Speaker 1: Pushkin, I want to do one hundred bucks on yes
Speaker 1: for the A's Yankees score.
Speaker 2: In the first inning, and I want to do one
Speaker 2: hundred bucks on a parlay. That's obviously me many months
Speaker 2: ago at a newish casino in Vegas called Circa, placing
Speaker 2: my very first two sports bets. I bet that yes,
Speaker 2: someone would score in the first inning of the A's
Speaker 2: Yankees game, and I placed a parlay bet on the
Speaker 2: seventy six ers the A's and the Denver Nuggets. Thank
Speaker 2: you very much. I'd only just started to figure out
Speaker 2: sports gambling. I downloaded Fan Duel and DraftKings on my
Speaker 2: phone at home in California, but they wouldn't accept my bets.
Speaker 2: That's how I discovered that sports betting was illegal in California,
Speaker 2: which in and itself was weird. For years, I'd been
Speaker 2: bombarded with ads on my home television trying to get
Speaker 2: me to make some sports bet with fan Duel and DraftKings,
Speaker 2: but the moment I tried to do anything, they told
Speaker 2: me it was against the law. Anyway, I just flown
Speaker 2: to Vegas because if you want to gamble, where else
Speaker 2: are you gonna go? I'm a calm better I'm not
Speaker 2: gonna cheer. I got ice wear in my veins, and
Speaker 2: I just care about my process right, and my process
Speaker 2: is good. It's pulling my bets out of my ass.
Speaker 3: That's my process.
Speaker 2: As always. I'm with LJ, my producer, who at that
Speaker 2: moment was still as innocent about the world of gambling
Speaker 2: as I was. It'll be months before she transforms herself
Speaker 2: into a mule for professional sports gamblers and quickly gets
Speaker 2: her bets rejected from all sorts of sports books. We're
Speaker 2: just standing in this sunken theater staring at twenty different
Speaker 2: sports being played on enormous screens. Outside. Circa had built
Speaker 2: huge swimming pools beneath another gigantic screen. Out there. You
Speaker 2: can float and drink and watch your money vanish. If
Speaker 2: you were sitting there with us inside the Circus Sports
Speaker 2: book and you knew nothing about sports gambling, you might
Speaker 2: think that you were right smack in the middle of
Speaker 2: the sports gambling industry. And obviously I knew nothing but
Speaker 2: my bet that someone would score in the first inning
Speaker 2: of the age Yankees game. So we're one swing away
Speaker 2: from going to collect it was still looking pretty good.
Speaker 2: Oh oh, don't do this, Oh my god.
Speaker 4: It happened. Oh no, I lost.
Speaker 2: How did this happen?
Speaker 4: How did this happen?
Speaker 2: How did this happen?
Speaker 1: You jaxed me.
Speaker 2: You came here and you jaxed me. I was supposed
Speaker 2: to win and you came your presence, isn't it.
Speaker 5: It's like.
Speaker 2: On the other hand, on the other hand, there's several
Speaker 2: lining here. John's point out, my parlay is looking better
Speaker 2: in Vegas. Hope dies hard. Three different games in two
Speaker 2: different sports needed to break my way for my parlay
Speaker 2: to win, in which case my one hundred dollars would
Speaker 2: turn into over twelve hundred.
Speaker 5: Yeah, we're in to parlay. That would be a big deal.
Speaker 2: I'm Michael Lewis, and this is against the rules, and
Speaker 2: you're gonna have to forgive me my ignorance for a minute,
Speaker 2: because I was just getting started. I didn't know that
Speaker 2: a parlay was the dumbest sports bet you could make,
Speaker 2: nor did I know that if you want to see
Speaker 2: the future of sports gambling in America, the last place
Speaker 2: to be was a Vegas casino. That Vegas was a
Speaker 2: sort of PG thirteen, and all the adult stuff was
Speaker 2: in other states. And I had no idea why California
Speaker 2: of all places, was banning an activity that was now
Speaker 2: legal in most other states. But I was about to
Speaker 2: find out. Way back in two thousand and eight, during
Speaker 2: the Global financial crisis, I remember thinking how weird it
Speaker 2: was that it played out so differently from country to country.
Speaker 2: In the years leading up to the event, every developed
Speaker 2: country was subjected to the same temptation. Everyone was basically
Speaker 2: left alone in a room with a giant pile of money.
Speaker 2: But what people wanted to do with that money differed
Speaker 2: from country to country. The Irish wanted to create an
Speaker 2: insane commercial real estate boom. Iceland's three hundred thousand citizens
Speaker 2: wanted to have three of the world's biggest banks. The
Speaker 2: Greeks turned their state into a pinata for its citizens
Speaker 2: to whack at. It was like you could go from
Speaker 2: place to place and see how these cultures differed by
Speaker 2: their financial kinks. One country's yuck was another's yum. You
Speaker 2: can see the same sort of thing right now in
Speaker 2: the United States with sports gambling. Since twenty eighteen, when
Speaker 2: the Supreme Court ruled that states could legalize sports gambling,
Speaker 2: every state has struggled with this new temptation. Actually, most
Speaker 2: haven't struggled very much, But as I'm recording this, eleven
Speaker 2: states are still holding out against legalization. My own state, California,
Speaker 2: but also Texas, Idaho, Utah, Minnesota, Alabama, Georgia, Oklahoma, Alaska,
Speaker 2: South Carolina, and Hawaii. These sports gambling holdouts are each
Speaker 2: kind of cool in their own way. No two are
Speaker 2: exactly alike, but many share a similar reservation, a moral reservation.
Speaker 6: Our focus was on addictive behaviors of moral issues in general,
Speaker 6: but particularly addictive behavior's alcohol, tobacco, gambling, marijuana, those kinds
Speaker 6: of things.
