Sportsbooks call them risk-free bets. Just don't read the fine print.
Next month, Ohio will become the 32nd state to offer legal sports betting, which is sure to generate a rush of aggressive marketing appeals. But regulators there have issued an unprecedented warning: The industry's standard inducements to new customers are "false, misleading and explicitly against" state law.
These enticements are often presented as can't-miss cash giveaways. BetMGM offers Michigan customers a "risk-free first bet" of up to $1,000. Barstool promises Maryland bettors a $1,000 "bonus" for wagering their first buck. In many states, Caesars offers the most generous-sounding deal: a "free bet" worth up to $1,250 if a customer's first bet loses. When legal sports betting launched in Colorado last year, the operator affiliated with Sports Illustrated briefly advertised a $7,500 "risk-free" first bet.
Such sign-up perks have been effective at persuading Americans to open betting accounts, but many lead to a rude awakening: Even "risk-free" bets can result in the customer losing every penny.
That won't fly in Ohio. "If something is claiming to be free or risk-free, then it has to absolutely not require the patron to incur any loss or risk their own money," Matthew Schuler, executive director of the state's Casino Control Commission, said in an interview. Disclosing the risks within the terms and conditions isn't good enough, he added. "We are not supportive of trying to put the truth in small print."
Schuler said Ohio crafted some of the country's strictest rules for promotions after observing how sports betting legalization has played out since 2018. "We've benefited from conversations with our colleagues in other states who told us, 'If we could go back, we would have changed this,' " said Schuler, who declined to name those states.
New bettors around the country are showered with promos, and similar offers - especially with the words "free" or "risk-free" - help keep deposits rolling in from existing users. Maryland introduced mobile sports betting in November, and in the first nine days, seven operators doled out a combined $160 million in promotional prizes. (That total is deducted from their taxable revenue, meaning Maryland collected just $4,262 in taxes on the first $186 million bet through mobile devices.)
These offers can be favorable to customers, but the days of companies giving away straightforward deposit matches worth thousands of dollars are largely over. Instead, sportsbooks are deploying increasingly complicated deals that advertise a big dollar figure but are far less generous upon closer examination. Savvy bettors know how to exploit these deals for reliable profits, but novices can be seduced into gambling over their heads.
Harry Crane, a statistics professor in New Jersey, runs a side business teaching people how to make money betting on sports. One of the first lessons in his program, called Analytics.Bet, explains techniques for extracting maximum value from sign-up promotions - and how to avoid what Crane calls "traps."
"If I read on a billboard '$5,000 risk-free first bet,' I'm thinking that if I lose the bet, they will give me back $5,000," Crane said. The fine print usually tells a different story.
Say someone places a $1,000 "risk-free" first bet at BetMGM, which requires depositing and wagering $1,000 in real dollars. If the bet is successful, the winnings are paid out as usual, with no additional bonus. If it loses, the customer is credited with five $200 "free bets," which expire after a week. The stake of a free bet isn't paid out with any winnings, meaning a successful $200 free bet at even odds returns roughly $190, accounting for the sportsbook's built-in advantage, or vigorish. In other words, a new customer who loses his "risk-free" bet but then manages to win all five free bets at even odds, a 1-in-32 feat, would fail to break even. Lose them all, and that customer comes away down $1,000.
"By nobody's definition is that risk-free," Crane said.
Regulators in his state disagree. "A 'risk-free bet' is not deceptive as it indicates to the consumer that the amount of any losing bet will be returned in some fashion," a spokesperson for New Jersey's Division of Gaming Enforcement said. "The terms always specify that losing wagers will be returned as non-withdrawable site credit."
"Risk-free" offers became ubiquitous among online sportsbooks about two years ago, after an initial wave of extremely generous deposit bonuses contributed to steep losses for many operators. Former PointsBet marketing and media director Steven Astrachan said his company saw DraftKings and FanDuel offering a $1,000 "risk-free" first bet and decided to double it.
"A $1,000 risk-free bet sounds like a nice, large number, and then when you compute the expected value, it's a lot more advantageous for the book than a deposit match would be," said Astrachan, who left PointsBet in 2020. "There's a fine line you have to walk as a marketer in a regulated industry between what will be attractive and what's misleading or kind of predatory."
