August 13, 2002 4:52 PM PDT

Siemens bets on mobile gambling

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February 6, 2002
It's been the one sure thing in gambling: You can't bet on the outcome of a sports contest once it's begun.

But German software start-up Scaraboo and telephone equipment maker Siemens are trying to change this centuries-old dynamic with what they're calling "live betting."

The concept of wagering on results of a sporting event after it has begun, and the technology developed to make it happen, debuted at the World Cup this summer. Subscribers of 02, a German cell phone carrier, were able to guess the outcome of World Cup matches up until the last few seconds of each contest, said Scaraboo Chief Executive Juergen Lukas.

Now Siemens and Scaraboo are marketing the technology to other wireless carriers, raising both interest and concern among the betting industry. For instance, Frank Shoop, chairman of the Kentucky Racing Commission, said not to expect it in the United States, where it's illegal to bet over the phone. Still, he called the idea "worthy of discussions."

"If someone wants to bet on a horse race after it's begun, then let them bet," Shoop said.

But some major casinos, already contending with Internet gambling's inroads, say even with a legal fix, live betting might not be worth it for the gaming industry. "I really don't see how it would fit into our business plan," said Rob Stewart, a spokesman for the owners of the Flamingo Las Vegas resort.

Scaraboo's system is meant for sporting events, but not all kinds. Because it can take one minute to appropriately enter a bet, a shorter event like a 100-meter dash would be over before the another bet could be made.

"It can be any sport, but some sports make more sense than the others," Lukas said.

Dynamic odds makers
Lukas said that live betting equipment uses a mix of traditional technology that lets someone send e-mail from cell phones, and new software that determines "dynamic odds," or odds that change as the match progresses.

The equipment made its debut during the month-long World Cup in Japan and Korea. Bettors were able to make as many wagers on a game as they wanted, up until the dying moments of each contest. Each bet counted separately.

To bet, people dialed a number associated with each country's team and entered in the amount they wanted to wager. A wireless e-mail was sent back asking the wagerer to confirm all the details, which included the odds on the contest. Any winnings or losses were logged into an account the bettor had set up.

One of the major hurdles was deciding what to do about the games' odds. Before gambling houses offer live betting they will want constantly changing odds, Shoop said.

Scaraboo's M.Traction software did the trick, Lukas said. It was able to change a contest's odds on the fly by following the amount of money being bet and what was being bet on, he said.

For instance, during the final game of the World Cup, Brazil took a 1-0 lead toward the end of the first half of play. Suddenly, the amount of money being bet on Brazil to win the game started skyrocketing. The Scaraboo software sensed the increase in money bet on Brazil and shortened the odds on the Brazilians winning the contest.

Because the amount of money being bet on Germany plummeted at the same time, the odds on Germany winning became wider, Lukas said.

"We don't tell the software there has been a goal," he said. "The odds were recognized by the behavior of the people's bets."

Not U.S.-ready
Right now, Lukas said he's targeting only European cell phone carriers. Unlike in the United States, in Europe using a phone to make a bet is legal. Scaraboo recently won permission from a major European wagering body, Eurotip, that cleared the way for the service to be used throughout most of the continent.

Siemens has now included the Scaraboo software into the lineup of goods sold to wireless carriers, according to a Siemens representative. A Siemens representative declined to comment on whether any carrier has actually bought the software.

But unless there is a major change in U.S. law, it's likely that live betting won't be a reality here.

The main problem is how the wagers are made. A 1934 law makes betting over a phone line illegal. "You can't make a bet over the phone; that's what bookies do," said a cell phone industry source who asked for anonymity.

Some U.S. companies aren't taking too kindly to gambling via the Internet, which could be another blow for gambling over cell phones.

For example, as part of its purchase of online bill-payment service PayPal, eBay announced that it would discontinue PayPal's online gaming business, because of the "uncertain legal situation" around online gaming. And banking giant Citibank recently announced it was no longer processing credit card payments from offshore gambling companies.

"From a technical standpoint, it would be a triumph, I'm sure," Stewart said. "But the major issues will be legal and regulatory."

 

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