Really interesting article on page one of Friday’s Wall Street Journal:

Investors are sometimes accused of treating the stock market like a casino. Now, one Wall Street firm wants to treat casinos like the stock market.

Bond-trading specialist Cantor Fitzgerald in March took over the management of sports betting at the M Resort, a new 390-room hotel and casino on the Strip’s southern edge.

“We wanted to turn gamblers into traders,” says Lee Amaitis, the 60-year-old Cantor executive who runs the gambling division, Cantor Gaming.

To do that, the company has transformed Las Vegas sports betting into something it thinks is akin to derivatives trading. By using financial-markets technology, Cantor allows bettors to wager not only on who might win the game or by how much, but also on whether a team can complete its next pass or make a field goal.

Essentially, in-game betting of this nature is not new.  However, it is not a robust practice here in the United States.  In fact, Cantor is seemingly the only firm that allows for such bets at this time (the practice is apparently common in Europe).  What is interesting is that such an approach allows gamblers (or what are essentially traders) to effectively hedge their bets (investments):

As the teams jockeyed for the lead, the betting line, which had started out favoring the Jets, shifted to Miami and back again many times. “The market keeps going up and down, like bonds trading,” Mr. Perry said during a Jets drive in the fourth quarter.

With his pick, Miami, in the lead, Mr. Perry decided it would be a good time to hedge his bet slightly. He tapped a screen for a $50 bet that the Jets would score during the drive—at about four-to-one odds. Not long after, a Braylon Edwards reception set up a touchdown.

“I was looking for a miracle and I got lucky,” Mr. Perry said, a small gold boxing glove strung around his neck. “I have $800 to $900 on Miami so now I’m almost $200 into that margin.”

This seems to me a natural progression. The financial world has made significant strides in its analytical and risk mitigation strategies. (In fact, modern risk mitigation strategies evolved from gaming in the ancient world.) From an analytical perspective, we’ve seen major advancements in sports like baseball, basketball, and football. Given the plethora of data, and the fact that players in sports compete in a more closed-system than firms in a market (making predictions based on past performance more reliable), sophisticated gamblers should certainly benefit from Cantor’s system.

It does beg the question whether gambling on sports should be as restricted as it is considering that the difference between gambling and investing in securities is somewhat superficial. In both realms there will be winners and losers. There will be those that take a systematic approach and those that will get in over their heads. There is nothing to stop an amateur trader from opening an internet-based trading account and losing their savings in short order if they make bad bets in the market. Additionally, the incentives for corruption appears equally as strong in the corporate world as the sports world. Both should of course be regulated, but the rationale for treating sports betting differently than investing is getting harder to sustain.