You can’t watch American sports without a barrage of commercials about sports betting — and it’s changing how fans interact with the action. Rolling Stone writer David Hill joins host Krys Boyd to discuss how new sports betting laws have opened up the market for all kinds of wagers and types of gamblers, the people who can’t stop, and the ways professional sports is changing because of the new money involved. His article is “Is the $11 Billion Online Sportsbook Bubble About to Burst?”
The online sports betting boom
By Madelyn Walton, Think Intern
Put together, sports and gambling have always been some of Americans favorite pastimes. Before the introduction of the NFL in the 1950s, popular sports to bet on were baseball, boxing, and horseracing. As soon as games became televised and the point spread was implemented, gambling took off.
Rolling Stone staff writer David Hill joined host Krys Boyd to talk about the world of sports betting. He spoke on the power of this industry, the government’s take on its growing popularity, and why sport fans find betting entertaining. His article is “Is the $11 Billion Online Sportsbook Bubble About to Burst?”
“PASPA, which stands for the Professional and Amateur Sports Protection Act, was a law in the U.S. that prohibited sports betting, except in a few states, like Nevada,” Hill says. “It was overturned by the Supreme Court in 2018, and ever since, sports gambling has exploded into the American zeitgeist.”
Online gambling companies such as Draft Kings Casino and FanDuel have made the accessibility of gambling in real time a big market for American sport fans.
Fans are intrigued by sportsbook ads and enticing promotions for new members.
While some fans tune into the game in person, other fans attend watch parties or stream various games at once from the comfort of their home.
One gambler Hill spoke with can’t get enough of the experience.
“He goes to live sporting events and bets on his phone — well, phones, because he has a few of them. He loads one with an over bet, one with an under, waits for a batter to get a hit and tries to press the right bet on his phone before the sportsbook can adjust the odds,” Hill says.
Some fans say that they watch the game on a delay to beat the sportsbook.
“Revenues for sports-betting companies reached nearly $11 billion in 2023, up 44.5 percent from the year before,” he says.
But increased popularity in the gambling world raises a few problems. Some athletes have been accused of rigging the games, but the problem gambling appears to be more prevalent with young men under 30.
“This has given the impression that sports betting appeared out of nowhere and is corrupting sports,” he says.
Hill is a gambler himself and has seen its recent history transpire.
“Gambling, to me and mine, was something we did for fun, and something everyone we knew did. By the time the PASPA repeal happened, I was the proverbial frog in the boiling pot of water,” he says. “I didn’t understand what all the fuss was about.”
The federal government is honing in on the activity and some sportsbooks are starting to scale back on marketing plans. The regulations on sportsbooks and betting are continuing to play out.
“After a cascade of 38 states adopted sports betting, voters and legislators in the states that have yet to come on board have pumped the brakes, with California, Georgia, and Texas all recently rejecting it,” Hill says. “The tide appears to be receding.”
“What I learned was that sportsbooks, state governments, and gamblers are all reconsidering a lot of what they assumed about this business, and that we just might be experiencing the beginning of the end,” Hill says.
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Transcript
Krys Boyd [00:00:00] Some fans watch sports out of love for one particular team. Others are interested in observing great athletic performances no matter who’s on the field. But in the past few years, a different motivation is turning large numbers of Americans into obsessive viewers. They’ve got money not just on a game, but maybe on one particular play. A wager made possible by the Big Bang in online sports betting. From KERA in Dallas, this is Think. I’m Krys Boyd. Sports betting used to be an under the table industry in most states. You could do it, but you had to know a bookmaker and you risked getting in trouble. The Supreme Court overturned that prohibition in 2018, which coincided with the rise of online fantasy leagues and positioned a handful of companies to hit the ground running. Converting all that data into categories for people to wager on. The industry has grown since at an explosive pace, but as my guest will tell us, it hasn’t turned out to be quite the win that it’s most enthusiastic boosters were hoping for. David Hill is a writer for Rolling Stone magazine, which published his article “Is the $11 billion Online Sportsbook Bubble About to Burst?” David, welcome to Think.
David Hill [00:01:09] Well, thank you so much for having me.
Krys Boyd [00:01:11] Talk a little about why fantasy sports sites were in such a good position to move rapidly into processing wagers on real life events.