Speaker 2: That's Reverend Joe Godfrey, a lobbyist for Alabama's many Southern
Speaker 2: Baptist churches and a leading opponent of sports gambling in
Speaker 2: southern state. What does the Bible have to say about
Speaker 2: gambling specifically?
Speaker 6: First of all, gambling is a part of the get
Speaker 6: rich or get something for nothing mentality, a get rich
Speaker 6: quick syndrome that characterizes our culture today. But one of
Speaker 6: the Ten Commandments says in Exodus twenty verses three and
Speaker 6: three and five, but in verse three particularly you shall
Speaker 6: not you shall have no other gods before me.
Speaker 2: When you're looking for something to tell you what you
Speaker 2: can't do, there's, of course no book is useful as
Speaker 2: the Bible, but even I was a little surprised by
Speaker 2: how many ways the Bible tells you not to gamble,
Speaker 2: and so I've had to leave out most of the
Speaker 2: reverend speech on the subject. But he ended with this
Speaker 2: the fourth principle.
Speaker 6: Gambling is a form of covetousness and greed. But the
Speaker 6: Bible says in Exodus twenty, verse seventeen, you shall not
Speaker 6: covet your neighbor's house. You shall not covet your neighbor's wife,
Speaker 6: or his male servant, or his female servant, or his ox,
Speaker 6: or his donkey, or anything that is your neighbors. That's
Speaker 6: almost half of the ten commandments that address the issues
Speaker 6: related to gambling.
Speaker 2: I sort of think that you should just feel what
Speaker 2: you feel for your neighbors donkey. But enough people in
Speaker 2: Alabama believe what Reverend Joe Godfrey believes. That he won
Speaker 2: his first skirmish with fan Duel and DraftKings, the lobbyist
Speaker 2: for DraftKings got so irritated that he named his fantasy
Speaker 2: sports team doctor Joe Gottfrey. The Southern Baptist fought and
Speaker 2: won battles not just in Alabama, but also in Georgia
Speaker 2: and South Carolina. In Utah, the Mormon Church has prevented
Speaker 2: sports gambling on religious grounds. But to me, the Mormons
Speaker 2: feel different. The Mormon Church just runs the show in
Speaker 2: Utah and no one really argues much about whether they
Speaker 2: should drink Coca cola or have thirty nine children, and
Speaker 2: somehow that all works for them. The Mormons, of course,
Speaker 2: would love to convert you, when when that fails, they
Speaker 2: sort of leave you alone and maybe even speed you
Speaker 2: along your journey to hell. For decades, Mormons basically ran
Speaker 2: the money into Vegas casinos, and that was fine as
Speaker 2: long as they did in themselves gamble. Southern Baptists aren't
Speaker 2: like that. They're surrounded by people who don't share their views,
Speaker 2: and they want to stop everyone from gambling. That's a
Speaker 2: way bigger lift. Do you have any sense of where
Speaker 2: this is headed if you had to bet where Alabama
Speaker 2: law is going to be ten or fifteen years in
Speaker 2: the future.
Speaker 6: First of all, the gambling forces never stop. They come
Speaker 6: back every year. And what happens is a lot of
Speaker 6: Christians and churches begin to get weary of the battle.
Speaker 6: And that's another thing I have to remind that the
Speaker 6: Bible tells us do not grow weary in doing what
Speaker 6: is good and doing what is right. But the fact
Speaker 6: is that churches get tired of the fight. Gambling crowd
Speaker 6: never gets tired.
Speaker 2: The sound you hear in that voice, that's resignation. He
Speaker 2: knows he's going to lose. The Wall Street analysts I
Speaker 2: talk to who follow the industry think Alabama will legalize
Speaker 2: sports gambling in the next year or two. Anyway, the
Speaker 2: Southern Baptists aren't the main story here because the main
Speaker 2: story is no longer really about morality. It's about money.
Speaker 2: More than one hundred million Americans are still being denied
Speaker 2: legal access to the new sports gambling apps. The vast
Speaker 2: majority live in states without any obvious moral reservations to gambling.
Speaker 2: What they have instead are actual reservations blasting ads like this.
Speaker 3: Discover your perfect combination at Batana Resort Casino where you
Speaker 3: can rock and roll.
Speaker 2: There's a very long story about how casino gambling came
Speaker 2: to Indian reservations. It's too good to totally ignore, but
Speaker 2: let me just give you the short version of it.
Speaker 7: If you had all these different little Bengal halls, so
Speaker 7: tribes were sort of able to offer that without any
Speaker 7: outside regulation, or if it was illegal in the state,
Speaker 7: tribes could still offer it.
Speaker 2: That's Steve Ruddick, who writes a newsletter on the sports
Speaker 2: gambling industry, and he says no one paid the tribes
Speaker 2: much attention at first, but in the early nineteen eighties,
Speaker 2: the reservation's bingo games became bingo machines, and the bingo
Speaker 2: machines were basically slot machines. O kis, do you have
Speaker 2: any idea what tribe first put the slot machine in
Speaker 2: the bingo hall.
Speaker 7: I'm going to draw a blank onto the tribe. But
Speaker 7: it was in Minnesota, and it was like bingo machines
Speaker 7: in someone's garage on the reservation. This stided to get
Speaker 7: legal challenges.
Speaker 2: Actually more than legal challenges and more than just Minnesota.
Speaker 2: In Florida, a local sheriff threatened the Seminole tribe with
Speaker 2: force unless they shut down the bingo games. There was
Speaker 2: also some fighting in California and Michigan. Lawsuits filled the air.
Speaker 2: One reached the Supreme Court in nineteen eighty seven. The
Speaker 2: Supreme Court ruled that states couldn't prevent the Native Americans
Speaker 2: from doing anything on their own reservations that was legal.
