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Monday, April 10, 2006
The Beauty of Bets: Wagers as Compensation for Professional Athletes

Professor Jeffrey Standen of Willamette University College of Law has posted on SSRN a fascinating article that will be published in a forthcoming issue of the Willamette Law Review. The article is entitled "The Beauty of Bets: Wagers as Compensation for Professional Athletes." It may be downloaded at this link (the link goes to the abstract, and you can download the article for free through "Document Delivery" -- all you will need is an SSRN account, which is free). The article examines athletes betting on games and it concludes that such betting is a good thing.

Here is the article's abstract:
Professional and amateur leagues prohibit athletic participants from wagering on the outcome of the games in which they play. Most also prohibit wagers on any aspect of the sport; some even prohibit wagers on any sporting contest. At the same time, these leagues typically allow teams to compensate players based on individual performance outcomes and team victories and championships. Certain non-league tournament sports, particularly professional golf, even allow players to bet on pre-tournament practice contests.

This paper outlines the advantages of allowing athletes to bet on their games. Betting aligns player incentives with team incentives, encourages team-oriented play, helps sustain fan interest, lessens the nominal costs of owning teams or ticket purchases, and reduces the likelihood that players will conspire to throw games or beat the point spread. In light of this advantages of betting, the widespread prohibition on participant gambling seems problematic.
And here is an excert from the article's introduction that rings so true:
Some fans also appear to enjoy financial aspects relevant to professional sports as much as they might enjoy the sport itself. For instance, some fans enjoy playing general manager, filling web sites with their analyses of how potential player trades or free agent acquisitions would comport with salary cap limitations. Likewise, many fans consume their taste for sports fantasy leagues, gambling on fictitious games made up of fictitious teams populated by real players playing in real games. Finally, some fans consume their sports viewing enjoying through gambling directly on the games themselves. Presumably, these fans’ taste for “financial sports,” such as fantasy trades, fantasy leagues, or wagers, shifts these spectators’ attention away from the pure competition of the sports themselves. Despite this possibility, the American professional leagues appear to tolerate side action by fans and fantasy league participants, and indeed welcome the added attention these financial fans bring to their players and leagues. The sports leagues produce the product that these financial sports fans consume; the leagues, however, do not capture the gains from their product.
Jeff delivered an excellent talk on this article at the Future of Sports Law symposium held at Willamette Law last month.

This is fascinating topic. Should athletes bet on games? And is it a good thing for the parties involved?


So long as such wagers are disclosed, allowing monitoring for abuse, I see no reason in principle why they would not have the same beneficial incentivizing effects that options have in the executive compensation concept. Professor Standen's paper is enjoyable and thought provoking! I would argue that if such a plan were adopted, the benefits would need to be retroactively extended to Pete Rose in the form of an invitation to Cooperstown.

Blogger Geoffrey Rapp -- 4/10/2006 6:40 PM  

Very interesting concept.

I have not had the opportunity to read this as yet. However, some questions come to mind such as: What is abuse(Betting to lose in a game you are playing in)? Others placing bets on your team to lose and then offering you a kick-back?

This idea raises some of the same issues the use of illegal substances does, such as the right to put into your body what you desire, are surgeries, physical training, etc. ok and the entire question: Why are some substances legal and some are not? The list of questions goes on and the civil rights of athlete's is at stake.

Anonymous Richard Mock -- 4/10/2006 9:59 PM  

Richard--WHAT "civil right of athletes" is there to gamble? NONE.

My worry is that the first time any player, team, coach, executive, or neutral official is seen gambling on their own sport to the point of affecting the games (due to large losses by gambling), the sport would lose all credibility (do I need to point out the 1919 Black Sox scandal as an example?). I know someone would say the same about steroids and baseball; I agree.

If you allow gambling by players on sports--DON"T ALLOW THEM TO BET ON THEIR OWN SPORT. Period. (I'm NOT talking here about the bet of, say, a $100 bill or a dinner on the Super Bowl result; try something where the amounts add up to a significant percentage of the player's income or contract.)
I do agree to some extent with Mr. Rapp's comments; since Rose's effective ban from the HOF was retroactive (or ex post facto), this would have to be the same.