David Hill [00:01:20] Well, you know, daily fantasy sports was sort of an innovation that evolved out of fantasy sports, which a lot of Americans were playing. But we’re operating in the sort of gray area as a quasi gambling game that sort of straddled the line between sports betting and and playing fantasy games. And they built a big customer pool, a big customer base through that particular offering. And when sports betting was legalized, they were prepared not only with the customer base, but also the technology for mobile sports betting, which I think a lot of the more traditional gaming brands weren’t ready with.
Krys Boyd [00:01:56] So with those fantasy leagues, as I understand it, before the overturn of PASPA, the Professional and Amateur Sports Protection Act, people might have taken that data and bet individually with friends, but they weren’t able to bet on the site. Is that right?
David Hill [00:02:12] No. Daily fantasy sports where people were playing with real money. They were entering these sort of tournaments with tournament fees and there were cash prizes. And so they were sort of operating in this gray area, kind of awaiting regulation. There were big legal fights in New York and in New Jersey around the legality of daily fantasy sports. This all predated the Supreme Court decision that ended up paving the way for, you know, the regulation of total sport betting.
Krys Boyd [00:02:39] So now that online sports betting is widely available, you know that even TV broadcasts are running graphics of point spreads and sportscasters are talking about them. Younger listeners may not realize that didn’t used to be the case at all.
David Hill [00:02:53] No, I absolutely this wasn’t the case before. But, you know, in a lot of ways, I feel like this is analogous to the situation that we faced with beer advertisements in the 1970s where there was a lot of pushback against the beer industry for running TV ads, particularly during sporting events. There was a big fight over how to get the government to regulate those ads. Now they’re so omnipresent, we don’t even notice them. It’s possible that that could happen again with gambling ads.
Krys Boyd [00:03:23] I’ll confess, David, it gives me agita to think about anybody being a professional gambler. But reading about this guy called that you call Scott Brody was really interesting. He treats his betting like a job, including. Including showing up in person. What is his strategy?
David Hill [00:03:40] Well, Scott’s what they call a court sider. In court siders are some of the more I think of the piece, I call them the bane of every sportsbooks existence. They they are betting life at sporting events live. And they’re trying to beat the sportsbook to the information that’s happening live at the game, whether it’s a call or whether they you know, they know that a ball, for example in a baseball game is going to be out or whether it’s going to be a home run or whether it’s going to be an error, they would try to bet that information before the sportsbooks odds can catch up to that information. And they’re quite successful. Scott, Somebody who has done pretty well with this and has made it his full time living.
Krys Boyd [00:04:18] In a way, it harkens back to the old way of betting on sports, right? Historically, legal or not, lots of betting happened right in the venue where games were taking place.
David Hill [00:04:28] Yeah. That’s you know, the origin of sports betting in America is that when there was a big you know, people used to bet on horse racing. That was one of the biggest sports in America, and that’s what people are wagered on. And it was incredibly popular. There was a big wave of sort of anti-gambling political fervor that swept the nation in the early teens, early 20th century. When the racetracks were being shut down in different states, the gamblers moved to the ballpark. And bookmakers, instead of taking bets on horses, showed up in the ballpark, stood in the stands and would offer and take bets on the various plays in the baseball game right there in the stands. That’s really kind of how sports betting came to be in America.
Krys Boyd [00:05:09] So why this explosion in online betting? Is it just the ease with which people can gamble on games happening pretty much anywhere?
David Hill [00:05:18] Yeah, I think there’s two things at play. One is that there’s always been, you know, a certain segment of the American population that has always bet on sports, even when it was illegal. This is one of these things that a lot of folks did with bookies that they maybe new at their local pub or at their fraternity house or whatever. And there’s always been some amount of people betting on pools in their offices or betting with their friends on games. So those folks were all pretty ripe for the picking whenever this became regulated and these companies entered into this space. But in addition to that, there was a sort of new generation of sports bettors who were entering this world for the first time. And what I think really grabbed them was a combination of an onslaught of marketing money that the top companies in this industry sort of dumped into trying to recruit new customers with big, you know, really generous offers of bonuses and free bets and things like that, essentially giving away free money to get people to sign up. And also, this technology that was really new to sports betting that was developed by those fantasy daily fantasy companies that we talked about before.
