Sports Betting

Sports betting has been technically legal (though controlled and regulated by the states) since 2018, when the Supreme Court struck down a 90s-era law banning it everywhere other than Las Vegas, for some reason. In 2012, New Jersey legalized it, in an attempt to help Atlantic City recover from the GFC and attract more gamblers. The NCAA (of all things) sued the state, and lost. The Court cleared the way for any state that wished to open the doors to sports betting:

Within a year and a half, Goldman Sachs estimated, Americans were betting about $50 million a month. By late 2023, that figure exceeded $1 billion a month—a 20-fold increase.

Two companies - DraftKings and FanDuel - were positioned to take advantage of the legalization, which rolled out in a few states right before the pandemic hit. They’d recruited millions of ‘daily fantasy’ players, a loophole allowing people to play fantasy sports for money, and were ready to cash in. Now, the two companies control 75% of the US sports betting market, currently legal in thirty states.

Gambling addiction affects a small percentage of the populace - mostly men - but can be difficult to study. Fortunately, social scientists have had a running experiment, complete with control groups, for the last six years. The results are, well, not great:

In a study released in June, researchers from Southern Methodist University, the University of Maryland and the University of California San Diego used anonymous bank records from hundreds of thousands of bettors across the US to track their gambling spend and monthly income from 2019 to 2023. In states with access to online sports betting, they found, rates of people spending at least 10% of their income on gambling rose slightly, with the greatest increases among low-income bettors.

Ten percent of your income on gambling is a distressing number. But, a ‘slight’ rise in addicted gamblers is to be expected in a large population. Surely the negative societal impacts are contained there, right?

In states that allow online betting, they found, the average credit score drops by almost 1% after about four years, while the likelihood of bankruptcy increases by 28%, and the amount of debt sent to collection agencies increases by 8%.

Oh, right, okay. The impacts of legalized gambling are felt across the entire population, though concentrated among the most addicted gamblers. Which is a problem for an industry that has taken in billions in investments, and spent billions more in marketing.

The blanketing of our sports with gambling content props up and industry whose profits are inversely correlated to a tiny minority of ‘whales’, or chronic losers who bet money they may not have to feed their addiction:

…fewer than 5% [of bettors surveyed] withdrew more from their betting apps than they deposited. These few players—whose wagers apparently won—collectively earned more than $100 million. The next 80% of bettors made up for those operators’ losses. And the 3% of bettors who lost the most accounted for almost half of net revenue.

You are reading that correctly - three percent of app bettors account for half of the gambling companies’ net revenues. They know this, and the regulators know this, which is why current attempts to provide gambler ‘services’ are woefully inadequate. But, the gambling companies actually take things a step further and punish people who are actually good at it:

Among the main challenges for a pro bettor is finding places that will take your money. If you show signs of being good, or even just highly methodical, most sportsbooks will drastically limit how much you can wager.

If you are a skilled stock trader, there are laws governing the financial system that prevent brokers from refusing your business because you might turn a profit. Not so in the gambling industry. Companies use sophisticated algorithms to spot ‘sharps’, or professional gamblers, and cut them off from the ability to bet large sums.

For the whales, however, the opposite is true. Some sharps have put this to the test, simulating addictive behavior:

Simulating addictive behavior, says [Rufus] Peabody, is an effective way to get online sportsbooks to send you bonus money and keep your accounts open. This isn’t necessarily because operators are targeting problem bettors, he says; they’re simply looking to identify and encourage customers who are likely to spend—and lose—the most. This just happens to be a good way to find and enable addicts, too.

Problem is - people who lose and keep losing are the addicted bettors. That’s how it works! For the 97% of us who lose or win a little and log off, gambling companies couldn’t care less. Whether intentional or not, their whale-seeking software is feeding dangerous addictive behavior.

Nor is it dangerous only to the gamblers themselves:

Earlier research found that an NFL home team’s upset loss causes a 10 percent increase in reported incidents of men being violent toward their partner. Matsuzawa and Arnesen extend this, finding that in states where sports betting is legal, the effect is even bigger. They estimate that legal sports betting leads to a roughly 9 percent increase in intimate-partner violence.

Betting houses have tried to juice their revenues by pushing money-losing parlays to tilt the odds in their favor, but it has been difficult to offset the enormous sums spent on advertising. DraftKings reported its first profitable quarter since it went public this last August, after years in the red. So what’s next?

