Gambling software RebelBetting enables punters to beat the bookmakers

For someone who makes a lot of money betting, it is odd that Simon Renstrom doesn't see himself as a gambler.

"I was never into gambling and I don't even play the lottery," says the one-time computer programmer.

Mr Renstrom is the co-founder and chief executive of RebelBetting, a provider of software based on algorithms that identifies differently priced online bookmaker odds for the same sporting event. Wagering on a pair can, in theory, lead to small but risk-free wins. The practice is akin to arbitrage in financial markets - taking a profit by simultaneously buying and selling the same security at different prices - but at the expense of bookies.

The proliferation of online gambling and betting exchanges such as BetFair, where punters can take bets from each other, has led to a panoply of tools enabling players to overcome the element of chance. And while such activity remains niche, growing numbers of consumers - and professional investors - are treating it as a form of serious investment.

RebelBetting charges €129 a month for a licence to use its software, which gathers combinations of odds for football, rugby and tennis matches. Users then have a short time to place two matching bets manually.

The Sweden-based company employs just four staff but had earnings before interest and tax of Skr3.6m ($523,000) on revenues of SKr6.7m last year.

"A normal player can make 10 to 12 per cent per month," Mr Renstrom says. "The greater bankroll you have the better up to a threshold of around €35,000, after which it gets increasingly difficult to distribute the money."

But beating the bookmakers at their own game isn't an open gold mine. There are scores of "get rich quick scams" that fool naive punters. And though arbitrage is perfectly legal, many bookmakers can detect and root out "arbs", who bring little profit.

"As soon as you start doing well the big bookmakers will limit the size of stakes you can place," says Richard Carter, an analyst at Deutsche Bank.

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Bookmaker Ladbrokes says that at the point of accepting a bet, it does not see the motive or process behind that bet and whether or not it is a bet generated by sports bet trading machines.

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"If we became aware over time that tools were available to consistently deliver profit to a customer we would need to take action to reduce our risk and exposure," a company spokesman says.

Such restrictions are one of the reasons why Peter Webb, the UK-based creator of the BetAngel software, has shunned arbitrage in favour of sports bet trading. It involves betting for or against an outcome in the expectation that the odds will move in a particular direction, before making the opposite bet to close a position and lock in a return.

BetAngel plugs in to BetFair and analyses data from the exchange including form, horses' behaviour and how much money is being traded. An annual subscription costs £100 and the company has six employees, though Mr Webb says he makes most of his income from proprietary trading.

"Our professional, full-time customers make tens of thousands [of pounds] a month - but that's the guys at the top of the pyramid," he says.

The founders of two-year-old start-up Stratagem aim to turn sports betting into a bona fide financial asset class by introducing mathematical principles of quantitative analysis usually associated with fast-trading hedge funds.

<>It offers a platform for punters, syndicates and bookmakers that uses statistical modelling to provide a "fair estimate" of odds across more than 20 football leagues, which are then adjusted with a subjective element that takes into account factors such as a team's motivation or the quality of shots on goal. The software facilitates trading across exchanges and bookie sites.

"We try to predict value," says founder Andreas Koukorinis. "If the odds are 2-1, is that fair or expensive? It's not investment advice - we want to give the tools for decision-making to trade over multiple platforms."

Stratagem says that it has a dozen customers including investors from big investment houses and is also developing investment products, similar to real money and hedge funds, providing exposure and liquidity. With 65 employees and revenues in the "hundreds of thousands" of pounds, it expects to make a profit next year.

Several bookmakers declined to comment on the implications of such technologies.

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