Speaker 2: Off the reservations. A pattern soon emerged. The federal government,
Speaker 2: responsible for giving financial support to tribes, tended to smile
Speaker 2: upon activities that might reduce the need for that support.
Speaker 2: State and local governments tended to frown on activities such
Speaker 2: as gambling, that might transfer money from their coffers to
Speaker 2: the tribes. In nineteen eighty eight, Congress finally passed a
Speaker 2: law Indian tribes could offer bingo without asking for permission.
Speaker 2: If they wanted to open a casino, they needed to
Speaker 2: cut a deal with the state, and so tribes began
Speaker 2: to cut deals with the states. One odd fact, there
Speaker 2: was only the loosest correlation between where Native Americans received
Speaker 2: a license to open a casino and where Native Americans
Speaker 2: actually lived. Connecticut has huge tribal casinos, but not very
Speaker 2: many Native Americans. Alaska has a lot of Native Americans,
Speaker 2: but hardly any casinos.
Speaker 7: Well, it turns out that a lot of tribes are
Speaker 7: pretty sharp, and ninety two you got Foxwoods, So all
Speaker 7: these tribes suddenly were like, hey, you know what, people
Speaker 7: are going to travel these casinos. Then you started getting
Speaker 7: commercial casinos also coming into the fold.
Speaker 4: Some have both.
Speaker 2: And how big has this been for the tribes huge.
Speaker 7: One of my favorite stories to tell about this is
Speaker 7: the sand Manuel Tribe.
Speaker 2: The sand Menuel Tribe resides just outside of Los Angeles.
Speaker 7: They're basically one of the biggest tribal casinos in the country,
Speaker 7: like billions of dollars of revenue. Before that, doctors used
Speaker 7: to ride in on horseback to the reservation to give
Speaker 7: kids their vaccines for free. So now this tribe is
Speaker 7: now making billions of dollars over the years they donated
Speaker 7: to that hospital that was doing That's that's the difference
Speaker 7: of it.
Speaker 2: Sense is that they were granted this right because the
Speaker 2: people who granted them this right didn't think it was
Speaker 2: that valuable.
Speaker 7: Yeah, exactly when it happened, it wasn't expected to be
Speaker 7: what it is.
Speaker 2: The same thing that happened in California also happened in
Speaker 2: the least likely places. In Oklahoma. The Chickasaw Nation opened
Speaker 2: a casino on the Texas border that soon became the
Speaker 2: biggest in the world and effectively controlled the Texas market.
Speaker 2: In Florida, the Seminole seized control of gambling in the
Speaker 2: entire state, but then came the Supreme Court ruling of
Speaker 2: twenty eighteen that allowed states to legalize sports gambling, and
Speaker 2: the lobbyists for fandueling DraftKings were suddenly everywhere.
Speaker 8: These companies, backed by Wall Street, basically swooped into California.
Speaker 8: I think, kind of confident that they could do what
Speaker 8: they did in every other state.
Speaker 2: That's Gus Garcia Roberts of the Washington Post, who covered
Speaker 2: the first battle in this new war war. That was
Speaker 2: back in twenty twenty two when fan Duel and DraftKings
Speaker 2: and some other sports gambling companies sponsored a California ballot
Speaker 2: proposition to legalize mobile sports betting.
Speaker 8: I love the name of the proposition that these companies
Speaker 8: ultimately pushed forward, which is I haven't written down here.
Speaker 8: It's Californians for Solutions to Homelessness and Mental Health support
Speaker 8: a coalition of housing and mental health experts, concern tax payers,
Speaker 8: and digital sports, entertainment and gaming companies.
Speaker 9: For Permanent Solutions to homelessness, mental health, and addiction in California.
Speaker 9: Prop twenty seven supports financially disadvantaged tribes that don't own
Speaker 9: big casinos.
Speaker 2: What were we actually voting on when we were voting
Speaker 2: on this proposition?
Speaker 8: So what you were actually voting on was the legalization
Speaker 8: of mobile sports betting in the state. There would have
Speaker 8: been minimal kind of involvement of California tribes. These companies
Speaker 8: had it was kind of an ingenious strategy in order
Speaker 8: to I guess divide the tribes. Their proposition would have
Speaker 8: benefited some of the smaller tribes that are not near
Speaker 8: cities and so did not have very lucrative gaming operations,
Speaker 8: and and so it would have made California like any
Speaker 8: of the other states where you can just kind of
Speaker 8: gabble on sports on your phone. Everybody I spoke to
Speaker 8: they were just moved by commercials that they thought were
Speaker 8: for a proposition that was going to finally do something
Speaker 8: about homelessness or you know, mental health.
Speaker 10: Twenty seven means getting people off the streets and into housing.
Speaker 11: Yes on twenty seven.
Speaker 8: There was one guy who I spoke to who was
Speaker 8: a truck driver and he was passing through California and
Speaker 8: he was just saddened by the homelessness situation. And then
Speaker 8: he was in his motel room and he saw the
Speaker 8: ad and he decided to contribute what he could.
Speaker 5: To me.
Speaker 8: That really encapsulated the confusion around these ballot measures.
Speaker 2: Not just confusion duplicity. It's sort of like FanDuel draving.
Speaker 2: They're foul hooking donors by persuading them that they're doing
Speaker 2: something other than what they're doing.
Speaker 8: Right, And it's not like those companies were reliant on
Speaker 8: one hundred dollars from the truck driver. But it really
Speaker 8: showed how they were trying to, you know, essentially, if
Speaker 8: not mislead, at least hoodwing Californians into not really knowing
Speaker 8: the true purpose of these propositions.
Speaker 2: But Proposition twenty seven did not go unopposed. From the
Speaker 2: moment the lobbyists from FanDuel and DraftKings massed along the
Speaker 2: California border, they'd been spotted by Indian Scouts because the
Speaker 2: tribes knew from bitter experience that the white man had
Speaker 2: a gift for what the white man called Indian giving.
