At the beginning of the interviews, the main objective was to identify which institutions deal with the regulation at the federal and state level. Next, it was asked which actors are in favor of the current prohibition of online sports betting and which actors are against it.
In the third part of the interviews, the main reasons that lead to the prohibition of online sports betting at the federal level and the obstacles facing its legalization were inquired. In the USA, the different regulations on state levels were discussed such as in Nevada and Delaware ; however, there was no need for this in Germany as the German states have a uniform regulation on sports betting. In the fourth block of questions, the international environment was discussed: Why does regulation on sports betting in Germany and the USA differ from the global trend; to what extent does the EU in the case of Germany and the WTO in the case of the US influence the domestic decision-making processes?
Finally, the interviewed individuals were asked about their predictions for the future of regulation in their respective countries. Apart from the interviews, all the issues of the weekly magazine The Economist, the daily newspaper The New York Times, the German online newspaper Spiegel Online, and the German online sports business platform Sponsors from the beginning of until the end of were analyzed.
In this selected timeframe important decisions regarding online sports betting in the USA and in Germany were made: the US Congress passed the UIGEA of , and the German Federal Constitutional Court decided that the German regulation on sports betting was unconstitutional and had to be modified by the German states by the end of Selective papers from other scholarly journals, magazines, and newspapers were included in the analysis as well.
Publications in European Sport Management Quarterly ESMQ have not specifically dealt with sports betting, but some papers have discussed related topics. Hill , see also Hill analyzed how gambling corruptors fix football 6 D. Reiche matches. Lee discussed the gambling scandal in professional baseball in Taiwan in This pertains to this paper in that the motivation to fix matches is high due to the large sums of money that can be earned in the international sports betting markets.
Rodenberg and Lima established a model for estimating the impact of referee bias on team performance in the National Basketball Association NBA. It is one of the main findings of this paper that the influence of the sports governing associations is in both cases Downloaded by [Danyel Reiche] at 26 November the main explanation for the most recent policy-making on sports betting.
The following case studies on Germany and the USA have the same structure. After the legal framework is described, the case studies follow the approach of Houlihan , pp. Sport bodies resolve political issues that arise within sports itself such as commercializa- tion, gender equality, anti-doping policy, or whether players and referees are allowed to place sports bets and whether or not the clubs can advertise for gambling companies.
Examples of policy interventions politics and sport are investments in sport facilities; the use of international sports to project a positive image of the nation abroad; making sports a diplomatic resource; using sports as a type of sanction; or, under the lens of this research, the current legal framework on sports wagering in Germany and the USA.
When interviewed, the staff of Congressman Frank Democratic Party said: It was strategically very clever of Peter King [a republican congressman from New York] to insert the prohibition of online gambling into the Safe Port Act.
The Safe Port Act was a must pass bill and online gambling had nothing to do with port security. Financial institutions are forbidden from transferring money to online sports betting companies. Online fantasy sports, online lotteries, and horse racing are excluded; wagering on all kinds of human sports is included in the prohibition.
Bush signed the Act into law on 13 October , it took much more time than expected by the proponents of the law for the responsible administrations, the Federal Reserve System and the Department of the Treasury, to implement applicable provisions of UIGEA. The compliance date of the final regulation was 1 December Foreign gambling companies avoid offering their business in the USA because the country is actively Downloaded by [Danyel Reiche] at 26 November implementing its online gaming prohibition.
Land-based sports betting is also forbidden in the USA. This dates back to the Professional and Amateur Sports Protection Act of PASPA that made it illegal to conduct betting, gambling, or wagering operations on human sports with a few exceptions Carter, , p. These states were exempted because they already had offered different kinds of sports lotteries before PASPA was passed. Only Nevada and Delaware make use of their right to offer land-based sports betting, while online sports bets are in both states illegal, as in the rest of the country.
Even the use of telephone calls to place bets is illegal; due to the Federal Wire Act of one has to be physically present in the betting facility in Nevada and Delaware Federal Wire Act of For a long time, Delaware did not exercise its right to offer sports bets. It started its scheme on 13 September Whereas in Nevada bets on different college and professional sports can be placed in various ways, wagering in Delaware is only possible on the National Football League NFL matches as a parlay bet.