Krys Boyd [00:06:24] Yeah, it is remarkable, right? People don’t have to travel to like Atlantic City or Las Vegas to bet they can do this from anywhere that has wi fi.
David Hill [00:06:32] True. But that’s been going on for a while. You know, the beginning of online betting, really. It really goes back to the late 90s when the technology was developed to process bets online. And a lot of American bookmakers, illegal bookmakers, decamped for the Caribbean to avoid getting arrested here in the United States and started to run offshore sportsbooks through the early aughts. And a lot of people were betting online as far back as, you know, 1998, 99, though, a lot of those companies still exist to this day and are quite large. And the offshore gambling industry is pretty big and by some estimates might even be bigger than the regulated American sports betting industry today.
Krys Boyd [00:07:12] Yeah. Why is Costa Rica in particular like the epicenter of this industry?
David Hill [00:07:18] Well, there is one man named Ron Sacco who was really probably the biggest illegal bookmaker in the history of the United States, who left America to avoid being prosecuted for booking sports. And he goes to a couple of different countries, but eventually settles down into Costa Rica, because Costa Rica was a country that did not have a prohibition on gambling and he was able to get his company license there as a as a digital or sort of a service provider company and could get sports betting websites up and running that could take bets from all over the world. And he built that company into a very successful one. And a lot of American bookmakers saw what he did and they followed him down there. There was sort of a an exodus of American bookmakers that traveled back, traveled down there and set up shop in and around what he was doing. And it really built up a quite a big industry in Costa Rica. There’s tens of thousands of people even to this day that work in the sports gambling industry down in Costa Rica. And it was all because of an initial surge of Americans that went down there. But now there are people from all over the world that have come to Costa Rica to set up shop.
Krys Boyd [00:08:29] So now sports betting is allowed and regulated in 38 states. What is the motivation for states that did legalize online sports betting?
David Hill [00:08:39] Well, it’s just that they want tax revenue. I mean, I think all state governments are looking for ways to, you know, fill in budget holes in their budget. And they are always looking for ways that they can do that without raising taxes. So sports gambling offered that to them. It was it was an attractive proposition to say, you know, let’s let’s legalize this and we’ll pay taxes and you can use that money to pay for roads and hire teachers and state troopers and the like. It hasn’t really panned out like that for most states. In New York where I live, the tax rate that the companies agreed to was 51%, which was pretty onerous, is far and away higher than the next, you know, the next biggest tax rate in America. And the state has done quite well. They’ve made billions of dollars in tax revenue off of sports betting here. But the providers really hate it. And it’s really cut into their bottom line. They don’t believe that they can make a profit with it. And they’ve been trying to get the state to bring that rate down.
Krys Boyd [00:09:35] Since all of this is taking place online. David, is it pretty easy for people who live in non gambling states to get around any geographic restriction?
David Hill [00:09:44] No, it’s quite hard, actually. The technology that sort of geo fences these sports books into a particular state works pretty well. And I would say it’s even more specific than particular states. There are some states where sports gambling is. Something that’s run by Native American tribes, and they sometimes will require you to be within the boundaries of that that that tribe or even within an actual casino. And they can they can prevent you from making any bets unless you’re within that geofence. The technology’s pretty good. People try to trick it. I know that before we had sports betting here in New York and it was only in New Jersey, a lot of people would try to like ride the Staten Island Ferry or whatever to get their phone to show them as being in New Jersey so they could make a bet. Sometimes it worked. Sometimes it didn’t. Most of the time it didn’t. You really have to be pretty close, pretty pretty far away from the border of a state for the for the technology to recognize that you’re in that state and can make a bet.
Krys Boyd [00:10:43] So back to this guy you call Scott Brody. He has been quite successful with this, which doesn’t exactly endear him to the online companies he uses to place wagers. Is it a small fraction of customers who tend to win the lion’s share of the money that’s up for grabs?
