The NFL Has a Gambling Problem

Source: NFL, ESPN. Baseball was my goal from a young age, but gambling had significantly few
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  1. I watch very little football and almost zero of the highlights. But on Sundays when I visit my parents there’s always a game on, so I watch. I like the game. Hell, I used to love the game, enough to even consider playing another season after getting a concussion at age 14. But I was unprepared at the start of this season for just how much has changed in the way the games are broadcast and what the advertising looks like.

    Yesterday I lost count of how many ads I saw for Caesars, Draft Kings, et al. When the Packers game went to halftime we put on the NFL Network and watched *highlights. As they roll through the previous games that day they get to the Sunday Night game and…the biggest graphic on the screen is the spread. Nobody said anything out loud about betting, but as they laid out what the two teams had to do to win the spread was simply there, a reminder that the only reason a fan from outside of those two respective cities would care about the game is the action they could get in on. Of course this has always been the case with these national broadcasts, but now the sotto voce implication of betting on the game has shifted to a bullhorn wielded by Peyton Manning in your living room.

    *Tangential: Those highlights. were…they were not being done by professionals. The broadcasters were legitimately bad. It was like listening to minor market sports talk radio. Growing up with ESPN in the 90’s skewed our sense of how easy it is to do that job. It is evidently very very hard to make it look easy.

  2. Don’t think the owners are ready at all Rusty
    When these critically important calls are being made by Part-Time workers( because you know Billionaire owners need to save costs) and massive sports betting is going on, well that’s an obvious narrative that seems likely to be really happening.

  3. FWIW, I too am shocked at the amount of advertising for sports gambling.
    Used to be verboten, now everywhere

  4. Warning: Following comment is tangential, possibly irrelevant, not particularly original – but all I’ve got.

    My husband counsels people with actual opioid addictions and he sez: Sports gambling is the new opioid crisis.

    Send in the clowns.

  5. Avatar for rguinn rguinn says:

    Gambling everywhere and on everything is becoming our new national pastime. The speculation layer is real. I don’t think your comment is tangential, irrelevant or unoriginal. It’s a useful observation - thanks!

  6. No disagreement with your detailed points Rusty, and your point differential curves were very interesting, but a couple points to add some broader context.

    1. Don’t have dispositive evidence readily at hand, but I think your claim that conventional wisdom hadn’t recognized the NFL’s huge dependence on gambling is wrong. Local newspaper have been publishing the NFL point spreads that fueled office pools forever. Hard core gamblers could wager on other sports but NFL wagering was a mass-market activity. Which inflated TV contract values because the NFL was the only sport where national audience cared about the result of largely meaningless out-of-market games. It wasn’t a highlight of media coverage because everyone who cared already understood what was going on. Just as the idea that corporate lobbying money influences legislation wasn’t breaking news. Football gambling (like corporate lobbying) was just part of the water we were all swimming in.
    2. We are in the wild exuberance/bubble phase of online gambling growth. Every company that ever thought it could become a big player in this industry is pumping millions into aggressive marketing in case this is a winner-take-all market where one company could realize mega-billions in equity value. None of know what things will look like in five years, but this flood of spending by online startups explains the big increase in gambling mentions in the media.
    3. The biggest driver of the opening of the online gambling floodgates is the coming total collapse of the professional sports revenue model. The huge inflation in the equity value of sports teams (and the smaller but still impressive growth in player salaries) was driven by rights payments from broadcast partners (RSNs, ESPN/TSN/Sportsnet, traditional TV networks) who thought that the value of sports to advertisers would increase infinitely, and that those networks could use artificial market power to force people who don’t watch sports to massively subsidize sports programming (e.g. every cable viewer was paying for ESPN although only 20% watched it). As everyone knows, the huge increase in cable TV fees have crippled demand and led to cord-cutting, There never was any way the sports leagues could maintain their revenue flows if fees were only collected from the viewers who actually cared about specific sports. With legitimately sustainable, subsidy-free user fees between 15% and 50% of MLB, NBA, and NHL franchises would soon be bankrupt and all team values would plummet overnight. The online gambling bubble is a desperation move to delay this collapse a bit.
    4. Given this confluence of big corporate interests (online gambling investors hoping to get rich, sports teams owners desperate to maintain unsustainable cashflow), we should take WhiteRaven’s opioid warning very seriously.
    5. But this points to the opposite of what I took to be Rusty’s main conclusion. The NFL is the least vulnerable league, not the most. The NHL and NBA are hugely dependent on RSN fees that are about to collapse. MLB is somewhere in between. They need to do everything possible to rapidly increase the level of gambling on their sports and to keep the online companies happy to pay for commercials and tie-ins. All of the high-level incentives suggest oversight will fail and corners will get cut. The NFL has much greater equity values to defend, has understood for decades that those values depend on the perception that games can’t be thrown, can survive fine without sucking up to online interests in the near term, and has much greater experience/expertise monitoring these types of corruption threats. NFL games get scrutiny from tens of millions more people than other sports, and any problems (real or imagined) would engender much broader public outrage. If you wanted to organize a major criminal gambling conspiracy would you try to get refs to influence the outcome of Packers-Cowboys type games, or would you focus on Orioles-Pirates and Blue Jackets-Ducks type games?
    6. Not a gambling point, but the current Chicago Blackhawks sexual abuse debacle starkly illustrates the ineffective oversight in many pro sports of similarly critical (if not existential) issues. It also illustrates how seemingly powerful corporate interests can myopically ignore major changes in conventional wisdom in order to protect self-serving views as to how the world ought to work.
    7. I would personally enjoy a more exhaustive discussions of Rusty’s very reasonable analysis of ref leverage, even if it is not the biggest single driver of potential gambling problems. His points about the inherent structural problems with the rules in each sport are important. But I’d look closer at league efforts at ref quality control—ensuring all refs are interpreting the rules as intended, grading ref performance against agreed standards, providing feedback, and weeding Angel Hernandez performers out. None of the leagues are especially good at this, as none have ever prioritized spending money on these issues, and each league has major areas where they can’t agree as to exactly what rules they want enforced. The idea that MLB has much clearer rules (on paper) than the NFL may not really be true. There’s nothing in the rules that an objective outsider could use to determine the difference between a check swing and a full swing, and thus no way to judge whether umpire calls are “correct”. I’ve seen several good articles digging into attempts to use laser-guided technology to call balls and strikes in the low minors. The problem isn’t technology, its that umpires have never called the rule book strike zone, and no one can deal with the changes when robots try to call it. And all of these create leverage that could be corruptly exploited. In the NHL and NBA refs are to some extent managing the overall flow and competitiveness of a game, and an anal lawyers’ interpretation of the rule book would render a lot of games totally unwatchable. But this obviously creates a lot of other messy problems.
  7. Avatar for rguinn rguinn says:

    Thanks, Hubert. Really great thoughts! My own thoughts follow based on the order of your comment:

    1. I’m not sure where you get the impression that I believe people didn’t realize the NFL’s dependence on gambling. I think I’m pretty explicit in saying that they did - or at least I tried to be! The point I’m trying to make is that common knowledge is different from widespread private knowledge. I think the rise of fantasy football was a long-time crutch for the maintenance of the belief about the beliefs of others that the NFL was about something other than gambling, as was the NFL’s long-time aversion to permitting open association with explicit gambling.
    2. Absolutely plays a big role.
    3. I’m not sure about the relative role being played by different things here. I agree with you that this is a part of it. I would be more confident, however, if it weren’t for your Point #2, which correctly identifies that this is part of a widespread phenomenon for online gambling specifically, and our broader point here at ET that the speculation layer is growing EVERYWHERE, not just in online gambling. I’m not sure how those things would fall out of a principal components analysis, but they’re all part of this story.
    4. I agree. I think it’s a very serious point.
    5. I think you’re attributing a point to me that I didn’t actually make. I don’t think I ever argue that NFL revenues will fall as a result of this, or that equity values will. I’m honestly not sure, especially in the short run. I DO think, as you argue in part, that the NFL has the most narrative control, the most media influence, and the most brand equity that would stand to lose the most if there were a scandal. But remember, my point is not the narrow point that a scandal is most likely in the NFL, but that this arrangement of narratives makes it perhaps the most likely that fans / media will increasingly suspect and promote without it being immediately dismissed that THE game or A game just might be corrupt. That’s what I don’t think the NFL is ready for. No sport is ready for an actual game-fixing scandal.
    6. Agree.
    7. I agree that it’s messy, and I’d LOVE for someone to explore this more deeply (a 3-foot dig is probably all that falls within our purview). I absolutely think all major sports have a “game flow” common knowledge effect on how they are called, as well. But it would take a lot to convince me that any sport fundamentally approached the NFL’s potential variability driven by officiating actions. I am happy to remain open-minded! (And for what it’s worth, when this note goes out on email and someone writes about soccer, I absolutely put the officiating variable there - especially in extreme situations - in a comparable class)
  8. you’ve got that right

  9. I unequivocally subscribe to the big picture thesis of this article, which is: the NFL’s wholehearted embrace of gambling will lead to unintended consequences that threaten its viability.

