The Volokh Conspiracy - The NBA Gambling Scandal:

In a New York Times op-ed piece today, Justin Wolfers, a very smart Wharton Business School professor, argues that legalization of a certain type of betting can reduce the risk of players or referees acting to affect betting outcomes. Wolfers' key assumption is that most gambling scandals involve point shaving but not throwing of games. That is, players take money to do something like miss a shot (or not take one) in the last few seconds when their team is behind by ten points and they are nine point underdogs, or the referee calls a foul on the nine-point favorite with a few seconds left, enabling the underdog to add two points and beat the spread. The solution to this problem is to legalize gambling but only on the question of which team will win the game. This type of bet, sometimes called a "moneyline" bet, gives the gambler who bets on the underdog favorable odds on the bet rather than "points," or a "spread." You can make such "odds" bets rather than "spread" bets in many places, although betting with a spread is much more common in basketball and football. (I believe that moneyline betting is the predominant approach for baseball).

Wolfers' suggestion is clever, and it just might work. Of course, off-shore bookies would still take spread bets, but if odds bets were legal and regulated, perhaps the market for spread bets wouldn't be very big. What is more interesting to me, however, is an implication that Wolfers does not address: if he is correct that nearly all gambling corruption involves only shaving points in a way that doesn't affect who wins, the public shouldn't be too concerned about the current NBA scandal. Sure, it isn't anything to be happy about if the corrupt referee was blowing the whistle (or not) at the end of games in an attempt to manipulate the final score. But this wouldn't fundamentally undermine the integrity of the competition for the vast majority of fans who care principally about whether their favorite team wins or loses. It undermines the integrity of the game for gamblers whose primary interest is whether their team beats the spread, but the NBA doesn't care about fairness to the gamblers. If my team is favored by six points and is up by five with ten seconds remaining, I don't care if the player with the ball throws up a final shot or just holds the ball and lets the time run out, or whether he's trying his best to make that last second shot or not. If Wolfers' tonic will cure the ailment, this itself is proof that the ailment itself isn't very bad.

The big question, then, is whether Wolfers' empirical proposition about the nature of sports corruption is correct. That is, when it happens, does it rarely affect who wins and who loses? The claim strikes me as unlikely. Even if it is true that players rarely are bribed to try to lose (rather than just shave a couple of points), or that crooked referees aren't trying to affect who wins (just the spread), any crooked activity before the last few seconds of a game could well affect the outcome. If we just had odds betting, gamblers might still try to bribe players to miss just a couple baskets or referees to ignore just a couple of fouls throughout the course of the game. This would be enough to give them a betting advantage.

	[Russell Korobkin, July 27, 2007 at 2:18pm] Trackbacks The NBA Gambling Scandal: In a New York Times op-ed piece today, Justin Wolfers, a very smart Wharton Business School professor, argues that legalization of a certain type of betting can reduce the risk of players or referees acting to affect betting outcomes. Wolfers' key assumption is that most gambling scandals involve point shaving but not throwing of games. That is, players take money to do something like miss a shot (or not take one) in the last few seconds when their team is behind by ten points and they are nine point underdogs, or the referee calls a foul on the nine-point favorite with a few seconds left, enabling the underdog to add two points and beat the spread. The solution to this problem is to legalize gambling but only on the question of which team will win the game. This type of bet, sometimes called a "moneyline" bet, gives the gambler who bets on the underdog favorable odds on the bet rather than "points," or a "spread." You can make such "odds" bets rather than "spread" bets in many places, although betting with a spread is much more common in basketball and football. (I believe that moneyline betting is the predominant approach for baseball). Wolfers' suggestion is clever, and it just might work. Of course, off-shore bookies would still take spread bets, but if odds bets were legal and regulated, perhaps the market for spread bets wouldn't be very big. What is more interesting to me, however, is an implication that Wolfers does not address: if he is correct that nearly all gambling corruption involves only shaving points in a way that doesn't affect who wins, the public shouldn't be too concerned about the current NBA scandal. Sure, it isn't anything to be happy about if the corrupt referee was blowing the whistle (or not) at the end of games in an attempt to manipulate the final score. But this wouldn't fundamentally undermine the integrity of the competition for the vast majority of fans who care principally about whether their favorite team wins or loses. It undermines the integrity of the game for gamblers whose primary interest is whether their team beats the spread, but the NBA doesn't care about fairness to the gamblers. If my team is favored by six points and is up by five with ten seconds remaining, I don't care if the player with the ball throws up a final shot or just holds the ball and lets the time run out, or whether he's trying his best to make that last second shot or not. If Wolfers' tonic will cure the ailment, this itself is proof that the ailment itself isn't very bad. The big question, then, is whether Wolfers' empirical proposition about the nature of sports corruption is correct. That is, when it happens, does it rarely affect who wins and who loses? The claim strikes me as unlikely. Even if it is true that players rarely are bribed to try to lose (rather than just shave a couple of points), or that crooked referees aren't trying to affect who wins (just the spread), any crooked activity before the last few seconds of a game could well affect the outcome. If we just had odds betting, gamblers might still try to bribe players to miss just a couple baskets or referees to ignore just a couple of fouls throughout the course of the game. This would be enough to give them a betting advantage.