Speaker 11: We want this thing in perpetuity.
Speaker 5: You know what I mean.
Speaker 2: That's Victor Rocha, conference chairman of the Indian Gaming Association.
Speaker 11: Hey, listen, if the Indians from one hundred years ago
Speaker 11: would have had the lawyers we had, you know what
Speaker 11: I mean, it'd be a whole different story in America.
Speaker 11: We would be instead of bows and arrows, we'd be
Speaker 11: checking attorneys. Excuse me, mister Custer. You know, mister Shinebaum,
Speaker 11: my attorney.
Speaker 2: Quivers loaded with shinebombs. The California Tribes watched and waited.
Speaker 11: We saw those pricks right on the horizon. We saw
Speaker 11: them coming.
Speaker 2: You did see them coming.
Speaker 11: We saw coming Tom all Away. It was very obvious.
Speaker 11: Because we're Native Americans, we suspect everyone and everyone. If
Speaker 11: it isn't Steve Wynn and the pricks at MGM, then
Speaker 11: it's then it's these new version of an old version
Speaker 11: of the guy. We kind of believe these guys are
Speaker 11: the same mindset.
Speaker 2: It must be odd, you know, to know that your
Speaker 2: role always is to wait for the peace treaty to
Speaker 2: be somehow violated. In this case, the California tribe saw
Speaker 2: a very specific threat. By law, their casino were confined
Speaker 2: to their reservations. If Californians were allowed to bet on
Speaker 2: their phones, no one would bother to drive to the reservations.
Speaker 2: Sports gambling was just a trojan horse. Eventually, they could
Speaker 2: imagine every Californian would have an entire casino in their pockets,
Speaker 2: a casino run out by tribes, but by FanDuel and DraftKings.
Speaker 11: These guys are like, we're not going to wait for
Speaker 11: you guys to get out of same foot. They saw
Speaker 11: it as an opportunity to screw us, and that's what happened.
Speaker 2: That's what had already happened in other states, even states
Speaker 2: with big tribal casinos. Arizona, for example, FanDuel and DraftKings
Speaker 2: talk to the Arizona legislature into handing out twenty sports
Speaker 2: gambling licenses, ten to tribes, ten to companies like FanDuel
Speaker 2: and DraftKings, and also sports teams themselves. They made it
Speaker 2: sound like a fair competition, but in no time at all,
Speaker 2: FanDuel and DraftKings routed the field.
Speaker 11: Listen, I hold DraftKings to their face. I go listen,
Speaker 11: if you come into California, we are gonna curb stomp you.
Speaker 11: And they got pissed off, you know, they because they go, no, no,
Speaker 11: we're your friends.
Speaker 2: So you didn't you didn't trust them?
Speaker 11: Oh fuck no, man, do you trust them?
Speaker 5: You know?
Speaker 11: These are the same guys that scooters for water, the
Speaker 11: scooters for land, different package, same schools. You know, it's
Speaker 11: this NBA mentality, you know what I mean. They're smarter
Speaker 11: than you. They know the future of the world. They're
Speaker 11: gonna plant it. We're just riding along. So all of
Speaker 11: a sudden they come into California and so we tell them,
Speaker 11: don't do it.
Speaker 2: Did any part of you think they're gonna be too
Speaker 2: powerful and they're gonna overwhelm us?
Speaker 11: No, No, not at all. Never had a doubt one second.
Speaker 11: You need a great villain in a story, and they
Speaker 11: were great villains in this narrative. They make great villains.
Speaker 2: That feels to me just very true. Fand and DraftKings
Speaker 2: make great villains. Why they make great villains is another matter,
Speaker 2: stick a pin in that question. We'll come back to
Speaker 2: it in a little while. Anyway, the California Tribes fought
Speaker 2: Prop twenty seven with their own ballot initiative. There's proposed
Speaker 2: limiting sports gambling to reservations. The two sides then vaporized
Speaker 2: half a billion dollars, trashing each other's propositions. After the
Speaker 2: dust settled, both propositions failed and nothing changed, which was
Speaker 2: a huge win for the Indian Gaming Association.
Speaker 11: That's why Fandel and DraftKings are so freaked out right
Speaker 11: now that that when we won, the day after, the
Speaker 11: tribes go fuck you, you're not coming into our market.
Speaker 11: The name fandel and DraftKings will not exist in this market.
Speaker 2: If you go out kind of imagine out twenty years.
Speaker 2: Can you imagine mobile sports betting in California but run
Speaker 2: by the tribes?
Speaker 5: Yes?
Speaker 11: Absolutely, and that's what they're doing in Florida. What the
Speaker 11: tribes in Florida did that freaked everybody out is the
Speaker 11: seven said, you know what, We're gonna have mobile sports betting.
Speaker 11: We're gonna have all this everything you want, but everything
Speaker 11: goes through us.
Speaker 2: It sounds good, but I'm not so sure things are
Speaker 2: gonna go Victor's way. There's something weird about this industry
Speaker 2: and something unstoppable about these two companies, FanDuel and DraftKings.
Speaker 2: There've been some skirmishes, the Indians have won a few
Speaker 2: of them, but the war that's not even close to over.
Speaker 2: In the run up to the global financial crisis, back
Speaker 2: in like two thousand and six and two thousand and seven,
Speaker 2: there was a character who was the first to see
Speaker 2: that something was off. The short seller, the character who
Speaker 2: makes us living by finding companies or whole countries to
Speaker 2: bet against. People love to hate short sellers. They seem
Speaker 2: so negative, so hostile to other people's hopes and dreams.
Speaker 2: But short sellers are also incredibly useful, more than useful
Speaker 2: necessary because you learn a lot when you think about
Speaker 2: the other side of the bet.
