Sports arbitrage - don't gamble on ‘get rich quick’ schemes

Simon Hampel · 28th Feb, 2009

From ASIC's Fido site: Sports arbitrage - Australian Securities and Investments Commission

In finance, 'arbitrage' is when you take advantage of a difference in price between two or more markets to achieve a small risk-free profit. 'Sports arbitrage' is when you gamble on random sporting events, taking the best odds on offer by different bookmakers, and covering all possible outcomes.

Warning: Sports arbitrage schemes are not financial products.Gambling systems are not investments.

Sports arbitrage is gambling

The operators of these schemes gamble on the outcome of sporting events on your behalf. Multiple wagers are placed on the same sporting events but with different bookmakers offering different odds so that money is won (supposedly) regardless of the outcome.

You usually have to pay an upfront fee or a 'licence fee' that could be thousands of dollars. Then you have to pay an additional investment amount, which they say they'll use to 'trade' with. The operators try to lure you in via professional websites and glossy brochures and by saying that your returns are 'guaranteed'. These operators usually spruik very high 'investment returns' as well, which is a strong sign that something is wrong.

The operators use investing jargon such as 'trading', 'arbitrage trading' and 'strategic investment'. They make it sound like an investment when in fact it's nothing more than gambling. In some cases there isn't even any gambling taking place and the operators are simply taking your money.

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Simon Hampel · 28th Feb, 2009

CA08-05 Sports Arbitrage ≠ safe financial investing don't gamble on this ‘get rich quick’ scheme! - Australian Securities and Investments Commission

ASIC is urging consumers to remain vigilant after a new form of ‘get rich quick’ scheme came to light.

According to ASIC’s Acting Executive Director of Consumer Protection, Ms Delia Rickard, a number of operators are cold-calling consumers to sell ‘Sports Arbitrage investment opportunities’ that promise impressive ‘returns’ of up to 56 per cent within six months. ASIC has received recent complaints from consumers in relation to 23 different schemes operating as ‘Sports Arbitrage investment opportunities’.

‘The operators of these schemes place wagers on various sports events on behalf of consumers. Wagers are placed on the same sports events but with different bookmakers offering different odds, so that money is won regardless of the outcome of the sports event’, she said.

‘These operators usually ask for an upfront fee or a ‘licence fee’ of up to several thousand dollars to join their scheme and an additional ‘investment amount’ which they say they will use to ‘trade’ with.

‘They then try to fool consumers by using terms such as ‘trading’, ‘arbitrage trading’ and ‘strategic investment’ so that consumers believe that the operators are not gambling with their money, but rather ‘trading’ it on their behalf.

‘In some cases, however, there is not even any gambling taking place and the money is simply being taken from consumers’, Ms Rickard said.

Consumers are usually told that regardless of what ‘trade’ is undertaken, the consumer cannot lose their money and the operator often offers a ‘guarantee’ to refund the money if a profit is not made within a certain timeframe. In other instances, the operator’s claim guaranteed returns could be generated.

ASIC has received complaints that these operators do not ultimately honour these guarantees, and in some instances, clients are unable to contact the company to enforce the guarantee and recoup their money.

Ms Rickard said that although ASIC had received recent complaints regarding sports arbitrage betting systems, these schemes do not involve the offer of financial products or services, and as such fall outside ASIC’s primary jurisdiction which is to regulate the provision of financial products and services to investors in Australian markets.

Consumers who have been caught up in this type of scam should report their concerns to the State Office of Fair Trading / Consumer Affairs (responsible for the regulation of sales offers or promotions about consumer goods and services in their particular State) and/or the State Police Service (responsible for the investigation of alleged fraud), as their respective jurisdictions more closely align with these types of complaints.

‘ASIC is aware of a number of websites and glossy brochures offering trading services in relation to ‘sports arbitrage’, said Ms Rickard.

‘We want to make it clear that we’re concerned that the language used may lead consumers to believe that this is a form of investment or trading. At best, it is in fact gambling. At worst, it may be a scam. We advise consumers to exercise a great deal of scepticism regarding anything labelled sports arbitrage.’

‘Consumers should also be aware that just because a business is trading as a registered company, or under a registered business name, it is not automatically legitimate. We recommend that consumers make diligent enquiries before investing their money, especially if the offer to invest comes out of the blue. When it comes to money and investments, the old saying that if it sounds too good to be true, it probably is, remains accurate and investors should be wary of investments offering returns that are unrealistic. If you cannot afford to lose the money, don’t invest,’ Ms Rickard added.

Sports arbitrage systems are gambling, not financial investments. Some of the sport arbitrage ‘schemes’ or trading programs that ASIC has been made aware of to date might not even be legitimate forms of gambling. Accordingly, ASIC has referred complaints it has received to state authorities.

ASIC recommends consumers consider obtaining advice from a licensed financial advisor prior to making investment decisions. Consumers should also be aware that it is a legal requirement for a person or company who is selling investments in genuine financial products to hold an Australian Financial Services Licence (AFSL) or to be an authorised representative of a licensee. Consumers can find out if someone holds a AFSL by doing a quick, free and easy check on FIDO.
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AsxBroker · 28th Feb, 2009

Hi Sim,

Very interesting.
I did meet one person who had bought some sports arbitraging software. He said he was making about 1% per bet. After reading the ASIC articles I am wondering how long it will go for and then stop?

Cheers,

Dan

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Sports arbitrage - don't gamble on ‘get rich quick’ schemes

Simon Hampel Founder Staff Member

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Sports arbitrage - don't gamble on ‘get rich quick’ schemes

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