Anonymous Anonymous -- 4/10/2006 10:22 PM  


Individuals have the right (civil right) to spend their money as they see fit (to gamble).

Baseball is credible today. The Black Sox players, Pete Rose and other individuals are not.

Players should not be allowed to bet on games in which they participate. How is this controlled?

If player gambling is not allowed in games in which they play do we not create the possibility of an "underground player gambling" enterprise similar to the one we now have in the "war on drugs"? We may have this now.

Pete Rose should be considered for the Hall of Fame based on his performance as a a player and not what happened after his playing days were over.

Anonymous Richard Mock -- 4/10/2006 11:27 PM  

I knows its trite, but I believe in the old saying that "It's not whether you win or lose, it's how you play the game." Personally, if mere internal motivating factors don't push an athlete to succeed, I don't want to watch him play.

Ideally, money shouldn't even enter the equation when determining an athletes' amount of determination and drive. Sadly, it all too often does, which creates an environment where the player with the most money on the line plays a little harder to protect his investment. We should work to lessen this effect, instead of enhance it.

This is not so much a "legal" opinion as a gut reaction. Make of it what you will.

Anonymous Anonymous -- 4/11/2006 12:06 AM  

One positive outcome would be the elimination of "garbage time." It's an interesting concept, but in practical terms I don't think it would work. Players would be incentivized to play to "the line" not to win. The increased likelihood of players and coaches (and owners) interacting with legal and illegal gambling entities is also troubling. Just think of the trouble Wayne Gretsky's wife would have gotten herself into.

Anonymous Bill -- 4/11/2006 8:14 AM  

I would agree with Bill in terms of playing to the line, but garbage time would not necessarily improve if one team's incentive was to not score in playing the line. Unless "lines" are eliminated, teams will play for the line that often does not translate into a win or loss. If you spend some time in sports books during March Madness, the importance of said lines are palpable.

Blogger Tim Epstein -- 4/11/2006 1:14 PM  

I am surprised no one mentioned horse racing and the parallels it can draw to such a discussion. There, not only is betting encouraged, everyone - from owners to jockeys (except horses) is almost expected to put some dough down.

Blogger DCThrowback -- 4/12/2006 1:23 PM  

It would only work with individual sports, in which players are already incentivized to win the purse.

For team sports, how do you value a role player? Who decides who gets into the game? If the pitcher less bet on the game than the catcher, who decides which pitches would be thrown.

Anonymous Anonymous -- 4/12/2006 1:37 PM  

headache smith didn't gamble to throw games.....he only shifted the point spread. Invariably an athlete will attempt to manipulate the points and his team will lose because the athlete is NOT in complete control of the line(he has teammates and competitors). this could only work for "straight bets", where their is no points spread. interesting otherwise!!!

Anonymous Anonymous -- 4/12/2006 2:38 PM  

it could, conceivabley, be feaseible in a "point spread system" so long as the player bet on his team to cover. however, i don't like the possible results. what if MJ's championship winning shot over Craig Elo never happened b/c some role player had some cash on the game and he thinks "its my money so its my shot". No dice.

Anonymous Anonymous -- 4/12/2006 2:47 PM  

I think such a system would work 99% of the time with no problems. However, the remaining 1% of games would create disaster.

The assumption is that the individual's motivation of financial gain parallel's the team's motivation to win the game. This would usually, but not always, be the case.

For instance, a quarterback who bet on his underdog team to cover the spread would face a definite conflict when he's leading a game-ending drive for the win (but already having covered the spread). Would he be so quick to try the desperation pass for the winning touchdown, knowing that if it's intercepted, the other team could end up covering the spread?

A baseball manager would face an insurmountable conflict if he's wagered on his team to win tomorrow's game, but in today's game he's faced with the choice of wearing out his bullpen in a close game.

Would the proposed rules allow betting on individual statistics in a team sport? There would be a definite conflict between the individual and team goals if a point guard has wagered on himself scoring at least a certain number of points. Same with a quarterback betting on his passer rating when his team would be better off emphasizing the running game.