David Hill [00:11:00] Well, it’s a small share of the customers who lose the most money to the sportsbooks. There’s a lot of customers that win or lose a little bit of money. But of the customers who win a significant amount, a significant amount of money or really customers who show the ability to win money. And by that I mean even if you’re losing better, the sportsbook can profile you and know whether or not the way that you’re betting should win over the long run, whether you have some sort of edge in this market. And when they profile players who have that edge, they will limit their bets down to essentially, you know, they’ll they’ll limit them, I mean, down to as low as a penny a bet, as a way to, you know, protect their own risk by taking bets from winning bettors. And in the beginning, they really applied this type of limiting practice to some of the larger professional bettors, people who are trying to bet tens of thousands of dollars a game. But what we’ve seen happen over the last five years is that now people are being limited, even though they may only bet 100 bucks or 50 bucks. They’re being limited down to like $5 just because they’re winning. And so we’re seeing a growing number of bettors becoming frustrated by the fact that they’re not allowed to win.
Krys Boyd [00:12:10] Yeah. You write about the fact that there are even associations that represent the rights or the interests of bettors against these companies.
David Hill [00:12:18] I think gamblers realize that all the sportsbooks are have lobbyists and lawyers and and employer associations, their industry associations. They’re lobbying, even writing the legislation and writing the regulations for these legislators who, you know, understandably know nothing about the gambling industry. In a lot of these states who now welcome sports betting in they’re having their horseracing commissions kind of regulate this industry and they don’t know anything about it. So the industry’s sort of writing the laws. I think gamblers, particularly this growing number of people who are doing this as a side hustle or maybe even doing it full time as a job are realizing that their interests aren’t being represented there at all. And furthermore, I think that even just a recreational gambler who maybe doesn’t want to make a living at it, but would like to believe that they could win every once in a while, recognize that their interests aren’t being represented. And there’s also organizations that deal with responsible gambling and and treat problem gambling issues. They realize that their interests aren’t necessarily being represented either. So there’s quite a bit of organization happening in a short period of time for people to sort of figure out how do I get in the room and make sure that our interests and our voices are being heard. And I thought that was really interesting that the sort of leading group of the leading group that’s sort of organizing and trying to advocate for the rights of the bettors is being headed up by Billy Walters, who’s one of the most successful and famous sports bettors of all time.
Krys Boyd [00:13:41] David, let’s go back to this profiling. How do these companies create these customer profiles to determine how much any given customer is likely to spend, likely to lose? Is this all done by algorithm or is it done by hand by somebody sort of looking at people’s social media posts and that sort of thing?
David Hill [00:14:00] Well, I’m sure it’s done by algorithm. I mean, there’s you know, every company probably has their own way they do it and they’re all very close, you know, tight lipped about it. I did speak in the piece to one person who does player profiling for one sportsbook in particular, and he was pretty adamant that he thinks it’s pretty easy to identify a winning player pretty early on in that gambler’s Bet portfolio, for lack of a better term, that he thought that in a small number within a small number of bets, he could tell somebody is going to win. And the way that he identifies a winning player is if a person is able to make a bet that at the time they make the bet, the odds are better than what those odds will be at the time that the game kicks off and that that’s usually a good indication that this person is on the right side of the market. Really, sports gambling is a lot like financial markets and the odds are really prices and the prices are dynamic. They’re constantly moving from the time they go up to the time that a game kicks off. And really what people are trying to do is buy low and sell high. And so being able to identify people who find that low price in the market is how he’s profiling potential winning bidders.
Krys Boyd [00:15:06] There are some alternative ways of doing this that are starting to arise based on the ways that this resembles, you know, betting in the stock market, for lack of a better term. What is the operation of the company sport trade?
David Hill [00:15:19] Well, sports trade is an interesting company. They’re a startup that was started by this guy, Alex Kane, who really was not a gambler but was interested in the world of sports betting because of his interest in finance and and the stock market. And he realized that there might be an opportunity to create a marketplace where gamblers really could just bet with each other by offering and trading essentially contracts on the outcomes of these sporting events. There is a precedent for this type of this type of a sportsbook overseas in Europe, one of the biggest sportsbooks over there is Betfair, which is a which is just that. It’s a market, it’s a it’s an exchange where people can buy and sell out of contracts and sporting events constantly, continuously, up until the point that a game kicks off. And he’s trying to build the same thing here. You know, it’s difficult because in America we don’t have a national you know, this isn’t a national law, which means there’s also not national regulations at state by state. And every state’s going to have its own regulations, its own laws, its own ways that it’s doing things. It also means that every state’s going to have its own pool of liquidity. If you are going to make a bet in New Jersey, then that money is going to stay in New Jersey. So for an exchange, if you’re betting into an exchange or you’re buying or selling contracts in exchange, it’s only to be with other people that are in that state with you, which is one of the challenges that I think he has. But if we ever get to a point where we have sort of a national where where where we have one federal sports betting law, it’ll really open up the opportunity for a guy like Alex and a company like sport trade to build something, build that out into something very big.
