Money For the Rest of Us – Ep. 544

Title: Sports Betting Is Not Investing
Host: J. David Stein
Date: November 12, 2025

Episode Overview

In this episode, J. David Stein explores the growing popularity of sports betting in the United States, fueled by changes in legislation and increased integration into mainstream media and platforms. Using a recent listener email as a case study, he examines whether sports betting—especially when approached with the discipline and terminology of investing—can ever genuinely be treated as an alternative to investing. The episode breaks down the math, the common behavioral pitfalls, and why, despite alluring claims, sports betting fundamentally differs from investing.

Key Discussion Points & Insights

1. The Rise of Sports Betting in the U.S. [00:12–02:55]

• Post-2018 Supreme Court overturning of the Professional and Amateur Sports Protection Act has led to a rapid mainstreaming of sports betting.
• Revenue from sports betting has increased dramatically: from under $1 billion in 2019 to nearly $14 billion recently.
• Sports betting is now deeply embedded in media (ESPN, Disney, etc.) and prediction markets (Kalshi, Poly Market).

2. The Listener Email and Sports Betting as “Investing” [02:56–06:45]

• Stein shares a pitch from a listener running a newsletter that frames sports betting as a portfolio strategy, incorporating investing principles like behavioral finance and “margin of safety,” invoking names like Warren Buffett and Charlie Munger.
• The newsletter touts high returns and beating the S&P 500 in select months, tracking win rates and return statistics meticulously.

Notable Quote:

"Applying proven investment strategies to sports betting and making healthy returns with lower risk... very much in the spirit of Warren Buffett and Charlie Munger's philosophy."
— Listener pitch [03:32]

3. Recent Scandals & Shifting Partnerships [06:46–08:30]

• Ongoing scandals in the NBA and MLB highlight corruption risks: sharing of insider information, prop bets, game manipulation.
• Disney splits with Penn Entertainment over its ESPN BET sportsbook due to traction issues; DraftKings becomes ESPN’s official sportsbook partner.

4. Mechanics of Sports Betting Odds [08:31–12:20]

• Stein explains the American odds system (e.g., -150, -700) and how implied probabilities are calculated.
• He walks through specific newsletter bets:
  • NFL bet: No team shutout, odds -700, 87.5% implied probability. Win: $14.29 on a $100 bet.
  • Pittsburgh Penguins bet: Odds -450, 82% probability.

Notable Quote:

"The problem is because the return on each individual bet is relatively low, when there's a loss it takes more successful bets to make up that loss."
— J. David Stein [11:12]

• Tracking performance shows periods of high win rates (81% in late 2024, +7.4% ROI) but also significant losses (73% win rate in 2025, -6.3% ROI).

5. The Profit Margin (“Vig”) and Its Consequences [14:05–17:00]

• Stein clarifies you are always betting against the “house”—the sportsbook—not another bettor.
• The sportsbook’s cut (the “vig” or “juice”) is built into odds, ensuring over the long run, bettors lose.
• Even with a high win rate (70%+), you can have a negative return due to the margin.

Notable Quote:

"Even with a solid 73% win rate, the portfolio shows a negative 6% return. That shows how the implied odds already include the house's margin."
— J. David Stein [15:10]

6. Why Sports Betting Isn't Investing [17:01–19:20]

• Investing offers a positive expected outcome (e.g., S&P 500’s growth/dividends from the productive economy).
• Sports betting is a zero-sum game (when betting against a friend) or a negative-sum game (when betting via a sportsbook, after their cut).
• Over the long run, the math is set up so the sportsbook always wins, not the bettors.

7. The Behavioral Finance Angles [19:21–21:50]

• Overconfidence: Belief that personal skill/knowledge can beat the odds.
• Gambler’s Fallacy: Misinterpreting streaks as evidence of skill rather than randomness.
• Illusion of Control: The sense that selectivity or discipline can overcome structural disadvantage.

Notable Quote:

"I kind of fell for it. Then I had to step back... the sportsbook platform has to make money and they are the ones setting the odds..."
— J. David Stein [22:00]

8. Final Distinctions & Takeaways [21:51–22:34]

• Investing, speculating, and gambling have different expected outcomes.
• Language from investing can be seductive but is misleading when applied to gambling.
• You “can’t beat the math” in sports betting; over time, the expected return is negative.

Memorable Quotes & Timestamps

• [03:32]
  "Applying proven investment strategies to sports betting and making healthy returns with lower risk... very much in the spirit of Warren Buffett and Charlie Munger's philosophy." — Listener pitch
• [11:12]
  "The problem is because the return on each individual bet is relatively low, when there's a loss it takes more successful bets to make up that loss." — David Stein
• [15:10]
  "Even with a solid 73% win rate, the portfolio shows a negative 6% return. That shows how the implied odds already include the house's margin." — David Stein
• [22:00]
  "I kind of fell for it. Then I had to step back... the sportsbook platform has to make money and they are the ones setting the odds..." — David Stein
• [21:16]
  "Repeated exposure to events with negative expected outcomes will ultimately lead to a negative return. Repeated exposure. And that's why sports betting is not investing." — David Stein

Structural Outline with Approximate Timestamps

| Section | Main Content | Timestamp | |------------------------|-----------------------------------------------------------------------------|------------| | The sports betting boom| Legal, financial, and media context | 00:12–02:55| | Listener challenge | Investing principles applied to sports betting; pitch overview | 02:56–06:45| | Scandals & ESPN shifts | NBA, MLB scandals, ESPN/DraftKings deal | 06:46–08:30| | Betting math & odds | Explanation of odds, example bets, ROI limitations | 08:31–12:20| | Vig & negative sum math| The “house” always wins due to built-in commission | 14:05–17:00| | Why not investing | Positive expected outcome in investing vs. negative in betting | 17:01–19:20| | Behavioral pitfalls | Overconfidence, gambler’s fallacy, illusion of control | 19:21–21:50| | Final thoughts | Distinction between investing, speculating, gambling; the inescapable math | 21:51–22:34|

Takeaways

• Sports betting often borrows investing language to appear safer or more lucrative, but it cannot reverse its negative expected outcome.
• The sportsbook’s margin ensures a structural disadvantage for bettors, regardless of discipline or selectivity.
• Most winning streaks will eventually be overtaken by the fundamental math; tracking results reveals this hard truth.
• Behavioral biases make it psychologically enticing, but investors should beware conflating entertainment with true investment.

Conclusion:
Stein’s analysis is clear: Approaching sports betting like investing—using modeling, tracking, discipline, and investing jargon—does not change its underlying negative expected value. For those seeking to grow wealth, the difference between investing and betting is not just semantics, but mathematical reality.