For a parlay bet in Delaware, players have to bet on at least three matches and are dependent on all of those wagers winning together. The other sports governing associations have held clear positions in the past and have disapproved of sports betting. Recently, however, divergent statements were issued by the NBA commissioner.
In hearings on gambling in the US Congress, the big four professional sports leagues strictly opposed any legalization of sports betting. This is why even proponents of legalization such as Barney Frank have modified their legislative proposals. Frank drafted a law proposal in that aimed to legalize the gambling market including sports wagering; this was excluded from his proposal for liberalizing the gambling market. The most recent example of cooperation between the big four leagues was the above-mentioned case of Delaware.
The leagues were cooperating and their official positions had not changed by the time that this work was completed at the end of However, unity on the issue was destroyed when, in a press interview, the NBA commissioner, David Stern, said: The betting issues are actually going to become more intense as states in the U. They emphasized that the official NBA position has not changed, and that there are no plans to lobby for a legalization of sports betting.
Politics in sport The sports governing associations agree upon sports betting policies. Garner explained that the sports governing associations share best practice. There are no exceptions to this rule [. National Basketball Association, n. Point shaving makes it exciting to bet on matches between an underdog and a successful team where the winner seems to be known. A player can fix a game without causing his team to lose, thereby ensuring that his team wins by a margin that is less than the betting point spread.
Apart from that recent change, after the Second World War the legal framework was stable and witnessed minor changes. Reiche Certain forms of gambling lotteries, land-based sports wagering are one of the last monopolies in the German economy. One of the few changes that took place in the legal framework of sports betting in Germany was related to the German reunification.
Whereas the German lotto pool remained successful, sports betting lost significant market shares to the foreign competitors who could offer much better odds than the German state Downloaded by [Danyel Reiche] at 26 November companies. The reason is that the state lotteries have to pay a lottery tax as well as a concessional levy to the states that is used to finance charity. As such, they can only give back about half of their pool to the betters as opposed to the foreign online companies that can distribute up to 90 percent of their pool.
Another disadvantage was that sports betting in Germany consisted of a large pool of games to be predicted, whereas foreign companies offered the opportunity to bet on single matches. While land- based sports wagering is still possible in around 25, agencies in the whole country, online sports betting was halted on 1 January This was due to a judgment issued by the German Federal Constitutional Court in March that the German sports monopoly is considered unconstitutional because it does not seriously deal with pathological gambling.
A private bookmaker from Munich had gone to court because the state of Bavaria forbid her from offering sports wagering opportunities by companies that are legal in other EU Member States. She argued that this would violate her freedom to choose an occupation. The Federal Constitutional Court presented the German states with an ultimatum: it either had to keep the monopoly and strictly fight compulsive gambling or it had to legalize private sports wagering companies Pfanner, After the IGT of went into effect, the states started to shut down private betting offices that had been offering, via the Internet, sports wagering by foreign companies.
According to the representatives from the Ministry of the Interior of Lower Saxony who were interviewed for this research, the Ministry had closed down private sports wagering offices by September As a result, Bwin had to stop all of its sports sponsoring. Some professional soccer clubs lost their main advertisement partner Koopmann, , p. However, the company did not stop European Sport Management Quarterly 11 its online sports wagering offers before August after a court in Munich threatened it with penalty payments.
Since then, there has been no bwin. Germany did not adopt measures to forbid financial institutions from transferring money to Bwin and other companies abroad as is the case in the USA , and individuals are not penalized for betting with Bwin and other betting companies abroad.
Other states took similar actions and began shutting down illegal betting agencies and made advertising of foreign online sports wagering companies illegal. There are different interpretations of the online sports wagering ban. The executive director of the lottery in Lower Saxony said: Downloaded by [Danyel Reiche] at 26 November We really would have loved to further offer online sports betting.
The mistake was made in the IGT of , which mainly justified the state monopoly by associating it with the combat against addictive gambling. After the Federal Constitutional Court judgment from , we had no other choice but to ban Internet gambling.
If private online sports wagering had been allowed, the next step would have been also to liberalize other lotteries which would have limited our ability to pay taxes to the states and support charity. Stypmann, personal communication, 20 September However, the chairman of the German Bookmaker Association said: The Federal Constitutional Court made it clear that the states could legalize private sports wagering companies.