The last roll of the dice, so to speak, is legalizing casino app gambling, a far more steady, profitable business. Sports betting is ‘lumpy’, meaning it is prone to swings and susceptible to sharps who can take advantage of uneven odds to take money from the house. Casino games are literally programmed to lose, slowly, and over a long period of time. Just ask the psychiatrist who lost $400,000 in a year doing it.

Sports betting is barely a profitable endeavor for the companies who’ve captured most of the market, and it generates scant tax revenue for states - less than legalized marijuana. For the gambling giants to ever have a sustained business, they must tap into casino gambling, which means extracting more from the dwindling number of whales.

It is no surprise that this Supreme Court defended ‘states’ rights’ by allowing predatory gambling companies to bribe state officials to open the gates to their poorest and most vulnerable, while also making the act of watching sports in this country deeply unpleasant. We all lose, so a tiny few can win. Damn if that isn’t as American as, well, baseball. Just don’t bet the over.

Sports Betting

Or, if you are going to bet the over, make sure to do it with your boss’s money:

A former Jacksonville Jaguars employee who stole more than $22 million from the team sued FanDuel in federal court on Tuesday, claiming the sportsbook "exploited" his gambling addiction and intentionally ignored its responsible gaming and anti-money laundering protocols.

Listen, I know we just spent a lot of words talking about the ills of gambling disorder, but this is kind of funny, right? There are so many details in this bonkers story.

First off, the Jacksonville Jaguars had a twenty-something managing their ‘virtual credit card program’ which allowed employees to make business-related purchases and expenses. He was the only person in charge, and stole twenty-two million over three years by duplicating expenses, inflating transactions, etc. I am clearly not as smart or successful as the median NFL owner, but ‘do not put a child in charge of your entire org’s expenses’ seems like reasonable advice.

At the time, Patel’s lawyers claimed he suffered from a ‘serious gambling addiction’ and that most of the twenty-two mil went to FanDuel.

FanDuel, for their part, treated Patel like the whale he was:

The sportsbook gave Patel $1.1 million in credits as well as trips to the 2023 College Football Playoff championship game and the Masters in 2021 and 2022, and Formula 1's Miami Grand Prix, according to the filing.

And, according to Patel’s lawsuit, went even farther than that:

The suit alleges Patel's VIP host at FanDuel, Brett Krause, communicated with Patel as many as 100 times a day between 2021 and 2023, on several occasions contacting Patel on days he was not gambling to find out why. Krause acknowledged on numerous occasions that they were "breaking AML [anti-money laundering protocol]," the suit says.

To sum up, FanDuel identified a young, addicted employee of an NFL team (who, by the way, are barred from betting on sports) and assigned a VIP host who stayed in constant contact with him, taking him on trips to championship games and sporting events, while he stole millions from his employer.

There are no real victims here, since everyone involved is either an NFL or gambling website owner, but it is easy to see how these things can spiral out of control in the real world, and how pathetic the ‘money laundering’ and ‘embezzlement’ controls were at FanDuel. It used to be you had to fly to Vegas to receive this level of treatment - now it walks around with you every day, in your pocket.

Endowments

If you have a lot of (legal) money and wish to engage in (legal) gambling, you can do it on the (highly regulated) stock market, or through (somewhat less regulated) private investment vehicles.

At a certain point of money-having, you have too much money to call up Vanguard and say “I would like to put all of my money in an index fund” because they would ask “how much?” and you would say “twenty billion dollars” and they would hang up the phone. That is not to say you couldn’t simply park your giant pot of cash in an online brokerage account, but it is not what the wealthy do. They want active management, because the need to be doing something with your vast piles of money distracts from the fact that if you’re gambling with your billions, maybe you don’t really need it at all.

There is another argument to be made, that maybe universities don’t need to be gambling with their endowments, which could be better spent doing things like teaching kids and offering teachers tenure, but unfortunately the people in charge of said endowments behave more like the idle rich than the custodians of storied educational institutions.

This is all a way of saying that Harvard University has an endowment of over $50 billion dollars, and it does not do a very good job of turning that into more money, which is an important thing to do, I guess:

Over the past 20 years, the 8.8% annualized return for Harvard’s endowment ranked seventh of the eight Ivy League universities and, according to the National Association of College and University Business Officers, lagged 60% of university funds with more than $5 billion under management. Harvard’s 10-year return trailed 80%.

Can you imagine how dull the annual meeting of the National Association of College and University Business Officers must be? Anyhow, Harvard is doing a lousy job managing its massive endowment, and that’s got the NACUBO up in arms.