Blogger GaryLippow -- 4/12/2006 4:35 PM  

I believe this would not work. Crimes like gambling and prostitution are illegal for a reason. It is not taxes, it is because it leads to violence. Now, some can be regulated, ala Las Vegas, but the structure behind this is too bare and there is too much room for error.
Players in team sports may not give their all, may not want to risk injuries when up big, coaches will never go for it because it forces them to change their coaching style. This would create so much chaos on a team that there would be less chemistry than a Terell Owens filled team. There is no way you can get a team full of players who will go for this, let alone a league.
As in real life gambling, there will be too many confrotational problems and questioning of desire, and too many trade demands.

Anonymous tommie -- 4/12/2006 6:36 PM  

as a former college hoops player, i love it.... with some quantifiers...oh, and college players should be allowed to bet too, since they don't get paid (and don't give me that "you get an education" crap.)

1) if the other team is favored, you must bet "to win" and cannot bet the spread.
2) if your team is favored, you can bet the spread only.
3) all gambling is public, and all winnings reported to the IRS, and all wagers are sin-taxed with the funding going to education & gambling education
4) limit the amount allowable on a bet to X amount of a player's salary
5) all players who win must donate X percentage of the winnings to a charity
6) all the previous weeks' bets must be published in the daily paper, so fans/gamblers have an idea what the players perception of the game and the line are.

makes for interesting food for thought.. i'm sure i could come up with more thoughts on this with more time... i'll tell you one good sidenote, it makes a hell of a lot more sense for matt hasselbeck and big ben to publicly make a bet on the SB than the mayors of the two towns.

Oh... but that of course reminds me-- officials should not be allowed to bet--- nor live in the town of either team in the SB, unlike this last one. Sorry... still pissed Hawk fan, and i digress.

Anonymous Anonymous -- 4/13/2006 3:31 AM  

crud... i forgot to mention to tommie-- when you said "Crimes like gambling and prostitution are illegal for a reason. It is not taxes, it is because it leads to violence" do you have any evidence of this?

I seem to recall very little violence in the streets of the Red Light Districts in many major European cities. (I never participated, but as a curious American, had to see the "girl in the window" display format.)

Tommie, all things are illegal because it benefited somebody somewhere to make it so. Right or wrong, ethical or unethical it is irrelevant.

Now, as for coaches being put in quandaries--- i don't see it. Coaches are put in quandaries anyway, everyday. I've stood in front of a student body and said we were going to beat our crosstown rival. I coached the game that way... if i wanted to take my measly stipend and multiply it--- why shouldn't i be able to?

and i've been part of the baseball staff deciding if we should play our CS Fullerton signed pitcher in the CIF Quarters/Finals or only the Semis. We chose quarters in a game we could have won anyway, and we lost in the Semis. These are decisions coaches make... money... would only make it sweeter.

finally, i seriously doubt anyone would propose this with individual statistics in mind-- only "team betting." Hell, it could help team chemistry just as likely as hurt it. And those role-players that don't make a lot-- they would be more likely to support the star late in the game if they get an extra 5G's if he hits that FT.

chemistry is all random and variable... not a not a known factor in either direction.

Anonymous Anonymous -- 4/13/2006 3:44 AM  

Several crimes that many people believe to be small are illegal because they lead to other crimes, more serious crimes.
I do not have direct evidence on hand but I have had discussions with college professors and law professors on this. If you take prostitution that leads to violence and drugs. Gambling leads to violence and other crimes that stem from this, it is an addiction and many people cannot handle it.
It is an interesting study, which I heard was the main reason for statutes banning many crimes. If you think about it a lot of crimes stem to other crimes.

Anonymous tommie -- 4/13/2006 9:38 AM  

Good points on most criteria on March 13th post except numbers four and five. If a players is going to risk their money they should be able to decide how to spend their money, not the government.

Good point about politicans placing bets on "local" outcomes. I BET Ministers, Priests, Rabbis, etc. place a friendly wager from time to time.

Any more comments about the "girl in the window" experience. This is more interesting than the betting issue. Just kidding.

The so called "victimless crimes" and do they add to violence comment. I, too would like to see empirical evidence that supports this contention.