This will not affect the state monopoly in other lotteries. By ending their online sports wagering offer, they have merely sacrificed a pawn. They are able to keep their monopoly over all the other state lotteries and combat local and domestic competitors. Albers, personal communication, 20 September The IGT of had a four year term and needed to be reevaluated in Thirteen out of the sixteen Prime Ministers of the German states have had to agree before a new treaty could have become effective a consensus had been usually reached in the past.
The state of Schleswig-Holstein voted against the proposal of a five-year testing phase, criticizing the other states for planning to place a limitation on the number of concessions for private betting companies and for the fact that the proposed tax would be too high which makes legal private companies less attractive as compared to illegal offshore companies. Instead, in September , the parliament of Schleswig-Holstein passed a law to legalize and liberalize the online sports wagering market within Schleswig-Holstein by March After the governing parties lost the state elections in May the new government of Schleswig- Holstein decided to join the other states.
The starting date 12 D. Reiche of the new IGT was July , and 20 concessions are scheduled to be issued by early Why were major changes in sports wagering legislation approved in Germany? These changes are, on the one hand, externally driven. Gambling is not regulated by sector-specific rules at the EU level, and Member States remain free to determine their approach in accordance with EU law European Commission, , pp.
On the other hand, there are also internal drivers for these probable changes. At Downloaded by [Danyel Reiche] at 26 November their meeting in March , the prime ministers of the German states generally agreed that the new IGT of should liberalize the sports wagering market, but retain its lottery monopoly.
Politics and sports Why did the prime ministers of the 16 German states change their opinion? Apart from the above discussed external driver there was an important internal driver: The German Soccer League DFL and other professional sports leagues, as well as the German Olympic Sports Confederation DOSB that represents major sports associations, had been strongly lobbying against the monopoly in sports betting and in favor of opening the market for private betting companies.
In , the DOSB which receives about one-third of its budget from payments from the state lotteries had already initiated a working group on gambling that included, among others, representatives of the German Football Association DFB and of some state sports associations.
In order to better evaluate the IGT, the conference of the prime ministers of the German states had solicited the opinion of German sports associations. Being a member of both groups, the DFL facilitated this support. There are two reasons behind the proposal of this dual system keeping the monopoly on lotteries, while liberalizing the sports betting market. The first reason pertains to the integrity of sports: if betting were done legally it could be better monitored and matches would less likely be fixed.
By maintaining their monopolization of lotteries, they can sustain their tax payments and support for charity including co-financing the state sports associations. A new regulatory authority should be responsible for overseeing the sports betting market and granting the concession fees. The concession fee should be relatively low so that it does not tempt people to place their bets at illegal companies that grant better offers.
The Director General of DOSB explained Once a legal market with many players exists, only a small percentage of the market will be controlled by illegal companies. Violations will always exist, but with this model we should be able to reduce the illegal market from its 95 percent dominance to around one quarter. Accordingly, players are forbidden from placing bets that are related to the league in which their clubs are licensed, and they are not allowed to accept bonuses from people outside the club.
Besides changing their prototype work contract for the players, the DFL has started two initiatives to prevent players from betting and to counter match fixing. The DFL has been cooperating with the company Sportradar that has developed an early warning system. Sportradar monitors all available data on bets that are placed on professional football matches in Germany and informs the DFL if there are any suspicious changes of odds, and if there are any unusual high amounts of money 14 D.
Reiche placed on certain results of specific matches regarding the limitations of this system, see Buschmann Comparative analysis The major difference between the two countries is the relevance of the topic. While in Germany a broad public debate on legalizing and liberalizing online sports wagering took place, this did not occur in the USA where the topic took a backseat and received significantly less media coverage.
Apart from this general observation, this Downloaded by [Danyel Reiche] at 26 November research has revealed that the same policy outcomes in Germany and the USA were only in part motivated by the same reasons.
Both countries have some factors in common, but due to their different historical, cultural, and socio-economic context, there are also variables that differ between them. This limits the possibility of this research to reach broad generalizations; another limiting factor is that this research only examines two countries.
Other countries that prohibit online sports wagering might have reasons that have not occurred in this study. Nevertheless, the small-N research design of this work is advantageous in that it provides in-depth analysis and a deep understanding of the cases. In this section the joint factors that led to the prohibition of online sports wagering in Germany and the USA as well as the variations across the cases will be described and explained. In spite of the ban, illegal sports betting still takes place in both countries.