Krys Boyd [00:16:57] So Scott formulated his strategy after watching videos made by a gambling influencer who calls himself Captain Jack. And one key piece of advice Captain Jack offers is not to treat sports betting like a get rich quick scheme. So what is his approach?
David Hill [00:17:14] Well, I think what he means by that is that people shouldn’t be people shouldn’t invest in sort of bet a little, win a lot type bets, which are really ironically, the most popular bets that sportsbooks have right now. The vast majority of people in America who are betting on sports are betting things called parlays, which is where you combine a lot of bets into one. And the reason these are enticing to people is that you can bet a very small amount of money, but your potential winnings can be quite large. But it also means that these bets are really, really difficult to hit. So it’s a lot like buying a lottery ticket. And I think what Captain Jack is saying to people is that if you can pick six or 7 or 8 games, you’d be much better off betting six or 7 or 8 different propositions and betting those games individually than putting them all together in a parlay. Over the long run, you’re probably going to win more money. But I think he also really preaches that people should learn how to do the math. You know, really learn how to analyze the market and be smart about the bets that they’re making. Ultimately, one of the things I learned after meeting a lot of professional gamblers writing this piece is that some of the most successful sports bettors in in America don’t even know the names of the players that play these games. And I think that’s counterintuitive because I think a lot of people who bet on sports in America really believe that it’s their knowledge of sports that’s going to help them win. A lot of people love sports. They maybe follow a sport really closely. They think they know a lot about that sport, yet they can’t win it betting on it. It’s because it’s fundamentally a different game. And a lot of people who are more successful at betting on sports and winning at sports are just better at modeling. They’re better at analyzing data. And they maybe don’t know as much about sports, quote unquote, than your average sports fan does.
Krys Boyd [00:18:50] So it’s a little bit how about the way that some really, really good tournament Scrabble players may not even know the meaning of all these words that they play in a game?
David Hill [00:19:01] Right. They are. English isn’t even their first language in some cases. It’s a very good it’s a very good analogy. And I think the same thing is true here. You know, Spanky is one of the sports bettors that I talk about in the piece. He’s a very well-known professional here in America, and he’s been a pretty outspoken voice on a lot of this stuff. He he brags all the time that he has no idea. He couldn’t tell you the starting five on any basketball team in America. Yet he makes millions of dollars a year betting on basketball.
Krys Boyd [00:19:29] Is it your sense that betting on a game enhances the enjoyment of that game, or does it somehow fundamentally take away from the purity of just watching a sport for its own sake?
David Hill [00:19:42] Well, I think my opinion might not be the best one to take here, because I do think that betting on a game enhances the experience for me, the same way that having a glass of wine enhances dinner. I don’t think that it’s the same for everybody. And I think one of the reasons we’re seeing some pushback here and we’re seeing some folks feel like the introduction of gambling into sports has maybe worsened the experience for them. Is that just like with fantasy football, it changes the way that people think about sports and how they root for a team or how or what they are hoping would happen in a particular game. So it’s rare now that when someone’s betting on a game that they’re just going to watch a game and root for their team to win. But they may have, you know, 10 or 11 different 10 or 11 different things happening in that game that they’re hoping will happen, whether it’s a particular quarterback to, you know, pass for a certain number of yards, maybe another player that they want to, you know, to get get a certain number of carries. Maybe they’re hoping that the score goes over a certain total. And so all of these things combined makes the experience of watching the game maybe more stressful and a little bit less fun than it was when they were just hoping that one team beat the other team.
Krys Boyd [00:20:50] What did Captain Jack tell you? The guy who calls himself Captain Jack about how the corporatization of sports betting has affected the stigma around gambling?