    I also concur with the premise that the referees are the vulnerable target were someone to devise a game-fixing scheme, given their outsize influence on the outcomes (as Rusty demonstrated) and their meager financial compensation. This is easily remedied, however, simply by increasing their pay (and potentially by adding an incentive comp plan). Closing this loophole would not even cost that much - maybe $1m per team. Yes owners are cheap, and often foolishly so, to the point of self-harm, but there are other constituents in the value chain here - the NFLPA, the broadcast partners - who could be made to chip in.

    At the end of the day, there is simply not that much money to be made in game fixing - not enough to tempt the players, or at least anybody good enough to be worth bribing. (The days of Arnold Rothstein possessing the power and wealth and Shoeless Joe needing some pocket cash are long gone. Today the eighth guy off the Miami Heat bench makes more than any gangster.). Legalized sports gambling is highly regulated. There is KYC compliance requirements and the casinos are highly attuned to irregular wagering patterns. The private (illegal) gambling market is small. No neighborhood bookie is taking $1m action on a single game. So the cost of paying the refs enough to blunt their financial motivation to fix games is by no means very expensive. If someone can pay Tony Romo $17m to blabber; they can find a similar amount to supplement the officials’ pool for guys who actually matter to the game.

    Tangential: officiating in the NFL DOES suck. Not in the sense that the calls are bad or blown; but in the way officials so frequently and inelegantly intervene in the game. They are full on participants. And nobody wants to see it. As an entertainment product, pro football is significantly harmed by referee interference. If I were an owner or member of the competition committee, my top priority would be putting that genie back in the bottle.

  10. Avatar for rguinn rguinn says:

    Great post, Michael. Since I think the risk lies as much or more in narrative land as it does in reality land, I don’t know that appropriately paid and employed officials completely solves the issue, but it would certainly make me feel a LOT better as a fan.

  11. The same has happened in the UK with Football (soccer to you guy across the pond), Cricket and to a lesser extent, Rugby Union.

    No broadcast of a live sports game is without the ads for online betting companies. In the case of Football and Rugby these are before, at half time and after. Remember that over here we don’t break the game for the convenience of the advertisers. With cricket the ads come when there is a change of batter, or a drinks break etc. always at natural gaps in play.

    There have been several high profile cricket betting scandals with players found guilty of being influenced by betting syndicates. When you can bet on when the first wicket will fall, or if a bowler will ball a “No ball” in a specific over, you can see the opportunity.

    A few years ago a few football match were called off because the floodlights failed in the second half. An investigation found that there was a huge amount of money bet on the team which was losing at the time. The main gamblers were Asian betting syndicates. See this article, point 3. The Joy of Six: football abandonments | Soccer | The Guardian

    And now to the pinnacle of team sports, Rugby Union. There is thing in Rugby called scrums, where 8 member of each team attempt to push each other off the ball as a way of restarting the game. Go watch a few. Even experienced commentators, former players, can be baffled at some of the penalty decisions at scrum time. The opportunity for influencing the outcome of the match is quite large, unless one side is really dominant in the scrum. Luckily in Rugby we have a TMO (Television Match Official) who is watching the game on the broadcasters feeds and can call the referee’s attention to foul play if the ;latter missed something. But at scrum time…

  12. Maybe I’m way too pessimistic.
    I honestly think what’s almost inevitable is that credible evidence of fixing will surface, calling the whole artifice of sports and payouts into question. Like credible evidence of collusion, chicanery and corruption in virtually every other arena of politics (many), business (Enron, Facebook), bureaucracy (alphabet agencies and privacy), high finance (bailouts), medicine and pharma (?) - need I go on? - it’ll be another chip at the facade that is current culture.

    I think this one will be different. Like Pete Rose, a wide-scale scandal here directs right at the Joe Six-pack big middle of culture, and could be a final nail in the confidence coffin. What happens when there’s virtually nowhere to turn to find any stability?

  13. The NFL has done a superlative job of bringing the game and the feel of the game to its viewing public. It also has down time between each play that is extended when penalties are called. In a greatly oversimplified view these two factors combine to (a) invite scrutiny and (b) promote discussion (c) allow beverage replenishment.

    Towards the speculative nature of everything has an Intrade type venture surfaced?

  14. It already happened in the NBA years ago. People still gamble, even more than they did back then. Gamblers love gambling. It’s what they do.

    I can see it actually creating an entirely new speculation layer ala the Keynsian Beauty Contest. When you’re placing a bet on the Raiders it’s not because you think that’s who will win, but it’s who you think the fixers want to win. Hell, this could be more fun than actually betting based on the metrics of the teams and instead focusing on the direction that the money is flowing. All the public money is going heavy into KC -3 1/2 but the sharps are quietly piling into the Pats? Take the Pats and the points.

