Inside the Algorithms Sportsbooks Use to Track Bettors, Limit Winners, and Push Losers to Bet More
Sportsbooks make almost all their money from just a tiny fraction of customers.
According to the Wall Street Journal, before sports gambling operator PointsBet was acquired by Fanatics in 2023, the company’s VIP sports bettors represented just 0.5% of its customer base but generated more than 70% of its revenue in 2019 and 2020.
The general rule of thumb is that sportsbooks operate on a profitability curve with a long tail. Roughly 5% of bettors cash out winnings, 80-90% lose enough to put the sportsbook back at breakeven, and then just 2-3% of bettors lose so much money that they end up accounting for more than 50% of a sportsbook’s annual revenue and profit.
This isn’t an accident; it’s by design. Sportsbooks don’t want “good action” — they want predictably losing action at scale, plus a small number of high-volume losing customers (whales) who can drive everyone else’s value. This is precisely why VIP programs are popular and why personalization has become so intense and targeted.
However, the real story goes much deeper than that. Sportsbooks aren’t just hoping a small percentage of customers lose enough money to cover all the winners; they are investing hundreds of millions of dollars in AI-enabled algorithms to guarantee it.
After spending the last few weeks speaking to several professional sports bettors and industry specialists, including those who have worked at large sportsbooks in trading, risk management, VIP services, and marketing, I have uncovered a concerning trend.
Sportsbooks are leveraging government-mandated data collection (KYC, AML) and personalized insights to assess the value of an account from the moment it is created.
These algorithms know everything — your date of birth, address, geolocation, and social profiles, what device you use to place bets, payment methods, how many times you check the app each day, and what time you are most likely to place a bet — and then they use this data to maximize profit, kicking out winners while pressing losers.
So for today’s newsletter, I’m going to explain exactly how all of this works. We’ll start by talking about what type of customers sportsbooks really want. Then, we’ll dig into the algorithms, including how they work, and, more importantly, how sportsbooks leverage the data to increase the ROI of a losing account through push notifications, bonus bets, timely discounts, A/B testing, VIP programs, and higher-margin products.
If you have been on the fence about becoming a paid subscriber, today is the day. This is one of the most fascinating case studies we’ve ever done, and since this is a reader-supported publication, I wouldn’t be able to spend weeks investigating it without you.
Let’s go…