Another former top PointsBet employee, Matthew Chaprales, agreed that "risk-free" was not as "transparent and legitimate as it could have been." He suggested operators consider "on the house" as a more honest alternative.
This past summer, FanDuel rebranded its "risk-free" offer as "no sweat." DraftKings followed suit. Those companies, along with several other top operators, did not respond to interview requests for this story.
In Chaprales's eyes, "no sweat" conveys the same misleading assurance to customers as "risk-free." "If you lose that first bet, you're still going to be sweating," he said.
Schuler wouldn't say whether "no sweat" violates Ohio's regulations but added, "We're not okay with folks trying to get around this through some kind of technicality or by trying to be cute with words."
While BetMGM, Caesars and other operators continue to promote "risk-free" opportunities, PointsBet is abandoning that phrasing. Becky Harris, a UNLV distinguished fellow and former chair of Nevada's Gaming Control Board, sits on PointsBet's board and encourages operators to simplify their promotions.
"How many people trying to bet on their favorite team on a Friday night are going to first read 20 pages of terms and conditions on their phone?" Harris asked.
DraftKings advertises a 20 percent deposit bonus for new customers, worth up to $1,000. On its face, that suggests a $5,000 deposit will earn a $1,000 bonus. But the fine print clarifies that after depositing $5,000, each dollar of bonus money can only be accessed by betting $25 on odds longer than -300. Factoring in the vigorish, a bettor who wagers $25,000 at even odds within the required 90 days would be expected to come away down about $135, even after claiming the $1,000 bonus.
Some say this type of deal encourages problem gaming. Andrew Pace, founder of betting advice company inplayLive, said the bonus acts like a "dangling carrot," driving new customers to satisfy imposing play-through requirements. "If you're betting responsibly," Pace said, "meaning you're doing it within your means, each bet should be 1 to 2 percent of your bankroll." Applying that responsible approach to the DraftKings offer, someone who considers their bankroll to be $5,000 would need to place about five bets every day for three months to claim the full bonus.
Deceptive offers can induce other forms of recklessness, said Drew Tabor, founder of BetsBooster, which advises customers on how to optimize promotions. He cited an offer on BetRivers: "NBA first field goal insurance." A bet of up to $25 on who will score the first basket in a game is refunded with a "free bet" (that expires after a week) if the bet loses but the player's team scores at least 120 points.
"This sounds good, like you're going to get your bet back if you lose," Tabor said. "But a team scoring 120 points is fairly unlikely" - it happens roughly a third of the time - "and having your player score the first field goal is extremely unlikely. The market you're betting on is so bad that, even with a promotion, it's still a bad bet."
Shrewd bettors follow an arbitrage strategy to neutralize the risk of "risk-free" offers. Most sportsbooks prohibit customers from wagering on both sides of a bet, but the operator has no way of knowing if a customer bets one side with them and the other side with a competitor. So if a customer gets a $1,000 "risk-free" offer, loses and receives a $1,000 "free bet," the arbitrage player could wager the initial offer on an underdog, then bet enough on the favorite at another sportsbook to offset potential losses. No matter what happens, profits and losses result in a virtual wash.
Betting the full value of a promotion, therefore, is a potential tell that someone is a sophisticated bettor, said David Paschkes, chief commercial officer of Tipico Sportsbook. He said their "ideal customer" wagered around $300 on a "risk-free" deal for bets up to $750. Tipico has since rebranded its "risk-free" offer as a "protected bet."
Britain-based sportsbook Betfred also did away with "risk-free" offers in the United States. Sharp bettors abused the promotion, but square bettors fell victim to it.
"We had some unclear terms, which doesn't do anyone any good," Chief Operating Officer Bryan Bennett said. "You get angry customers and customer support agents getting beaten all day. We made a conscious decision to not do that anymore and try to be as upfront as possible."
Colin Davy, who founded line-shopping service Betscope, predicted a growing number of customers, disgruntled over "deceptive" sign-up experiences, will want to stick it to the sportsbooks. "When you push complexity on people and squeeze them for every dollar, you're creating a long tail of resentment against the books," Davy said. "Customers are going to want to punch you back."
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