Sportsbet Loses $1.3mil on Early Election Bet Payouts
An Australian gaming company made a huge mistake when it paid out proposition bets on last Saturday’s national election. Sportsbet paid out AU$1.3 million for those who wagered on the Labor Party’s Bill Shorten two days before Prime Minister Scott Morrison won re-election.
All the major polls had Bill Shorten’s Labor Party defeating Scott Morrison’s Coalition in the election. The margin was small, though, and parliamentary elections have a lot of moving parts.
The day Sportsbet paid out the Bill Shorten bets, its predictions had Labour winning 82 seats against the Coalition’s 63.
Instead, the Coalition won 75 seats and might win more in the days ahead, as election organizers count votes in the closest elections. Seventy-five seats is enough to give Scott Morrison another go at premiership. Meanwhile, Sportsbet must pay out almost AU$5 million in wagers that came in for the Coalition.
Of the wagers, most of the big wagers backed Bill Shorten, while a vast number of small bets backed Morrison. That makes sense, given the fact small stakes punters could bet a little bit to win a lot on Scott Morrison.
Why Pay Off Prop Bets Early?
The question many have is why Sportsbet paid out the wagers early. In fact, it’s a common tactic for bookmakers. If a prop bet is all-but-certain to go one way, it’s better to pay off the bet early.
The reason: paying early puts the money back into the hands of the bettors. A fair number of them will wager the winnings on some other proposition. The bookmaker site gets an early chance to win back its losses.
Early payouts only backfire when the math is off. The calculations missed by 12 seats and $1.3 million this past weekend.
Sportsbet Jokes about Early Payouts
Whether someone got fired over the mistake or not, Sportsbet poked fun at itself on social media. One Twitter post had pictures of the four biggest losers from last weekend.
Next to the tweet’s pictures were the words Bill Shorten (“Lost the Unloseable Election”), Paul Gallen (“Broke the Record for Most Losses in the NRL”), Tony Abbott (“Lost the Warrington Seat after 25 Years”), and Sportsbet (“Us: Paid Out on a Labor Election Victory Early”).
Bookmaker Site Confirmed Unnecessary Losses
A spokesman for Sportsbet, Richard Hummerston, confirmed that the company wrote off the losses on the early payouts. The spokesman said Sportsbet plans alternative measures to offset the losses.
At the same time, the sportsbooks pointed out that it could have been worse. To cite an example, Sportsbet pointed to mining executive Clive Palmer, who invested AU$80 million in a Labor Party victory. That’s a lot of money for a losing outcome.
Matthew Tripp founded Sportsbet in 2005 as a small bookmaker based out of Darwin, Australia. Tripp began luring traditional gamblers to his bookmaker site through advertising deals with Seven Network and Ten Network. In this way, he expanded the business from 8 to 250 staff members.
Sportsbet’s pivotal moment came in 2018 when the High Court ruled that sites licensed in the Northern Territory could advertise to punters in the more populous Australian states.
Paddy Power Takeover
Irish bookmaker Paddy Power bought 51% of Sportsbet in May 2009, giving it a controlling interest in the sportsbook. Media reports suggested the deal was worth AU$200 million. Paddy Power took full ownership in February 2011 when it bought the remaining 39.2% of the company from Matthew Tripp for AU$132.6 million.
These days, Paddy Power CEO Patrick Kennedy is chairman of Sportsbet. While the parent company controls the brand, Sportsbet remains its own brand name in the Australian gaming market. Since Paddy Power took control, Sportsbet ran afoul of various Aussie state governments.
For instance, in 2011 the company admitted it pays $3 million to $4 million a year in commissions to companies and individuals which promote the bookmaker site. While no great secret in the online gambling business, Australian parliament MPs who dislike online gambling made much of the admission.