All bookmakers impose stake limits on their customers. This restricts the amount that any trader can place on an arbitrage trade, with the average bet size limited to the range £200 - £1000. This means that sports arbitrage trading funds cannot scale up as they grow.

2. Daily returns of 3%+ are not possible.

It’s possible to make 3% on a single trades. However, it’s not possible to place the fund’s entire capital on any single trade so it is very likely that some of the capital will be unused. Even if they manage to place all of the money on a series of trades, they cannot do this every single day: it takes time for bets to settle, winnings to be paid and funds to be transferred across accounts for rebalancing.

3. Logical use of capital

If the owners of the trading fund are genuinely able to produce consistent daily returns of 3% or more, then why do they want your money? It would surely make better business sense for them to borrow capital from a bank at less than 10% per annum and then keep the daily 3%+ profits for themselves.

There have been a number of such schemes in the past and they have always followed the same path: they market their services, start taking money from people and have some of their operatives post on websites about the profits they have been paid. This creates more interest in the fund and they take even more money from people. Early ‘investors’ of small amounts may now increase their ‘investment’ as the fund grows in credibility. Some early investors may even receive some profits.

Then the fund disappears, and with it, everyone’s money.

There will be no way for you to contact them and no regulator will be able to provide you with any assistance. These funds are also known as Ponzi Scams

There has been such a proliferation of these scams recently that the Australian Competition & Consumer Commission has released a warning which, unfortunately, seems to attack sports arbitrage itself as well as the types of scam described here.

Scam 2: Sports arbitrage software sold for very large upfront fees

There are quite a few companies now selling sports arbitrage software as a product to be purchased for a one-off large fee. They use high-pressure sales tactics to railroad the buyer into making a rash decision. They invariably hype the profit-potential of sports arbitrage and invoke the ‘miracle of compounding’ to inflate your expectations.

The problems with this approach are that once you have paid the large fee you have no control over the situation and no way of getting your money back:

• You may decide that sports arbitrage is not for you, after trying it out for a month or two. If you were paying a subscription service then you would just cancel the subscription, having paid for what you used. But since you have paid a large upfront fee, your only recourse is to ask for a refund and you can be all but certain that this will not be forthcoming.

• You may find that the software you have purchased is not as good as you thought it would be. As your trading experience grows so will your ability to discern high-quality sports arbitrage trading software from that which is low-quality. Unfortunately, if you have paid a large upfront fee for your software then you are stuck with it.

• The software stops working after a couple of months. The fact is that sports arbitrage software requires a lot of resources to maintain and there are only a few companies in this space that are capable of providing a consistent service. Anytime a bookmaker changes the design of their site, sports arbitrage software has to be updated. This happens extremely frequently and when you consider just how many bookmakers there are, you can begin to appreciate that the maintenance of sports arbitrage software is an ongoing process for any company focussed on providing a quality service. Companies which take in subscriptions have a compelling reason to maintain their services and innovate their offerings - if they do not then they can expect their customers to stop paying. However, a company which has taken you money upfront no longer has any incentive to spend any further resources on maintaining their product.