No, not arbitrage. The "insight" was that the odds offered by bookies are remarkably accurate predictors of the outcome. Averaged across a number of bookies the

No, not arbitrage. The "insight" was that the odds offered by bookies are remarkably accurate predictors of the outcome. Averaged across a number of bookies the small variations cancel out. In other words, you can't beat the house. However, there are two additional details to consider. 1: Bookies may incorporate information at different rates and delays, so every now and then you can have a couple of outfits who are behind the trend, and where the odds for a given outcome are better than the industry consensus. And 2: sometimes a bookie may choose to offer over-the-odds opportunities to invite bets on one side of the market to balance out their net exposure for a lopsided game. If we ignore the bookie's commission structure, let's say that a game has seen lopsided betting activity. Out of 1 million as placed bets 80% have been placed for the home team, so their exposure from home win is at least 800k. If they calculate that the away team has 13% probability of winning, the bookies may want to offer odds above that (ie. the payout of a bet is above than its fair value). That will invite some sharper bettors to put their money on the away team win, and the bookie gets more money on both sides of the book. In other words, they try to reduce their net exposure to the game. In an ideal world for a bookie, the bets placed across all three outcomes cancel each other out, and over time they make their money from the commission. In the real world, the bookies will identify sharp clients and prevent them from playing. They will also use the winning clients' trades as a pricing signal for themselves - and will hedge out accordingly on the exchanges when the same mispricing opportunity presents itself.