Speaker 5: I think we got an average price of about forty
Speaker 5: and I think we averaged exit was about fifteen. So
Speaker 5: you never get the highs of the lowest, but it
Speaker 5: was a successful position.
Speaker 2: That's Jim Chaino's maybe the world's most famous short seller. Actually,
Speaker 2: if you google world's most famous short seller, a picture
Speaker 2: of Jim Cheno's pops up. In his spare time, he
Speaker 2: teaches a course at Yale on financial fraud, which well,
Speaker 2: of course he does, and he has a track record
Speaker 2: of successfully betting against gambling companies. He did it first
Speaker 2: back in two thousand and five after a bunch of
Speaker 2: online poker sides sold stock to the public, and he
Speaker 2: read their prospectuses.
Speaker 5: And in the board of directors section there was a
Speaker 5: list of five or six people who were on the
Speaker 5: board of this particulicular online poker company, and at the
Speaker 5: very end of one of the listings it said, mister
Speaker 5: so and so is currently a fugitive from justice.
Speaker 2: Jim Chenos just loves it when the board of directors
Speaker 2: are fugitives from justice. I mean I kind of thumbed
Speaker 2: it all up.
Speaker 5: These entities were all offshore, a lot of them were
Speaker 5: being used to launder money, which is what things the
Speaker 5: US authorities were worried about at the time, and ultimately
Speaker 5: they all got shut.
Speaker 2: Down hard in the US. All right, so you shorted
Speaker 2: those and it worked.
Speaker 5: Yeah, those worked.
Speaker 2: The poker companies all went bankrupt. Then in twenty twenty one,
Speaker 2: Jim notices these new sports gambling companies, Draft Kings and
Speaker 2: fan Duel. He reads their prospectuses, he sees that they're
Speaker 2: run by some of the same people who ran the
Speaker 2: poker companies. DraftKings goes public and it's stock soares, but
Speaker 2: it's still losing money hand over fist, and it feels
Speaker 2: like those on line poker sites. Jim does a back
Speaker 2: of the envelope calculation in mid twenty twenty one, he
Speaker 2: shorts DraftKings stock, and sure enough, it soon collapses. He
Speaker 2: buys back the stock and takes a big profit. But then, incredibly,
Speaker 2: Draft Kings bounces back and keeps on rising. And that's
Speaker 2: when Jim Chainos realizes he screwed up.
Speaker 5: We made a fundamental error in that we modeled out
Speaker 5: the business based on it being the same economics as
Speaker 5: a typical Vegas you know, sports book at a casino
Speaker 5: well basically and historically has earned five to six percent
Speaker 5: on the amount wagered. And that's been a That five
Speaker 5: to six percent number has been kind of static for
Speaker 5: years and years and years.
Speaker 2: But DraftKings wasn't a casino. It was something else, something new,
Speaker 2: something very weird.
Speaker 5: What really has changed is because of the ease of
Speaker 5: gambling by having this device in your pocket that allows
Speaker 5: you to place a bet, is that people are basically
Speaker 5: making dumber and dumber bets. Right, They're making more and
Speaker 5: more parlay bets. They're making more crazy odds bets. You know,
Speaker 5: will Taylor Swift be wearing a Chiefs jersey at the game?
Speaker 2: You know, a casino has all these games, and the
Speaker 2: odds are of course always against you. But casinos don't
Speaker 2: coax you into playing, say roulette, with one set of odds,
Speaker 2: and then once you're hooked, switch out the odds to
Speaker 2: make them far worse. But that's exactly what these sportsbooks
Speaker 2: are doing by coaxing people into parlay bets. Here's an
Speaker 2: example of how this works in practice. On a simple
Speaker 2: bet on, say the Kansas City Chiefs to beat the
Speaker 2: San Francisco forty nine ers. DraftKings average profit and casinos
Speaker 2: they call it the wind margin is roughly five percent
Speaker 2: on a two leg parlay bet. A bets say that
Speaker 2: the Chiefs win and Patrick Mahomes throws for more than
Speaker 2: three hundred yards. On that kind of parlay bet, average
Speaker 2: profit to DraftKings rises to ten percent on three legged parlays,
Speaker 2: where for the better to win, the Chiefs need to win,
Speaker 2: Patrick Mahomes needs to pass for three hundred yards and
Speaker 2: Travis Kelcey needs to score at least one touchdown. DraftKings
Speaker 2: rakes in fifteen percent or more. There's this useful rule
Speaker 2: of thumb. With each additional leg of a parlay, the
Speaker 2: book is keep an extra five percent. And DraftKings and
Speaker 2: Fan Duel have learned how to herd their customers into
Speaker 2: longer and stupider parlays. Their TV promotions are designed with
Speaker 2: this one goal in mind.
Speaker 4: This is you and this is your first hunch of
Speaker 4: the season.
Speaker 2: It's parlay time. Promotions like that are working. They're leading
Speaker 2: the American gambler to make different kinds of bets.
Speaker 5: Those are really bad bets. Professional betters still make those bets, yep,
Speaker 5: but the public does and and that changes the economics dramatically.
Speaker 2: Because because they're on the other side of the bad bets.
Speaker 5: Well, and it's the same the same overhead costs, right,
Speaker 5: But if you're breaking off higher amounts of the bet,
Speaker 5: it's all gravy. The extra gross profit is all gravy.
Speaker 5: The bad news is, of course, is if you're the better,
Speaker 5: if the house is taking ten percent of each bet,
Speaker 5: your your bank role begins to dissipate dramatically faster, and
Speaker 5: so they're going to need to find more and more,
Speaker 5: you know, suckers if you will to keep making these bets.
Speaker 2: So far they have. So that tells you something. It
Speaker 2: does tell you something, and it tells you that it's
Speaker 2: a different business from the old sports book at a casino.
