The smart contract gets its state updated by trusted external APIs, in that ecosystem they are called oracles. So they would use the same one they use in their web2 system, just write the results onchain instead of just in their database or just on a tv.

And yes the low side of the market is one of the reasons why people start trading in capital markets, other ways to make money with bets are too limiting even if you find an edge. There are usually a couple places around the world with higher amounts possible.

Again, what happens if the oracle gets it wrong?

The problem I have with this scenario re: sports betting is that it decouples the trust of scoring games and paying out bets - which is not a "feature" for bettors.

If I'm using a reputable, "centralized" sports book, they have a reputation at stake. They have more of an incentive to accurately score games than a third party oracle. If they pay out in error, they are likely legally required to eat the loss and pay the true winners.

None of that is enhanced by web3 if sports betting is legal and regulated.

Check out chainlink ( https://chain.link/ ). Effectively, third parties are incentivized to run oracles which provide the data, and they all have to come to a quorum.

Thanks. I will look at this.

And there are plenty of other competitors to chainlink too