If a secondary individual commits a crime because they observe another (primary)
individual doing so does not make the original party responsible for the secondary individual commission of the crime. Individual responsibility (not to commit crimes)is needed here.

Anonymous Richard Mock -- 4/13/2006 11:02 PM  

"Several crimes that many people believe to be small are illegal because they lead to other crimes, more serious crimes."

Hmm... eating an appetizer leads to eating more food in a main course. Things lead to other things... but... many crimes are only crimes in one local governance but not another--drinking AND driving ages both vary from nation to nation, and (not sure if they still do) from state to state.

"I do not have direct evidence on hand but I have had discussions with college professors and law professors on this."
Well, are you taking the "they are law professors so they must be correct" stance? If so, question, my friend, question.

"If you take prostitution that leads to violence and drugs."
Slippery slope. very slippery. Sometimes it simply leads to orgasms and companionship for a set period of time with money trading hands, no more no less. In fact, often "Escorts" which are essentially higher paid prostitutes work exclusively with rich and powerful clientele. So does the prostitution lead to violence and drugs, or does it lead to tax evasion and money laundering?!? Or does it lead to a college education for a retired escort?
hmmm... not so black and white...

"Gambling leads to violence and other crimes that stem from this, it is an addiction and many people cannot handle it."
So is gluttony, so is masterbation. Why don't we make laws to outlaw these forms of addiction? (of course i'm sure some states have them for the latter example.)

Why don't we outlaw drinking? Leads to more violence than pot, and is more physiologically addictive...

"If you think about it a lot of crimes stem to other crimes."

Not true. Criminals will commit a lot of crimes. Regardless of how many laws are enacted, the same group of people will often do pretty much anything. In education we have the 90/10 factor. 90% of the problems are caused by 10% of the students. You can make more or fewer rules, and it is irrelevant-- the same core group will be causing the disruptions.

As for gambling-- I've gambled many many times in my life, and unlike most gamblers I'll admit that I've lost more than I've won. But man, those wins ARE SWEET!!! Did my gambling lead to me committing more crimes ('cause let's be honest, even the "office March Madness pool" is illegal. Ask Nuehiesel.)

Richard, you are probably right about the governmental aspects of my points... i threw them together rather quickly, but as you may ascertain from my posts i'm pretty much a libertarian at heart. well, a socialist libertarion, if that is possible....

Anonymous Tyler -- 4/14/2006 6:08 AM  

Actually some crimes do lead to other crimes. How can you say that some drug attics, who cannot afford to buy the drugs, do not start prostituting for drugs, not even money. If prostitution was legal, there would be more people resorting to it to make money.
Several crimes became illegal because they led to violence. Many of it stems from the history of making these laws. When they did, they had in mind that violence would stem from these acts, like loan sharking and gambling. When people do not pay, there become threats of violence. Prostitution has always led to drug use. Not in all situations, but in many.
Saying prostitution leads to a college education is obsurd. I do not know any prostitutes, however I am willing to say if I cross town to the Hunts Point Section of the Bronx ( a well known area filled with prostitutes) they are not doing it for a college education.
Also, why should we bend rules and break existing laws for athletes? If anyone is allowed to gamble it should not be atheltes. There will be too much confrontation there.

Anonymous tommie -- 4/15/2006 10:40 AM  


Yes, some crimes do lead to other crimes. When these crimes become violent then punish the violent crime. Let's look for better ways to deal with the "victimless" crime (drug use, prostitution, etc.)

What evidence do you have that if prostitution were legal more people would turn to it? Some prostitutes do go to college and some even complete college.

The real point of your post is the last where you say that athlete's should not be allowed to gamble.

How do you deal with surrogate or proxy gamblers and athlete's as "second class" citizen's (denied the right to gamble).

What other rights would you take away?

Anonymous Richard Mock -- 4/15/2006 11:39 AM  

Atheltes cannot be given a legal right to gamble without giving every other citizen the same right to gamble. They are not second class citizens, in several aspects of life they are 1st class and everyone else is second class. There is no reason they should be given above the law status in anything.
Following through with something like this would bring chaos. There is too much potential for things to progess negatively.
What good comes out of gambling? For some people that can handle it, it may be fun. For the people I know, especially in college I have seen more young people get in trouble by betting money they do not have and older people ruinging their lives along wiht their families. These are not good examples to set for young America. You do not want to send the message that gambling is good to people. While some people can handle it, this would be a terribly bad idea.

