Soft vs. Sharp Bookmaker Models

The sports betting industry is divided into two distinct business models: **Sharp** and **Soft**. * **Sharp Bookmakers (Market Makers):** Exemplified by operators like **Pinnacle**, these books operate on low margins (2-3%) and high volume. They welcome professional bettors, using their wagers as information to shape efficient market lines. They rely on **price discovery** and liquidity rather than marketing. * **Soft Bookmakers (Recreational):** Dominant in the UK and post-PASPA US (e.g., DraftKings, Bet365), these operators focus on recreational players. They utilize high margins (6-8%+), aggressive marketing, and **account limiting** to manage risk. Rather than originating odds, they typically copy pricing from sharp books and ban customers who consistently win. The industry relies on a symbiosis where sharp books establish the "true price" through market forces, and soft books consume that data to offer products to the mass market, protected by aggressive risk management software.