David Hill [00:20:58] Well, a lot of the people that I talked to, including Captain Jack, felt that the corporatization of it has really helped take away the taboo from sports betting that people who’ve been doing this professionally for a long time have really felt like they had to do this, were kind of in the shadows. Maybe it wasn’t something that they could necessarily brag about because there was a taboo still associated with betting on sports and with gambling in general in the United States is the regulation has sort of removed some of that stigma and has made it less it made it seem less seedy, maybe seem less, seem less dangerous. There’s always been this weird stereotype of a bookie as somebody with like a lead pipe who’s going to break your knees if you lose a bet or whatever. And I think that’s persisted for a long time now that America, even though it really has not been the case, but it is it has sort of existed. And I think people are now realizing that that’s washing away and that people are people are finding this game anew and they are that there that to them, sports betting is more something that they do on their phone. That’s more like what they might do with their friends than something that’s scary or intimidating to them.
Krys Boyd [00:22:07] So if that stigma has diminished, why does Captain Jack keep his true identity such a closely guarded secret?
David Hill [00:22:14] Well, Captain Jack and the other people in my story, he used pseudonyms are not afraid that the general public or the police or the government are going to find out who they are. It’s the sports books that they don’t want to know their real names. And that’s because if a sports book knows their real name, they won’t take their bets. And so they go to great lengths to hide their identities because they want to be able to continue to make bets at sports books and have their bets accepted by those sports books who probably would limit them or kick them out if they knew that they were professionals.
Krys Boyd [00:22:43] What does it mean when sportsbook companies talk, I guess, internally about ban or bankrupt?
David Hill [00:22:48] Well, the sports was company. This is a term that originated in Europe and it was something that was used to talk about the practice of sports books, who either kick out people who win or they offer lots of bonuses and and perks to people who lose. And we’re seeing that same model kind of take root here in the United States. The problem here is the problem is not just that winners get limited. It’s that if you bet if you want to bet a certain amount of money on a game, you can’t you can only bet a certain amount if you win. But if you’re a losing player, you can bet as much as you you could possibly come up with the thing about limiting that, I think, is to me, as I was writing this piece, that I found the most kind of offensive wasn’t so much that they weren’t allowing these professionals to win as much as they wanted. A lot of people would sort of say, Look, if you want to address your risk as a sportsbook and not take on too much risk, why don’t you just create one limit? That’s the maximum that anybody can bet on a game and we’ll all just follow that limit. The sportsbooks won’t hear of that because they want to be able to take a lot of money from the players they know will lose. And that I think is kind of in it is is a little bit insidious because we don’t know if those players who are VIP players are wealthy enough to afford how much they’re losing, which would be fine, or if they actually might be problem gamblers who can’t afford to lose as much as they’re losing. And the one thing that I found to be the most striking about these VIP programs is that all the benefit that comes from being a VIP at a sportsbook comes after you’ve lost all your money. You are offered a bonus or some sort of perk to deposit more money. So it’s a way to encourage people who are big losers to continue to deposit more. It creates a situation where you really only have two options. You’re either going to get banned or you’re going to get bankrupt.
Krys Boyd [00:24:36] It is interesting that it’s legal to ban players who win too much, even if there is no evidence that they are somehow cheating. I mean, I understand the motivation of these companies to stay in business. Is this maybe akin to saying, you know, a grocery store saying we’re going to offer this can of soup ten for a dollar, but you can only buy ten?
David Hill [00:24:56] Right. I mean, there are examples of this where people have maybe found in sweepstakes or coupons. You know, you see extreme couponing shows, right, where people find in the fine print that they can use coupons in a way that they can get get things for almost free. And it’s sort of like we’ve got enough laws and regulations and content consumer protection in America that says that the onus is really on the company to make the fight right. The fine print, you know, in a way that protects them and that’s not on the consumer did not take advantage of that. We don’t really have that in gambling and in sports betting that the sportsbook can limit players for a lot of reasons. They can even cancel wagers or, you know, call off wagers or keep bets that maybe should have been paid out over a lot. There’s a sort of a wide berth that they’re given a lot of latitude for how they can decide how to grade bets. And that’s because I think we’re kind of behind on creating consumer friendly regulations around sports betting. But there is also some precedent for this, too. I mean, in casinos with black, the game of blackjack in the 1960s, a mad professor named Edward Thorp figured out how to beat the game of blackjack by just counting the number of cards that come out of the deck and waiting for there to be more face cards in the deck. And ever since then, people have tried to make a living by counting cards when they play blackjack. And casinos go to great lengths to limit the bets of people who bet who are counting cards or even kick them out of the casinos and ban them from the casinos for counting cards. So the same sort of thing is happening now in sports betting. You identify a player who’s better than you and can win and you just refuse to take their action.
