The $600M Bet that Stole the Show

Betting exchanges were in the news this week thanks to Sporttrade's COO David Huffman sharing his account of betting activity on the Raven’s game and further reporting from ESPN’s David Purdum . Whilst I do not have anything interesting to add there, I thought it might be fun to re-live the story of the Christmas Hurdle at Leopardstown.?

This is a story about six hundred million dollars of liability on a betting exchange, a rogue bot, a betting technology glitch, legal and regulatory scrutiny and ultimately, maybe, the eighth Mersenne Prime.

The Woodiesdiy.com Christmas Hurdle was a horse race that took place on December 28th, 2011. It was a largely unexciting race that saw the favorite, Mourad, beaten by the second favorite, Voler La Vedette (with a starting price of around $2.96 - think +196 in US odds). It is not unusual to see a 2-1 chance salute, however, the in-play markets on a certain betting exchange make it quite the cautionary and memorable tale.?You can watch the finish here.

The exchange offered the following explanation of the events that took place, via their interim CEO:?

The race in question was of course the 2pm at Leopardstown on 28th December, won by Voler La Vedette. The race went off on time and there were no issues with the bets struck on the race before the start.

During the race, one bet was placed, and allowed onto the Exchange, laying Voler La Vedette for ￡21,474,836 at odds of 29. This would have left the customer with a maximum liability of close to ￡600m.

This bet was placed by one of our UK customers trading the race via our API or Application Programming Interface […] using an automated program (a “bot”). Their bot had developed a fault causing it to try and place a very large number of bets on the Exchange.

There were no questions surrounding the integrity of the race, the jockey’s intent or any other fixed elements that often arise when unusually large sums are scrutinized. There were many questions from punters across the jurisdiction who were debating whether the customer, but mostly the exchange, should be required to pay out the $23M in trading losses on the race due to the rogue bot. The exchange voided in-play bets on win and place markets and essentially, impacted accounts went back to where they were prior to the incident. A look at what a trading screen looked like during the race is available here.

Unsurprisingly to many, the Independent Betting Adjudication Service supported the exchange’s decision to void bets related to the issue. Although an exchange is not the same as a bookmaker, one offers betting against the house and the other offers peer to peer betting, an exchange doesn’t always fit nicely into the category of technology provider solely facilitating peer to peer transactions (that debate for another day).

The other rabbit hole that emerged from this freak event was the appearance of the eighth Mersenne Prime. The eighth Mersenne Prime is a number proven by Leonhard Euler in a letter to Bernoulli in the late 1700s. For those of you that play video games, let’s say Grand Theft Auto, you may notice that your score cannot exceed 2,147,483,647. How is this relevant you may ask? The bet that was erroneously allowed on the Exchange was ￡21,474,836 at odds of 28-1. Some have pondered as to whether the technology glitch was due to the eighth Mersenne Prime given it is?the maximum positive value for a?32-bit?signed binary integer?in?computing. Not even Microsoft is immune from the eighth Mersenne Prime.?

I wonder if there were any people who bet the 28-1 and laid the same horse on another exchange at a far lower price, locking in a profit, or so you might think (resulting in a voided wining trade and a losing trade on the other exchange that would stand). That is a bad beat, even if you intuitively knew the 28-1 was too good to be true.?

I wonder how many bets have been entered into exchanges above limits and thresholds that were appropriately declined before the perfect storm of events required for this particular bet to sneak through and onto the exchange. I would love to see an over/under market on that or maybe it is already an interview question at Jane Street.

I marvel at how simple betting was prior to the online revolution. You would walk up to a bookie who is offering a price, you strike a bet and walk away with a ticket. Whilst the act of striking a bet hasn’t changed for centuries, the technology, complexity and potential reverberation of a bet has certainly been amplified.

Caveat Emptor, friends.

Jake Williams is a sports betting and gaming expert who has worked in various roles in the betting industry. Most recently, Jake was the Chief Operating Officer at PointsBet, which was sold to Fanatics for $225M in 2023. Jake is the former host of the Business of Betting Podcast and is currently an advisor and consultant focused on the betting and gaming industry.