Thursday, October 25, 2012
Authorities expose $50M betting ring
By Chad Millman
ESPN The Magazine
Queens District Attorney Richard A. Brown and New York City police commissioner Ray Kelly announced the indictment of 25 people Thursday following an 18-month investigation into illegal sports betting in five states and allegedly yielded payouts of more than $50 million on horse racing, pro and college football, basketball, hockey and baseball.
"Illegal gambling is not a victimless crime," Brown said at a morning news conference. "Such unlawfully earned profits are often diverted into more insidious criminal enterprises."
A little more than 24 hours earlier, Nevada Gaming Control Board agents, who had been assisting New York investigators in the case since July 2011, arrested eight people in Las Vegas on charges of conspiracy, money laundering and enterprise corruption. Among those taken into custody was Mike Colbert, a prominent Las Vegas sports book director for Cantor Gaming.
Arrests took place in New York, New Jersey, Pennsylvania, Nevada and California.
The Las Vegas arrests initially were reported Wednesday by the Las Vegas Review-Journal on its website. The news caused a ripple effect throughout the insular, yet highly liquid, world of sports betting. While only $2 billion to $3 billion is wagered on sports each year in Nevada, the only state in which betting on individual sporting events is legal, it is estimated that another $500 billion is wagered worldwide by Americans, either with illegal bookmakers or via Internet betting sites.
The owners of Curacao-based Pinnaclesports.com, one of the most prominent sports betting websites, were named in the indictment.
"The ramifications of this are huge," one industry source told ESPN. "The guys involved had to be handling millions of dollars a week."
The professional sports betting world is a complex web of bookmakers, gamblers, people who make bets on behalf of gamblers, and others who collect those bets. It spreads from brick-and-mortar casinos in Nevada, to local bookies in nearly every American city, to Internet sports books mostly based in tropical locales such as Costa Rica and Antigua and Curacao. It is illegal for offshore books to accept wagers over the Internet from people in the United States. Those arrested Wednesday allegedly are agents hired to help gamblers circumvent those laws, as well as bookmakers, distributors and collectors.
"I know that people in the islands are crapping their pants right now," a source with ties to the offshore sports betting industry told ESPN. "The money involved in this is what moved point spreads."
Cantor Gaming, an affiliate of the New York-based financial services firm Cantor Fitzgerald, is not implicated. But Colbert has been a visible presence representing the nascent wagering company on the Vegas Strip. Cantor Gaming is trying to revolutionize the sports wagering business by using high-speed, Wall Street-style trading philosophies at the six Las Vegas sports books that it runs. It also has been at the forefront of mobile gaming efforts, which allow in-state residents to make bets at Cantor properties using mobile devices. Cantor has also pushed hard to popularize in-game wagering -- in which bettors can bet on plays and ever-changing odds of which team will win -- as a game is happening.
But mostly, the Cantor sports books and Colbert have become known for their willingness to take nearly any bet. Over the past several years, most Nevada-based sport books have placed limits on the size of the wagers they are willing to take, to mitigate any long-term losses. But Cantor became a favorite of professional bettors -- known around Las Vegas as sharps -- for inviting any wager, no matter the size. Boxing champion Floyd Mayweather often tweets pictures of the six-figure bets he has made at the M.
Cantor officials declined to comment. According to Jerry Markland of the Nevada Gaming Control Board, the investigation is ongoing.
The arrests come at a turbulent time for the sports betting industry. According to the National Gambling Impact Study, released in 1999, as much as $380 billion was bet illegally on sports each year in the United States at that time. That study predates the rise of online wagering which, until crackdowns by the federal government in recent years, had been relatively easy to access for U.S. bettors. Some industry estimates now put the total amount illegally wagered nationwide at $500 billion.
Many states struggling with crippling budget crises have made it known that they would support legalized, state-regulated sports betting to help generate revenue. In 2009, New Jersey sued the Department of Justice to overturn the Professional Amateur Sports Protection Act (PASPA), a 1993 law banning sports betting nationwide (four states that already had made sports betting legal -- Delaware, Montana, Oregon and Nevada -- were grandfathered in. At present, only Nevada and Delaware offer sports wagering).
New Jersey citizens also recently passed a referendum making sports betting legal in the event that the lawsuit, which has been winding its way through the courts for three years, is won. Meanwhile, the four U.S. major professional sports leagues and the NCAA have since sued New Jersey, saying the referendum violates PASPA.
A hearing in that case is scheduled for Dec. 18 in Trenton, N.J.