Speaker 5: Yes, absolutely a different business.
Speaker 2: That change in behavior is everything. Fan Dow and DraftKings
Speaker 2: have all these competitors, Caesar's and MGM and Circa and
Speaker 2: the other Las Vegas casinos have all launched sports gambling apps,
Speaker 2: but Vegas for some reason can't compete. Neither can ESPN
Speaker 2: or the Fanatic Sports Apparel Company or well there's no
Speaker 2: end to the failed competition. After Colorado legalized sports betting
Speaker 2: back in twenty nineteen, twenty companies launched sports gambling apps.
Speaker 2: Less than two years later, seven of those twenty apps
Speaker 2: are gone. In the end, there's really been no serious competition.
Speaker 2: All these other companies have been losing huge sums of
Speaker 2: money and making zero dent in DraftKings and fan duels
Speaker 2: market shares. FanDuel and DraftKings have remained something like eighty
Speaker 2: percent of the entire market.
Speaker 12: Most of the questions I had were is this going
Speaker 12: to be an Internet marketplace?
Speaker 2: Which is winner takes Most. That's Sean Kelly, an analyst
Speaker 2: at Bank of America. He was covering the casino industry
Speaker 2: when along came these sports gambling companies and he felt
Speaker 2: a professional obligation to follow them too, thinking that they
Speaker 2: were just like casinos and so like Jim Chaino's, like
Speaker 2: basically every Wall Street person, he at first missed what
Speaker 2: was really going on.
Speaker 12: The Internet has actually led to a handful of winner
Speaker 12: take most marketplaces, ride share, so uber lyft. If you
Speaker 12: think about the consumer marketplace and home sharing, so Airbnb
Speaker 12: and all.
Speaker 2: Those businesses, I can see what the network effects are.
Speaker 12: So The reason it was the debate in this business
Speaker 12: was unlike those other places, those were two sided marketplaces.
Speaker 12: If you controlled supply, and you had the most supply,
Speaker 12: you'd get the most customers, you'd have the demand.
Speaker 2: In mobile sports gambling, there were no obvious network effects.
Speaker 2: FanDuel and DraftKings weren't like say, Facebook, which everyone is
Speaker 2: on only because everyone else is on it. They weren't
Speaker 2: even like Uber, which people use because it has so
Speaker 2: many drivers, and which has so many drivers because so
Speaker 2: many people use it. But these two companies were dominating
Speaker 2: their market. It's the same way as Facebook and Uber had.
Speaker 2: It was like they had this moat around them that
Speaker 2: prevented anyone from invading their castles.
Speaker 12: At the time, we couldn't identify what the moat was,
Speaker 12: But here's what the moat was.
Speaker 2: The answer is three billion dollars. That's what it costs
Speaker 2: in marketing just to get people to know about you.
Speaker 12: Actually it's two billion in marketing and one billion in technology.
Speaker 2: Three billion dollars to create a brand. But their brand
Speaker 2: names are just the start of the edge that these
Speaker 2: two companies have. Their deeper edge is what they know
Speaker 2: about the American sports gambler. Technology has allowed them to
Speaker 2: create something very different from casinos or old fashioned sports bookies.
Speaker 2: But what makes these two companies unbeatable is the data
Speaker 2: they've acquired, and it's basically impossible for anyone else to acquire.
Speaker 12: Why do these companies win? The answer is the perfect
Speaker 12: seam for the American sports better was not you know,
Speaker 12: commercial casino gambling. It was daily fantasy sports. You had
Speaker 12: customers who cared so deeply about sports that not only
Speaker 12: were they willing to gamble on real sports, they would
Speaker 12: gamble on fantasy sports.
Speaker 5: Right.
Speaker 12: So if you just take that at as simple as level,
Speaker 12: these are people that had money on deposit on the
Speaker 12: Internet to gamble on fantasy sports. They sure as heck
Speaker 12: couldn't wait for the real money alternative to come, and
Speaker 12: when and when it did, it was a perfect pivot
Speaker 12: to the exact customer set that wanted to do this.
Speaker 2: Who still left who you think is a plausible competitor
Speaker 2: to fandueler DraftKings.
Speaker 12: So the truth is, yeah, the game has largely been one.
Speaker 2: I think we can safely say that it's totally been one.
Speaker 2: The sports gambling industrial complex will be dominated by two companies.
Speaker 2: Anyone who challenges them will have to spend three billion
Speaker 2: dollars to get to where they are now if they're lucky.
Speaker 2: But by then Fandulin DraftKings will have acquired more data
Speaker 2: on the American sports gambler and found craftier ways to
Speaker 2: both find and manipulate him. The capital markets will see
Speaker 2: that any attempt to challenge their dominance is a waste
Speaker 2: of money. Anyone willing to invest three billion in a
Speaker 2: sports gambling app would be nuts to invest in any
Speaker 2: place with fanduela DraftKings.
Speaker 13: What they did was they created a business model that
Speaker 13: is a loss leader for X number of years to
Speaker 13: gain market share and dominance.
Speaker 2: That's Jim Allen, CEO of Seminole Gaming. The Seminoles acquired
Speaker 2: the hard Rock brand back in two thousand and seven
Speaker 2: and used it to name their gambling app. It's the
Speaker 2: biggest and the baddest tribal gaming company going after FanDuel
Speaker 2: and DraftKings where they live online.
Speaker 13: Then that creates profitability, you know, in a five to
Speaker 13: seven ten year window, versus trying to be profitable the
Speaker 13: first year. That was their business model, and frankly Wall
Speaker 13: Street supported them in that.
Speaker 2: Hard Rock has managed to get sports, gambling life licenses
Speaker 2: in eight states and wants to be a threat to
Speaker 2: the duopoly very humbly.
Speaker 13: Our app is the number one app in the United States.
