It appears that the advent of AI assisted products in sportsbooks could be a game-changing step forward for risk management. Does this mean margin volatility is a thing from the past? Experts say not quite yet. The product is still in development.
There are few buzzwords more popular than “AI assisted”. “AI-assisted” is one of those buzz phrases that can’t be beat.
Artificial intelligence in betting and gaming may not elicit the same apocalyptic images as those AI critics elsewhere. It still seems to have the potential of radically changing business practices.
The two largest sports data collection organizations are the ones leading the way, largely due to the importance of data for any future machine learning or AI development.
Both companies have launched AI-assisted products for sports betting that seem to indicate a new age of margin management in sportsbooks.
Sportradar launched Alpha Odds in 2022, a tool for automated odds calculation. The company claims that this tool allows sportsbook customers to create bespoke betting rates in accordance with their risks and liabilities.
The company has recently announced that the product is currently in use with 60 clients and will deliver an average profit increase of 10% in 2023.
In January, Genius Sports launched its Edge product that promises the same automated pricing. It claims to be designed to maximize the profit in every single wager.
The Promise of AI
According to Darren Small of Sportradar, the promise of AI for sportsbooks depends on data access. It’s a lot of data.
He says that “AI is capable of a great deal, but can only enhance the results.” “There must be a loop for feedback, or it will not work. To make AI work, a company must have data. The more the better. “Once a company has data, the possibilities are endless.”
What kind of future can we expect? The potential of AI in sports betting is still a bit theoretical, just as it was when discussing AI’s development.
Small says that it is too early for the industry to understand the potential benefits of automation. At the moment, many traders are not yet able to understand how the automation will change the way the trading desk operates.
A flurry of Events
Even without Sportradar or Genius Sports’ enhancements, the backends of sportsbooks across the industry are aware that the challenges have changed dramatically in the last few years.
Tom Holland, Genius Sports’ product director says: “The sheer number of events that take place is staggering.” You can’t manually manage thousands of events every year.
Sportradar’s Small points out that its managed trading system sportsbook uses the VAIX technology. VAIX, which will be purchased in 2022 by Sportradar, provides AI-learning across 60 million transactions per day across 60 different sportsbooks.
Small says that when you consider the number of transactions on our platform, “it is clear why we are adopting machine-learning.”
AI Alchemy
Automated odds calculation. Alpha Odds, as well as Genius Sports Edge’s product promise that once you have this information at your fingertips, it is possible to use these data in order to manipulate margins. These products allow you to manage an entire product in order maximize returns.
Small says that they can “adjust the prices a customer offers to its customers to reflect their financial situation and liabilities, and improve their trading efficiency”.
The system allows the operator to choose from a variety of strategic options. They can decide how to offer odds to customers and service them.
It is the same thing we would have done 15 years ago, with a single trader or matchmaker making decisions based on data that was available. The only difference now is it’s being done at scale.
Small elaborates: “We have the system, or machine, in place. Our liability trading team oversees that and makes sure it is configured the most appropriate and efficient way for each customer.” It’s a custom solution.
It will be able to determine where a client may wish to “potentially become a bit more aggressive, or conservative.” We will then configure these odds to maximize the potential of each model on an individual basis.
Smooth operators
Clyde Harris is a partner in the betting and gaming products development company Circle Squared. He says that it makes sense for such systems to “smooth volatility”, depending on which strategy the sportsbook chooses.
Both AI-assisted trading systems offer the opportunity to avoid the low points in margins while still being able to reap the benefits of higher returns.
Tom Daniel, partner of sportsbook operation consultancy Propus Partners says that it’s advances like this, which have relatively recently spawned “small quant shops”, as he calls them, in order to rationalise the idea that it may be possible over time to “solve” sports betting.
Daniel says that people who work on this type of thing will make incremental improvements. But the goal of “solving” sports betting the same way some high-frequency investors think they’ve solved financial markets, is still a long way away.
Next step?
Small is in agreement. He says, “This is the starting point to use AI.” What Alpha represents, is an additional mechanisation of the back end sportsbook.
He adds, “This was a process that began many years ago when algorithms were introduced.” This was the initial step, and now we’re moving on to Alpha Odds. “It is all about the building blocks.”
This is an ongoing process. It is a process that is ongoing.
Holland, from Genius Sports, says that automation will reduce the amount of manual work required by trading desks, especially in the areas of risk management and segmenting customers, but still allow them to provide their subjective opinion.
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What could AI achieve next? Holland adds: “Once certain processes are automated, you can free traders up to focus on new content instead of simply optimising what they have.”
What we’ve developed, and what we offer on the market as far as machine learning and automation in sportsbooks processes are themselves a huge leap forward. What comes next is really exciting, as the more data that the system can ingest, the greater the quality of the results,” says he.
It will be fascinating to see where this leads sports betting. With the amount of data we have, I see the potential for greater use of AI to increase operational efficiency across the board. Small believes that AI will affect every part of an operator’s business.
The future is going to be exciting, especially when you consider what the sportsbooks are able achieve in the future and the types of products that they can offer.
