Winning by losing: Bookmakers’ marketing tactic divides betting industry

By David Purdum, ESPN

In gambling parlance, it was a bad beat. Jon Rahm, leading the Memorial Tournament by six shots after the third round, was forced to withdraw after testing positive for COVID-19.

He was the betting favorite, paying 12-1, and would’ve been an odds-on favorite entering the final round. As the news of his withdrawal spread on Twitter, the sports betting community went into an uproar — but not because of the brutal beat.

One by one, around 8 p.m. on June 5, the biggest sportsbooks in the U.S. began handing out refunds to anyone who bet on Rahm.

Bad beat refunds, as they’re commonly called, are a marketing tactic that international sportsbooks have used successfully for decades. They’ve raised profiles of some bookmakers and helped sportsbooks gain notoriety when launching in new markets.

They work like this: bookmakers, smelling an opportunity for publicity, seize on a controversial outcome and refund losing bets on the event. The refunds are often paid in site credit and not available for immediate withdrawal.

“The PR value is way more than anything they could do,” Scott Ferguson, a veteran of the betting industry based in the United Kingdom, said. “It gets to both ends of the paper. It’s not for just the pure gamblers who see it. Everyone sees it.”

But not everyone likes what they see.

While commonplace in more mature markets, in the U.S., bad beat refunds, somewhat remarkably, irritate bettors, divide old-school bookmakers from the new breed and even prompt responsible gambling concerns and fears of future litigation. All because bookmakers have the nerve to essentially give bettors their money back.

Backlash on refunds

On the surface, it’s difficult to understand why any bettor would be upset with a bookmaker refunding a losing wager. Everyone likes money, after all. But when sportsbooks like FanDuel began promoting that they would give back any lost stakes on Rahm in the form of site credit, some bettors lashed out.

Professional bettors have been especially aggravated by the bad beat refunds as they’ve become more common in the U.S.

“I still think that it really comes down to fairness,” professional bettor Rufus Peabody said. “If people believe that someone else is being treated a different way than they are, then they will be upset. And I think that’s what operators aren’t thinking about, and it can create some negative consequences downstream.”

Peabody had money on Rahm to win the Memorial Tournament. None of his bets were placed with sportsbooks that chose to offer refunds, though. Talk about a bad beat.

Peabody, while disappointed, was able to shrug it off, mostly because he knows the sportsbooks he bets with offer higher limits, which is more important to him than a random refund of a losing bet. Still, Peabody acknowledges that watching bookmakers who have either limited him to meaningless amounts or cut him off altogether unleash a marketing blitz around refunds can be tilting.

“People don’t like paying taxes,” he said, “but if you pay all your taxes, what you really hate is if you see your neighbor not paying his taxes and getting away with it.”

There’s also a sense from professional bettors that paying out on losing wagers cheapens their trade, makes it feel gimmicky. Multiple serious bettors compared the refunds to “participation trophies.”

“There’s an American cultural aspect to it, bravado,” said Ed Miller, a Las Vegas-based sports bettor whose company Deck Prism offers live odds to sportsbooks. “[Professional bettors] play the game on a more serious level, and they want people to join them in that view. To me, that’s where a lot of the backlash comes from.”

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