Personally, I'm all for efficient markets...

[randomness]

...but how does this differ from sports gambling, exactly?

Red Sox Reward Futures Traders Who Favored Them Over Yankees

"The Boston Red Sox, who became the first team in Major League Baseball history to win a playoff series after trailing three games to none, rewarded the futures traders who made them favorites against the New York Yankees.

"The payoff was even greater for speculators who wagered on the Red Sox when their futures contracts were selling for pennies on the dollar.

"Traders were paying more for Boston contracts than for New York futures before the American League Championship Series, even though the Red Sox haven't won baseball's title since 1918, and the Yankees have won four of the past eight.

"``It's phenomenal how efficient the sports markets are,'' said Mike Knesevitch, a spokesman for TradeSports.com, an online exchange where futures contracts were traded on the series. ``I'm always amazed.''

"Traders on the Dublin, Ireland-based exchange who were betting on a Red Sox victory were able to redeem contracts that were almost worthless four days earlier. Traders were able to increase their investments 40-fold if they bought Boston contracts at their low and held them until today."

http://quote.bloomberg.com/apps/news?pid=10000103&sid=aMJUmSbh.O8o&refer=us

Comments

[totient]

So the thing about futures traders is that they're in there because they think the market is not 100% efficient, and they want to take advantage of any inefficiencies they can find. In sports, the obvious inefficiency is that individuals have inflated ideas of the capabilities of particular teams; this is probably more true of the Red Sox than anyone else and is reflected by the odds being only 40:1 rather than the 62:1 you'd expect from historical evidence. Bookies suffer from the same inefficiency since their job is not to reflect the actual chances but to set the odds such that no matter what happens they can pay out. If 90% of everyone is betting the same way on a coin toss, the bookie has to adjust the odds so he won't get burned.