Anonymous tommie -- 4/15/2006 12:53 PM  


I respect your desire to "help' others by imposing restrictions and enforcing laws that enter the area of "personal" decision making.

In my opinion I would leave these decisions to the individual, as long as they do not harm others.

Your position is yours and mine is mine.

Let's agree to discuss other aspects and issues in the sports world and not get into a "shouting match" that will not change either of ours minds.

Anonymous Richard Mock -- 4/15/2006 1:27 PM  

"Actually some crimes do lead to other crimes."
Well, yes. Just like some eating leads to more eating... but i ask you to see the forest, not the trees....

"How can you say that some drug attics, who cannot afford to buy the drugs, do not start prostituting for drugs, not even money. If prostitution was legal, there would be more people resorting to it to make money."

Probably not. Most people would not want to degrade themselves to become prostitutes; but that truly isn't the point. You are saying that drug addiction leads to crime. But, truthfully, since rich people can afford rehab-- you are saying poor drug addicts commit crime. So, instead of cutting the weed (drug use) out of the ground, you will snip the top of it (by making certain things/actions illegal) and then call the case closed and if someone does something against the cultural norm they are then deviants and wrong and committing crimes.

Part of the reason drug use does not lead to (very much) prostitution/theft in places across Europe is because of free methodone clinics, free needle drops, etc. They try to cure or at least placate the problem before it becomes a deeper issue.... here, you are choosing a simplistic and unrealistic slippery slope of logic.

And also, when they have free methadone, the people may still be pick pockets and thieves, but is that because of drug use or because they have a moral comnposition that makes them more likely to be out for theirs and not care about, say, a rich american tourist who they know has more money than they've ever seen.

"Several crimes became illegal because they led to violence. Many of it stems from the history of making these laws."
Or they led to the right/wrong people getting/not getting a piece of the pie, and being bitter for it, and creating rules so that if they couldn't get a piece, nobody could.

What "history," by the way? And of course we all know who writes history-- the winners. And history is ALWAYS proven right, correct and judicious, isn't it, Tommy?

"When they did, they had in mind that violence would stem from these acts, like loan sharking and gambling. When people do not pay, there become threats of violence."

So Tommy, what is the difference between a loan shark and "Check Into Cash" or "The Money Tree" or any other strip mall pre-payday loan operation. They charge an inordinately high interest rate taking advantage of a poorer and/or less intelligent section of the population. I don't recall any of those places being in operation when I was a kid. Who funds them? Rich people who get richer off poor people. Perfectly legal, of course.

"Prostitution has always led to drug use. Not in all situations, but in many. Saying prostitution leads to a college education is obsurd."

Absurd, first.
But I was talking about escorts, not prostitutes like you see on "Hookers at the Point." I'm talking about the kind of girls that people who are rich and powerful and travel for their work like to hang out with if their wives are away. And I've known one, I went to school with her, and she just kind of moved up the ladder from stripper (in the "good" club) to escort. And it paid her VERY VERY well, and since it is illegal, it isn't taxed. How well? Try 1000K for a night of company---and she didn't always even sleep with them, more often didn't, actually. Sometimes they just wanted the company, or an attractive smart funny quick no ties attached date for a social gathering. In the 1600's she would have been known as a courtesan. She is retired now, went to college, bought a nice house and car and has plenty of money left over.

Is she the norm? I don't believe so. But to say that one crime leads to another crime is hogwash and a logical fallacy.

I do not know any prostitutes, however I am willing to say if I cross town to the Hunts Point Section of the Bronx ( a well known area filled with prostitutes) they are not doing it for a college education.

Probably not. And they probably are casualties of our successful "war on drugs" but that is the system we have created. In Europe (and Nevada, as I've learned on that HBO show) the prostitutes are tested frequently for AIDS/HIV. The girls you talk about are outside the law outside normal society, in a location where they probably wouldn't have much of an opportunity to do anything else-- if they had the skills/education/ability to do something else, don't you think they would?