Speaker 13: DraftKings is second, not just here in Florida, but in
Speaker 13: the United States. It's because the technology that we have
Speaker 13: is world class.
Speaker 2: You know, maybe, but if you want to know what
Speaker 2: I think, I think the Indian casinos are in basically
Speaker 2: the same position as the Vegas casinos. They're getting to
Speaker 2: the sports better too late, with the wrong approach, and
Speaker 2: they're hunting with inferior weapons.
Speaker 4: So the morning of January tewond, I'm at my home
Speaker 4: in Florida, and I get a text from a high
Speaker 4: school friend of mine, Brian.
Speaker 2: That's Danny Moses, a character in The Big Short, a
Speaker 2: book I wrote about the financial crisis. In the movie version,
Speaker 2: Danny was a short seller who had one swollen testicle,
Speaker 2: which on Wall Street kind of counts as an advantage. Anyway,
Speaker 2: back to Danny and his friend.
Speaker 4: Eight fifteen in the morning. He's on a flight from
Speaker 4: Europe and he lives in Florida, and he's on the
Speaker 4: hard rock gap. But he can't gamble, because you can't
Speaker 4: you have to be in the state right to do it.
Speaker 4: And he says, Danny, you need to go check out
Speaker 4: something on the hard betting app called Specials under the NFL,
Speaker 4: And I go, what are you seeing? He goes, I'm
Speaker 4: seeing a crazy line that the Baltimore Ravens to beat
Speaker 4: the Detroit Lions in the Super Bowl is five hundred
Speaker 4: to one. I said, well, it can't be. Let me
Speaker 4: go look. So literally he's in the air, I'm looking
Speaker 4: around and I find it and.
Speaker 2: It's obviously a mistake. The playoffs are set, Detroit and
Speaker 2: Baltimore are both in them. Baltimore is better than Detroit
Speaker 2: and a favorite to make the Super.
Speaker 4: Bowl, so both teams were locked in. And so I
Speaker 4: look at it, and I look at the reverse of it,
Speaker 4: which is Detroit to beat Baltimore, and that's sixty to one.
Speaker 4: So you know inherently that Baltimore to beat Detroit has
Speaker 4: to be less than sixty to one. So I'm texting
Speaker 4: with him and I said, all right, I'm going to
Speaker 4: put it down. I'll put down as much as I can. Well,
Speaker 4: the max bet being offered was fifty dollars, and I
Speaker 4: found out that day the DraftKings and FanDuel had offered
Speaker 4: the same bet. Roughly the odds have called it thirty
Speaker 4: to forty to one, so we knew we had found something.
Speaker 2: Of course, it's not likely that both Detroit and Baltimore
Speaker 2: will make the Super Bowl, but the true odds are
Speaker 2: nothing like five hundred to one. The Seminoles have clearly
Speaker 2: screwed up.
Speaker 4: Call my friends in New Jersey. I'm like, you better
Speaker 4: jump on this quickly, I said, because it's probably going
Speaker 4: to go away. So they all put it down. Those
Speaker 4: like six or seven guys that made the bet.
Speaker 2: Some huge number of gamblers have probably grabbed the five
Speaker 2: hundred to one odds. Then Danny uses Twitter to tell
Speaker 2: the Seminoles how badly screwed they are. He's actually measured
Speaker 2: it using a company called wager Wire. Wager Wire runs
Speaker 2: an entire market for secondhand sports bets. Yes, you can
Speaker 2: now buy and sell your sports bets with other gamblers,
Speaker 2: so wager Wire can tell you at any given moment
Speaker 2: what your bet is worth. And wager Wire tells Danny
Speaker 2: that he could sell his fifthifty dollar bet for seven
Speaker 2: hundred dollars.
Speaker 4: So I tweet out too hard rock bet by the way,
Speaker 4: which is probably run by a twenty something year old
Speaker 4: who just understands social media but not gambling, basically saying
Speaker 4: thanks so much for this opportunity.
Speaker 2: Still, the Seminoles don't react. They must have algorithms. Everyone does,
Speaker 2: but the Seminoles algoes are obviously not up to speed.
Speaker 2: Not until Danny takes a photo of the bet they're
Speaker 2: offering and tweets it to hard Rock does the tribe react.
Speaker 4: Fast forward a couple days. I open my hard Rock app.
Speaker 4: I'm down here in Florida and the BET's gone. Can't
Speaker 4: find it, And I searched back through and I find it.
Speaker 4: Says void basically voided the fifty dollars bet and credited
Speaker 4: my account back for fifty dollars. They canceled, didn't reach
Speaker 4: out to me, didn't call me. They you know, they
Speaker 4: didn't honor it. So I call my friends in New
Speaker 4: Jersey and I said, my BET's void, how about yours? Nope,
Speaker 4: not void, And they're The reason is because in New Jersey.
Speaker 4: New Jersey Gaming Enforcement Division doesn't mess around.
Speaker 2: The Seminole tribe is apparently willing to treat their customers
Speaker 2: in Florida one way and their customers in New Jersey
Speaker 2: another that's what it begins to dawn on. Danny Moses
Speaker 2: that he shouldn't be placing sports bets in Florida, that
Speaker 2: he'd be better off using friends to place bets with
Speaker 2: fandueland DraftKings in New Jersey. But then the plot thickens.
Speaker 2: The Baltimore Ravens and Detroit Lions keep winning. Both get
Speaker 2: to their conference championships. The bet that wager Wire said
Speaker 2: was worth seven hundred dollars is now worth two thousand,
Speaker 2: seven hundred and eighty three dollars, and the seminoles are
Speaker 2: just pretending that it doesn't exist. Danny goes nuclear, or
Speaker 2: rather he goes onto television.
Speaker 6: More and more gamblers are beginning to share stories of
Speaker 6: how bets got voided by their sports books, alike from
Speaker 6: Danny Moses, an investor who was profiled.
