Sports-Betting Hedge Fund To Launch
This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.

Mark Cuban, the colorful and outspoken owner of the Dallas Mavericks, is making a bet on sports gambling – literally. Mr. Cuban is opening a hedge fund that will seed “the best and brightest” sports gamblers with capital and see if they can generate a return on that capital by placing winning bets.
Having initially achieved fame for co-foundingBroadcast.com-which was sold to Yahoo! for $6 billion in 1999 – Mr. Cuban is now better known for his outbursts courtside at Dallas Mavericks games.
Mr. Cuban outlined his thesis on his Web log, maverickblog.com on November 27. He said that in wagering on sports, “stupid money” invests primarily on emotion. Moreover, he said people who bet like this often do so with the expectation of minimal returns. “How efficient can a market be when the majority of investors expect to lose money?” he wrote.
Mr. Cuban wrote that the odds-makers in Las Vegas intentionally set the odds for sporting events to exploit this sentiment, seeking to attract so-called “stupid money” to skew the betting. Right before the contest, the “smart money”- sensing an inefficiency-places its wagers. More often than not, they win.
The people who have the ability to exploit this market inefficiency – Mr. Cuban said he sees no difference between gambling and investing- are the ones he wants to hire.
“I will find the best and the brightest with a confirmable track record and hire them,” he wrote, without specifying whether their backgrounds will be in sports or finance.
Mr. Cuban did not immediately respond to a request for comment.
A longtime stock trader who claims that an unspecified hedge fund was founded based on his trading picks, Mr. Cuban said that in sports betting, as in stock-picking, access to clear and accurate information is key. As such, he said sports betters have access to vastly better information on players and teams than stock traders do on markets.
He said that public companies cannot disclose critical information about executives, contracts, and cash flow on a daily basis, whereas sports teams post daily updates on roster moves, player injuries, and trades. Moreover, Mr. Cuban wrote that while public companies have such a long history of playing games with their earnings “that it’s ridiculous,” there is no way a teams move can escape the scrutiny of the media or the league.
However, Mr. Cuban’s arguments have not won over a veteran hedge fund-of-funds manager, Lyster Watson & Company’s co-founder and president, Robert Watson.
“That’s absurd,” he said of Mr. Cuban’s plan. “Idiotic even.”
Mr. Watson manages $2 billion worth of investments across dozens of different hedge fund strategies. He said Mr. Cuban has failed to differentiate between investing and gambling and that he has not taken into account the fact that in so-called parimutuel betting – where the public sets the odds – it is very difficult to beat “the crowd” with any frequency. “Statistically speaking, it’s really hard to beat the house enough to earn a living; in fact, it’s designed to defeat you,” he said.