I know many heavy drug users that conduct completely functionable lives and don't prostitute themselves. I know a couple degenerate gamblers that neither do drugs nor hook themselves. Okay, so I've only known one "prostitute" and she did drugs occasionally, but not more or less than any random college kid, i think.

"Also, why should we bend rules and break existing laws for athletes?"

Tommie-- if you change the law, it isn't bending or breaking rules, it is playing by a new set of rules. That is fundamental.

"If anyone is allowed to gamble it should not be atheltes. There will be too much confrontation there."

Confrontation? Who are they confronting? How about this, "If EVERYONE is allowed to gamble-- why shouldn't athletes?!??!

Anonymous Tyler -- 4/15/2006 1:48 PM  

First off, the theory of why some crimes were made illegal was told to me by a ciminologist/college professor/ex-NYPD 30 year veteren who has done studies on the field. I am not saying I agree with it 100 percent, but it does make sense. And we are talking when the laws were created, which was many years ago. Now we are able to have SOME structured and monitored operations of these illegal crimes.
There is a difference between an escort and a prostitute. The point is that some of these people who engage in criminal activities are bound to engage in other criminal activites. Just like many people refer to marijuana as harmless while others see it as a gateway drug.

In New York when Guliani was elected mayor he cleaned up the streets of NYC. His philosophy (one I agree with) is to rid the city of all the small petty crimes. He stopped the squeegee men from operating in NYC. He took the prostitutes off of the street. By taking care of small problems like that he cut down felonies by 5,000 per week. He turned NYC from a dirty and dangerous city back to one of the top tourism destinations for people all over the world. Now granted these people were already breaking law, police never enforced anything against these individuals, so essentialy while doing something illegal in a way they were not since nobody would enforce the laws.
Of course there are going to be people who only commit one crime. But even if it leads to a small percentage of people committing other crimes, that is a lot of different crimes being committed against a lot different people. And objection number one is to protect society. Think of how many people, innocent people, would suffer by a percentage as small as even 10 percent.
As for athletes and rights, I do not care who you are , everyone in this country that is a law abiding citizen should have the same rights. If you work for a private company or organization then they have every right to limit what they think is reasonably harmful.
Athletes gambling on sports is also similar to insider trading on the stock market. Think about how much "inside" information they are able to obtain. There can be a lot more correlation between atheltes gambling on sports and the stock market.

Anonymous tommie -- 4/15/2006 4:52 PM  

But one thing that both I and somebody earlier stated is that the athletes wagers should be openly and immediately viewable by the public. The public then is privy if not to the knowledge, at least to what the athlete that has the knowledge is comfortable with.

I would suggest the same legality and consistency by having every trade public as well... could be onerous, but it would help give people a better idea what the insiders think. Plus when a current CEO trades off shares, the regular joe would probably like to have that info public.

Your NY example is a good one, and go buy "The Tipping Point" by Malcolm Gladwell-- a worthy investment for any college student. Well worth the read. (And this is an English Teacher/Sociology Teacher telling you this.)

Also, I'm not saying your professors are wrong and I am correct... I'm saying that his experience has led him to what he sees as an obvious conclusion. My experience leads another direction. A person in Sweden would probably see it differently as well. We are a product of our society, as is our rationale. I've lived in WA state, Cali, and currently Denver, and have seen very different attitudes in all. Being a huge sport fan, I have also witnessed a unique perspective from Yankee fans as well-- as if it is their god given right to win all the time. I say it is a product of unfair resources and a lack of a salary cap.

I have never been to NY. I can't say I know NY any more than anyone who has seen a lot of TV and movies.

I'm certain your NY professor is a smart man... keep listening to him. But just don't-- and remember this is a teacher telling you this--- just don't always believe him! Find your own logic and reason. He would probably want you to do the same.

Unless he is an egocentric professor... i've had a couple that route as well. But true educators want you to come to your own logical conclusions-- not spout back to them what they already lectured. Students seems to fail to grasp that far too often.

Good luck Tommie, and enjoy college. It is the best times of your life.

Anonymous tyler -- 4/15/2006 6:47 PM  

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