The Digital Bookie: Assessing AI's Emerging Role In Sports Betting

Welcome to this week’s Deep-Fried Dive with Fry Guy! In these long-form articles, Fry Guy conducts in-depth analyses of cutting-edge artificial intelligence (AI) developments and developers. Today, Fry Guy dives into AI’s emerging role within the sportsbook. We hope you enjoy!

*Notice: We do not receive any monetary compensation from the people and projects we feature in the Sunday Deep-Fried Dives with Fry Guy. We explore these projects and developers solely to showcase interesting and cutting-edge AI developments and uses.*

“… and the crowd goes wild!”

From the roar of the crowd to the thrill of the underdog, sports have always been a mix of passion and unpredictability. But in the realm of sports betting, AI is quietly rewriting the rules, bringing precision and analytics to a field once dominated by luck and instinct.

For generations, sports betting was a game of gut feelings, insider tips, and lucky guesses. But as AI enters the playing field, what was once a high-stakes gamble is becoming a science, with algorithms as powerful as any sports star on the field. As AI continues to saturate every domain, its application to sports betting is becoming more prevalent and more controversial.

The rise of AI in sports betting leads to some interesting questions. How is AI being used to help people bet on sports? Is it really helping people win? And does the application of AI to sports betting defeat the whole purpose? Let’s explore this rising phenomenon.

THE SPORTS BETTING BOOM

Sports betting is a way for people to place monetary wagers on future or real-time sporting events. This can include betting on things like which baseball team will win a game, which football player will score a touchdown, or how many points a basketball player will score in a given game. The betting combinations are endless, and the betting odds are adjusted based on the probability of those events occurring, given historical and predictive data. So betting on a historically good team to beat a bad team might give you a potential return of $5 profit for your $10 bet, but betting on the underdog may get you $20 profit for your $10 bet. Of course, this is simplified a bit, but hopefully you get the gist.

As one can imagine, betting on sports can be incredibly fun for those who like sports and choose to gamble. In fact, a Seton Hall study found that 37% of the general population has bet on a sporting event at least once. For avid sports fans, this is up to 60%. Over the past few years, these numbers have been skyrocketing, with sports betting from the general population up 9% since just 2022 and up 4% in that time for avid sports fans.

Much of this growth has been due to the legality of sports betting in the United States. In 2018, the U.S. Supreme Court struck down a 1992 federal law which had prohibited most states from allowing sports betting. Such wagers are now legal in 38 states. This means people no longer have to travel to Las Vegas to consult a bookie. Now, most people can bet on games without having to leave their home state.

Adding to the legality of sports betting has been the emergence of mobile apps, such as FanDuel and DraftKings. These apps make it so users don’t even have to go to the casino to place bets. Rather, people can deposit money directly to the app and place wagers from the couch. If someone gets a feeling that their team is going to win the big game, they can whip out their phone, press a few buttons, and the bet is placed. Combine this availability with more people than ever watching sports, and we have a sports betting revolution on our hands.

These factors have led to a monstrous new industry, where sports betting revenue has increased from $910 million in 2019 to 7.56 billion in 2022 and over $11 billion in 2023! This number continues to snowball year after year, with no signs of slowing down.

AI + SPORTS BETTING = THE PERFECT STORM

As we have seen, sports betting is all the rage these days. So it should come as no surprise that AI is attempting to get its grubby hands all over it.

AI tools of all kinds are emerging on the internet and in the app store, promising users more optimal results for wagers on sports. Some of these “AI bookies” include Rithmm, Sports AI, Juice Reel, and Gridiron AI. Many of these tools claim to outperform human predictions about sports significantly, with purported success rates of up to 60% or 70%! The broad claim is that AI algorithms, when trained on relevant sports data, are able to synthesize stats and historical trends in ways humans are not (at least without a whole lot of research and calculative work), resulting in more accurate predictions about future events.

This data-driven approach is catching the attention of sports bettors, and the market is becoming very flooded with these AI sports prediction tools. When we compare the demographics of sports bettors with those of AI users, this comes as no surprise.

A Birches Health study found that 39% of sports bettors are under the age of 35. To further these demographic statistics, the majority of sports bettors are also male (69%). Do these demographics ring a bell? These numbers parallel a similar demographic: those who use OpenAI’s ChatGPT. 59% of ChatGPT users are between the age of 18-34, and 59% of those users are male. So it is no surprise that AI is emerging as an attractive tool for sports bettors, who are already using such technology. This is what some might call the perfect storm.

PROBLEMS WITH AI BOOKIES

At face value, it seems like a data-driven approach to sports betting is a winning game plan. AI can seemingly help us with everything, from writing speeches to creating music. So maybe it can help us predict sports as well, right? After all, data-driven decisions may lead to overall success in the long term. However, there are two major drawbacks with this approach that show why AI-driven sports betting might not be as effective as it initially appears.

One consideration for these AI bookies is that they are competing against themselves. Virtually every oddsmaker at all licensed and regulated sportsbooks in 2024 uses AI algorithms and predictive modeling to set their betting lines, running thousands of simulations in a brief amount of time to produce the betting odds. This means that an AI model trained on the same (if not more) data than the AI bookie is being used to set the odds that the AI bookie is trying to bet against. As a result, AI bookies might not improve sports betting results because they are playing against better versions of themselves!

A second consideration for AI bookies regards the purpose of sports betting altogether. Although 80% of sports bettors believe they can make money betting on sports, 93% say they bet primarily because it is “fun and exciting.” If AI bookies are used to make bets for people, this may reduce a lot of the fun and excitement people seek when betting on sports. A large part of the fun is knowing certain factors about the teams, picking teams and players you like, debating on which teams to bet on, “trusting your gut,” and bragging to friends when your predictions are correct. If this process is purely algorithmic, sports betting is reduced to something like investing in penny stocks because a financial advisor told you to. Not only are the results out of your hands, but so are the picks.

CAN AI ENHANCE THE FUN?

As we have seen, behind almost every sporting event is a wager. When a football player scores a touchdown or a basketball player makes the big shot, there are inevitably people who are winning big and losing it all.

As AI rises onto the sports betting scene, understand that many of these tools are out to capture a small portion of the exploding market. Although many might actually prove successful at predicting certain outcomes with a high probability, understand that when you rely on these algorithms, you are subject to the laws of statistical probability which may or may not be in your favor.

So next time you whip out your sports betting app or find yourself in your local casino’s sportsbook, maybe you will want to consult AI first. Or, maybe you should ignore the analytics and trust that feeling in your gut instead. After all, what could go wrong?

*Disclaimer: The contents of this article do not constitute any sort of financial advice. If you or anyone you know is struggling with a gambling addiction, visit this website and/or call 1-800-GAMBLER.*