from 11/3/16 at 9AM Eastern:

Again, notice how I’ve circled the odds.  On a 3.45/3.5 Trump market on Betfair, Trump is 28.57% “bid” and 28.98% “offered”.  On a 1.42/1.43 market, Hillary is 69.93% “bid” and 70.42% “offered” – quite a tight quote for both.  Meanwhile, Paddy Power’s sportsbook is offering Trump at 33.33% and Hillary at 71.42%. They have surely been pocketing the difference every single time someone places a bet at their sportsbook, laying off the risk on the exchange (fee-free, since they own it) whenever the book gets too much action on one candidate.

How about Evan McMullin, Jill Stein, or Gary Johnson?  They are all between 700-1000 to 1 on Betfair’s exchange, but offered on Paddy Power for 500-1 – again, just more risk-free money for their bottom line.  Of course, Bernie Sanders, who is closer to 340-1 on Betfair, is not even offered at Paddy Power.  Are they worried that it would look bad if they were “afraid” to offer him for the same levels as the other candidates?

Obviously, the other sportsbooks are doing the exact same hedges if they have to.  Bovada, another example, is below, with a screenshot again from 11/3/16 at 9AM Eastern:

A Hillary “offer” at -260 has a percentage equivalent of 72.22%.  A Trump “offer” at +175 has a percentage equivalent of 36.36%.  Bovada’s sportsbook is even further above the Paddy Power offers!  Perhaps this is because they don’t own/operate a Betfair-like exchange, and would have to pay fees, or a “vig”, to use Betfair or another sportsbook/service to hedge their risk?

So it should come as no surprise that Paddy Power is calling attention to the fact that they’ve already paid out on Hillary bets; they’ve simply calculated that the $300,000 (if that) they have to lose is both a) worth way more in its publicity value, and b) more than adequately hedged should Trump win the election. 

Unsurprisingly, plenty of idiots on Twitter jumped in to tell Paddy Power how stupid they were, blissfully unaware that this is just a shrewdly executed publicity stunt, done to play on the naivete of the gambling public and try to entice even more people to bet on Trump, where Paddy Power will continue to lay off their risk on the Betfair exchange if necessary.

Thankfully, humanity has some hope, as not everyone on Twitter is buying what Paddy Power is selling.

Go on, stick it to the man, and bet with Paddy Power on Trump to win.  Just know that you’re not really sticking it to anyone at all, and can get much better odds if you use the Betfair exchange.  However, don’t act like you’ll be sticking it to Paddy Power if you do that, because you’re just a) paying the whole company fees to use the Betfair exchange, and b) providing even more liquidity for them to lay off their risk from the Paddy Power website and their other retail sportsbooks.

It sure is great to be a bookie come election season, isn’t it?