Speaker 4: In I went on CNBC with an interview with contested
Speaker 4: Brewer in the middle of all this, and har Rock
Speaker 4: was claiming that I did reach out to customer service,
Speaker 4: but I did gets a one and hundred number, and
Speaker 4: it just goes into the abyss. I tweeted at hard
Speaker 4: Rock Help. I tweeted at hard Rock Bet. I could
Speaker 4: never get a response.
Speaker 2: At the heart of the new sports gambling industrial complex
Speaker 2: is a predatory market. But the Seminoles don't seem cut
Speaker 2: out to be apex predators. The trick of the role
Speaker 2: is to coax Americans and too voluntarily making dumber and
Speaker 2: dumber bets. But you need to do it in ways
Speaker 2: that people don't really notice.
Speaker 4: Even if I find something that I think is going
Speaker 4: to be great, I don't know if I'm going to
Speaker 4: get paid out on it, And to be honest, that's
Speaker 4: a confidence issue for me.
Speaker 2: Obviously this is just one story, but what I hear
Speaker 2: in it is even the most powerful Indian tribe isn't
Speaker 2: close to ready to compete with FanDuel and DraftKings. If
Speaker 2: Danny could just short the Seminole tribe, he would, And
Speaker 2: I think maybe they sense their bigger problem because just recently,
Speaker 2: Seminole Gaming announced that they'd be open to forming a
Speaker 2: partnership with either FanDuel or Draft Things. And why would
Speaker 2: they do that if they thought they could compete with them.
Speaker 2: That's why these two companies make such great villains. Yes
Speaker 2: they're dishonest with the public when they create their ballot propositions.
Speaker 2: Yes they're targeting vulnerable people who have no real idea
Speaker 2: what they're doing. Yes, they're effectively mining addiction, but none
Speaker 2: of that is why they make for great villains. They
Speaker 2: make for great villains because they're so incredibly good at
Speaker 2: what they do. Preachers aren't going to stop them. Native
Speaker 2: Americans aren't going to stop them. Lord knows, short sellers
Speaker 2: aren't going to stop them. The market power of these
Speaker 2: two companies will enable them to capture their regulators, seduce
Speaker 2: the media, and in general evade real scrutiny. History might
Speaker 2: not repeat itself here, but I'm betting it at least rhymes.
Speaker 14: Thank God, like a bigger Ranta.
Speaker 2: This situation is obviously not exactly the same as that one.
Speaker 2: This sports gambling industrial complex will carve its own path
Speaker 2: through our society. The damage is already inflicting on athletes,
Speaker 2: on college sports, on how fans feel about the whole thing.
Speaker 2: That's where we're going next. But I'm not quite ready
Speaker 2: to leave Vegas yet, because I met a lot of
Speaker 2: interesting people there and I want you to hear more
Speaker 2: from the characters who populated this one time sports gambling empire.
Speaker 2: So in the coming weeks, you're going to hear from
Speaker 2: gambling legend Billy Walters.
Speaker 15: Because I got access to more money, I got invited
Speaker 15: to go to Las Vegas. And you know, clearly that
Speaker 15: was an eye opener. I mean, it's like, you know,
Speaker 15: a wild dog going to meet us.
Speaker 2: You're also going to hear from some old school Vegas bookies.
Speaker 2: How's the legalization around the country changed your business?
Speaker 10: A lot of these guys came in from Europe. They
Speaker 10: were very corporate, British corporate. This is the legal this
Speaker 10: is the marketing, this is the HR this is blah
Speaker 10: blah blah. Why don't we have to adapt ourselves to
Speaker 10: these Brits? You know, we just showed up on our
Speaker 10: doorstep a couple of years ago. They had got these
Speaker 10: English accents and every ratings are so brilliant.
Speaker 2: Against the Rules is written and hosted by me Michael
Speaker 2: Lewis and produced by Lydia Gene Coott, Catherine Gerdeau and
Speaker 2: Ariela Markowitz. Our editor is Julia Barton. Our engineer is
Speaker 2: Jake Gorsky. Our music was composed by Matthias Bossi and
Speaker 2: John Evans of stell Wagon Cinfinett. Our fact checker is
Speaker 2: Lauren ves Polli. Special thanks to a few more folks
Speaker 2: who made this season Against the Rules possible. Jacob Weisberg,
Speaker 2: Greta Cone, Sarah Nix, Christina Sullivan, Kerry Brody, Eric Sandler,
Speaker 2: Kira Posey, Jordan McMillan, j Flanagan, Owen Miller, Sarah Bruguier,
Speaker 2: Jacob Goldstein, and Sophie Crane. Against the Rules is a
Speaker 2: production of Pushkin Industries. To find more Pushkin podcasts, listen
Speaker 2: on the iHeartRadio app, Apple Podcasts or wherever you listen
Speaker 2: to podcasts, and if you'd like to listen to ad
Speaker 2: free and learn about other exclusive offerings, don't forget to
Speaker 2: sign up for a Pushkin Plus subscription at pushkin dot fm,
Speaker 2: slash plus or on our Apple show page.
Speaker 7: How does it feeled?
Speaker 2: I have one a parlay because we don't have a
Speaker 2: trusting relationship. I'm counting it. Yeah, wait, that's actually dollars
Speaker 2: and ninety five cents. Oh you keep the change?
Speaker 11: Well you also you as there.
Speaker 4: The brains are in the operation.
Speaker 2: Yeah, the brains are brain. There were no brains a
Speaker 2: found operation. That's the amazing thing. And the really amazing
Speaker 2: thing is that the first thing you think when you
Speaker 2: saw it worked out is I know something when all
Speaker 2: I did was purely yess. I think the trick to
Speaker 2: this game is, if that happens, you leave