On Developing a Solvency Framework for Bookmakers

The betting industry has grown significantly but there have been no developments in creating a regulatory framework akin to the EU Solvency and Capital Requirement Directives in the Financial Services. This work derives a modular method to calculate the profit and variance of a portfolio of wagers placed with a bookmaker by subdividing these into bundles according to their likelihood size. This calls for improved risk manage-ment and regulatory set-ups similar to those of the financial services industry, which should include a minimum capital requirement for bookmakers to accept a particular number of bets — “A passport for taking risks.”