The endowment is managed by an ‘in-house hedge fund’ (cool) called Harvard Management Co, and has been investing in riskier vehicles like hedge funds and private equity (not cool), but, again, is bad at it. That is not to say that the employees of HMC are not well-paid for their efforts:

…HMC tax filings show the endowment paid its top investment managers and executives a total of about $800 million—enough to cover the school’s undergraduate financial aid budget for more than three years.

Endowments, like most things in our increasingly unequal society, have ballooned in size and scope over the last couple decades - likely due to the increasingly wealthy alums (and their tax exempt status). Rather than reinvesting some of that money in, say, undergraduate financial aid, colleges have turned to investment teams to grow the pot, collecting banker salaries for their troubles.

It is not only that endowments have become vehicles to enrich the richest colleges and their administrators, they’ve also enabled universities to snap up precious real estate in high value markets like, say, Boston:

Though construction ceased in 2009 amid the recession, Harvard continued to buy properties, only to leave them vacant for nearly a decade. Finally, in 2019, the City of Boston granted Harvard permission to develop 1.9 million square feet (approximately 15 acres) for the Enterprise Research Campus. Only 250,000 square feet were designated for housing.

Did you know Harvard evicted thousands of students from its more than sixty properties during the pandemic? Cool.

Harvard, perhaps more so than even its Ivy League brethren, has worked for decades to become a hedge fund with some colleges attached. Endowments make a fantastic argument for a wealth tax, because colleges continue to demonstrate their obscene accumulation is not for the benefit of the students or faculty. The bankers get paid, though.

Round Up

Sometimes around here, we like to check in on what’s happening to the (bad) people we’ve previously talked about.

The US Senate has voted to hold Ralph de la Torre in criminal contempt of Congress for failing to appear to testify about why he pocketed hundreds of millions as he bankrupted a major hospital chain.

Alex Jones is now (finally) facing the liquidation of his Infowars show and its associated bits, after attempting for years to hide his wealth behind bankruptcy filings. It is more of a moral than financial victory for the Sandy Hook families, because it’s estimated Jones’s junk will only net in the single-digit millions, since he’s siphoned off much of the money to family members, and the brand isn’t really worth much without him at its helm. This hasn’t stopped him from actively campaigning with the GOP and doing other ‘shows’, because if you’re a brazen enough financial criminal the law can find it difficult to keep up.

Rudy Giuliani has been ordered to pay $300,000 to the accounting firm who tried to trace all his assets during his failed bankruptcy filing. The firm can get in line behind the other people Rudy owes money to, some of whom are in court trying to force him to sell his properties. Oh, and Rudy was disbarred in DC, a huge blow to any GOP Congressperson in need of high quality legal defense in the District.

Loan servicer and comic book villain Navient has been barred from federal student loan servicing and ordered to pay $120 million in fines and compensation to borrowers it screwed over. It took eight years for the government to prevail in the case, though the award pales in comparison to the $1.85 billion the company paid in 2022 for predatory lending.

Short Cons

ProPublica - “Three investigators for the Heritage Foundation have deluged federal agencies with thousands of Freedom of Information Act requests over the past year, requesting a wide range of information on government employees, including communications that could be seen as a political liability by conservatives.”

NY Mag - “In a way, Rupert Murdoch’s tabloid made Eric Adams mayor. From its front-page endorsement in the month before the Democratic primary in 2021 until the end of the election that year, the Post printed ten covers either boosting Adams or trashing his rivals.”

American Immigration Council - “In total, we find that the cost of a one-time mass deportation operation aimed at both those populations—an estimated total of is at least $315 billion. We wish to emphasize that this figure is a highly conservative estimate.”

Jalopnik - “A new survey shows that 31 percent of American drivers who financed their car are underwater on their loans. The problem is even worse for EV owners – 46 percent of those folks have negative equity in their electric cars.”

LV Review Journal - “Federal prosecutors announced criminal charges against a company founded by Las Vegas celebrity Dan Bilzerian, and against his father, alleging the elder Bilzerian “funneled” money to his son’s business while owing judgments that now surpass $180 million.”

Miami Herald - “The FBI descended on a luxury Miami waterfront home Wednesday in a raid connected to the theft of cryptocurrency the government said was worth hundreds of millions of dollars.”

Delish - “Despite the high price tag—$75 for five cookies, compared to just $21 for four in the U.S.—customers rushed to buy them, only to be met with disappointment. Instead, what they found were days-old cookies that were reportedly stale and flown in from Hawaii, rather than freshly baked goods from an official Crumbl outlet.”

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