  15. “… who you think the fixers want to win. Hell, this could be more fun than actually betting based on the metrics of the teams and instead focusing on the direction that the money is flowing. All the public money is going heavy into KC -3 1/2 but the sharps are quietly piling into the Pats?”

    Wasn’t this the reality of meme stock play? It’s like an onion of narrative derivatives.

    My concern/interest is in the tipping point where the widespread public narrative and collective attitude is that everything is hopelessly corrupted and untrustworthy.

  16. We’re a very industrious people, Ed. If there’s something upon which we can cast speculation we will never give up hope.

  17. The arbitrary enforcement of the rules is what makes the game so American. We’ve got thousands of pages of laws and regulations that would absolutely cripple society if enforced, but we all generally ignore them most of the time and follow our sense of what the rules should be.

    I ran right into this firsthand during some work recently. A certain overseas country adopted a section of our regulations word for word, but didn’t adopt all the waiver processes, workarounds, and public use exemptions. End result? Impossible to do business within the rule set that they literally copied from us.

  18. Avatar for rguinn rguinn says:

    Both true and endlessly infuriating to me personally! Enough so that I actually wrote briefly about this a couple of years ago.

    I do think, however, that the nature of football and how it is played makes this more true than it is for almost any other sport. As others have pointed out, rugby, Aussie rules and soccer are possibly in the same neighborhood.

  19. Avatar for Zenzei Zenzei says:

    An arbitrary set of rules and regulations is what makes day care, particularly for infants, an impossible business in the US. The strict model required to comply with state regulations (which touch every aspect of the care operation) raises costs to the point where margins collapse if you don’t raise prices or revenue collapses if you do.

    This is what happens when the Mandarin class becomes a thing unto itself.

    (Not intending to thread drift - just pointing out that the NFL refs and the gambling consequences are a subclass of a more meta - regulations and unintended consequences archetype.)

  20. I know we’re done with the trivial stuff like sports gambling, but this popped up in my feed yesterday and I found it interesting.

    The networks that carry NFL games cash checks from Caesars, Draft Kings, MGM, et al. The NFL functionally endorses gambling in a sport where the reffing can impact the outcome in an outsized way. But the moment a player wants to get in on the grift? No no no you can’t do that, it will hurt the image of the game and spoil the purity of sports gambling. A full season suspension for placing bets–on his own team to win–in a game he wasn’t playing in? Very bad. He should have stuck to the League-approved violations, like beating up a woman, or beating up a second, unrelated woman.

  21. My fickle attention was redrawn to this topic this morning, thinking of the outsized effect of last Sunday’s call(s).

    Setting aside the impact of widespread online sports betting on personal finance, debt, marriage and other relationships, and potential damage to impressionable teens, now that we have a little data would it be possible to suss out some statistical ‘special cause’ variation in game outcomes since the implementation of betting?

    Mark me as interested but not competent in the effort. And apologies in advance for re-booting this thread. :face_with_peeking_eye:

  22. Avatar for rguinn rguinn says:

    I think that one could solve some share of the problem by simply identifying Penalty EPA over time. I strongly suspect this dataset already exists. The problem with that, of course, is that it can’t handle uncalled penalties in a sea of randomness, which lies at the center of why I think this is such a big can of worms: That holding call at the end of the game on Sunday was absolutely within the confines of the rule and absolutely of a magnitude that didn’t get called in numerous other instances in the game and in general.

    That randomness is why, short of literally finding refs betting or getting paid off, this risk doesn’t go away and the dominant role of this conversation in NFL discussions doesn’t go away, so long as betting is around.

  23. The NFL continues to provide me with a reason to resurrect this thread.

    So a six game suspension for gambling on non-NFL games is now the new standard. The reason seems to be it was done from a ‘team facility’, but isn’t the whole pitch of Draft Kings et al that you can gamble from your phone anywhere, any time? If these guys had waited until they were in their driveways would it have been kosher? What an absolute mess the NFL has made of themselves.

  24. An utterly bizarre little finger trap they’ve gotten themselves into. It’ll be interesting to see how the NFLPA decides to appeal this, and what arguments the NFL feels compelled to trot out other than “rules is rules.”

  25. That call, IMO, was “the perfect crime” for a part-time employee to make $millions off of some person’s or syndicate’s $Billion bet

  26. Now you’ve got a throwaway account on Reddit claiming to be a personal friend of Will Levis - previously a +4000 to +6000 long-shot to be the first overall pick at most sportsbooks - also claiming that he was telling friends and family that the Panthers were drafting him at #1. NFL Draft books are pretty thin, but it pushed Levis at #1 to as low as +400 overnight. An insane odds shift that has largely retraced.

    The derivative economies of professional sports are astounding, and the NFL just seems to keep trying (or accidentally) to find more and more of them.

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