Table 2 shows the amount of money wagered in both countries on sports events. Even if the National Gambling Impact Study Commission data for the USA, mainly based on surveys and the consulting firm Goldmedia data for Germany, based on company reports and interviews might have employed different methods to generate their estimations, and despite the fact that their data do not differentiate between land- based and online wagering, the data reveal similar tendencies: the amount of money that is wagered is huge and sports betting mainly takes place illegally.
Some of the stakeholders who were interviewed argued that the data clearly reveal that the online sports wagering ban failed in both countries. Others argued that the size of the market would have been even larger had the ban not been instilled. According to Table 2. Table 3 summarizes the findings of this research regarding the main differences and similarities on the regulation of online sports betting in the USA and Germany.
While in the USA the federal government is responsible for dealing with this issue, in Germany this responsibility lies with the states. Both countries do not accept online sports wagering but have accepted some exceptions for land-based sports betting. Both countries have used different policy instruments to implement the ban: the USA forbids financial institutions to transfer money to illegal online sports betting companies; in Germany, betting offices that illegally offer sports wagering via the Downloaded by [Danyel Reiche] at 26 November internet have been shut down.
In addition, the German states forbid the advertisement of online sports wagering companies and any form of sponsorship by them. According to Werner and Wilson , p. However, there has been a clear trend towards an increased role for the judiciary in policy making in many democracies. In Germany the influence of the Constitutional Court was strongly felt, when it offered the government an ultimatum in The government had to choose between retaining the monopoly while strictly fighting compulsive gambling or the legalization of private sports wagering companies.
This ultimatum led to the ratification of the IGT of that prohibited online sports wagering. As explained in the case study, the UIGEA of in the USA was inadvertently passed by Congress when it was added to a law that had to pass and was not related to gambling in any manner. While the Constitutional Court in Germany was a main driver for political change, the United States Supreme Court defended the existing legislation.
In , the Supreme Court forbade Delaware to extend its sports wagering offer. In both countries, the main professional sports leagues closely cooperate. The most important difference between the two countries is the attitudes they have demonstrated toward the topic. In the USA neither amateur sports nor the main professional sports leagues are in favor of legalizing and liberalizing sports betting; this is not the case in Germany.
As a result, proponents of the legalization of online gambling in the USA 16 D. Reiche Table 3. In contrast, the German professional sports associations and the DOSB are in favor of legalizing and liberalizing sports betting due to the additional advertising and sponsoring opportunities that such a change provides.
In the USA, kit sponsoring does not exist in the main professional sports leagues, apart from the MLS that has recently allowed it. A main explanation for this difference could be that the North European Sport Management Quarterly 17 American sports leagues operate in closed markets whereas the German sports leagues are integrated in European competitions such as the Union of European Football Associations UEFA Champions League in soccer in which they compete with clubs from other countries that allow online sports gambling.
These clubs such as the Spanish Real Madrid that is sponsored by Bwin have a competitive advantage insofar as German clubs cannot get advertisement money from the growing online betting market. The sports associations in the USA fear risking the integrity of sports, while their German counterparts argue that a legalization would offer better monitoring opportunities of sports betting that takes place anyway.
Besides the above-mentioned internal driver, an external driver Pfanner, strongly influenced and finally changed the position of the Prime Minister conference of the German states. External pressure exerted upon the USA from a WTO ruling in has led it to offer the suing country a compensation payment, but has not led to any policy Downloaded by [Danyel Reiche] at 26 November changes in the country.
In both the USA and Germany, the sports governing associations have the power to influence the policy-making process. This policy window was provided by the judgment of the European Court of Justice and by the fact that the IGT is only valid for four years which allows for a policy evaluation by the end of Policy evaluation is a powerful tool in the policy-making process as: it possesses the potential to reframe an issue once thought to be resolved by policy- makers, but [.
In this respect, policy evaluations can pave the way for policy learning and evidence-based policy making. Conclusion The third and final step of any comparative method is to formulate predictions. On a federal level, the USA will adhere to its strict opposition toward online wagering, while Germany will join the majority of industrialized countries that have legalized online sports betting and have liberalized their markets.
We are yet to discover whether or not any form of international agreement will be attained at the level of the EU. Currently, no movement towards a harmonization of online gambling regulation exists. You can find list of all systems in the paid app on our facebook page.
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