Krys Boyd [00:26:32] Surely it’s good for marketing purposes to let potential players know that some people occasionally pull down huge amounts of money with sports betting. Tell us a little bit about how these companies are trying to sell their service to new players.
David Hill [00:26:45] Well, in the beginning of there was a real sort of onslaught of marketing, advertising and promotional offers that came from all of these sportsbooks. It was a little bit of a gold rush because they were offering insane amounts of free money to people to open up accounts. And they did that. They took a loss on that because they wanted to acquire these customers and they were able to write a lot of those expenses, that money that they were giving away. They were able to write a lot of it off as marketing expenses when they were doing their taxes. So that was sort of the first initial push. There’s still a little bit of that that goes on now where there are still promotional offers here and there, especially when a new state opens up. But for the most part, those things have dried up. And I think that even a lot of the big celebrity endorsement deals and and partnerships with leagues and teams and things like that, they’re starting to rethink a lot of those, too, and wondering whether or not they actually got enough bang for their buck with those. And they’re they’re unwinding a lot of those deals. So I think we’ll see far less of that as we go forward, especially in the states where they’ve already established themselves and grabbed all the customers that they’re going to grab if they are able to break into these new markets that are still out there waiting. California, Texas and Georgia being three of the biggest. I think you probably see something very similar to what we saw in 2019. If especially in California, if they have to if they I think we’ll see a lot of marketing money spent on trying to acquire customers in California.
Krys Boyd [00:28:14] All that marketing spending by these online bookmakers would seem to suggest these companies are making huge profits. What did you learn about that?
David Hill [00:28:25] I learned that the two biggest companies in this industry who are both together combined for about maybe 70 something percent of the market are not profitable. And it’s because they’re they’re spending so much money on technology, they’re spending so much money on marketing and customer acquisition, and they’re really operating as marketing companies at this point and not as sports betting companies. Sports betting has never been an incredibly profitable business. The margins are very tight in Las Vegas for a long time. Casinos refused to book sports at all. If you wanted to bet sports in Las Vegas before the 1980s, you had to go to some strip mall and make a bet in some like, you know, one room sportsbook in a strip mall somewhere in town. It wasn’t until the 80s they started bringing these sports books into the casinos. And even then there was the idea. The concept of bringing them into the casinos was really to offer them as an amenity to their customers, not something that they expected to make any money on. They might even be willing to take a loss in the sportsbook in any given year because they hope that those players would come in and, you know, bet and gamble and lose on things like slot machines and dice. So sports betting has never been an incredibly profitable venture. Not only is it not that profitable, it’s risky. It’s much more dynamic. The odds are not fixed mathematically and it’s set in stone. They depend on a lot of variables. There’s a lot of information that’s that goes into a sporting event, whether that’s injuries, whether whether that’s, you know, news things that are happening behind the scenes that that that impact what how you might want to set a fair price on a sporting event and there’s a constant battle between the bookmaker and the better over who has the best information, who has the best model, who’s doing better predicting these games. So the sportsbook is taking a tremendous amount of risk, and that’s a hard thing for a corporation. That’s a publicly traded corporation. Just recently, DraftKings had their third quarter report come out and they had to tell their shareholders that they missed the mark. And they said, look, we had some customer friendly sporting outcomes, which is essentially just saying, hey, the favorites, the favorites all covered this past month. So we lost money. And it’s hard to imagine shareholders in publicly traded companies accepting that as an excuse. You know, quarter after quarter.
Krys Boyd [00:30:37] You learn. David Although most of us might have assumed that the overwhelming majority of online sports bettors are men and young men in particular. At the risk of asking a question that seems obvious. Is there some reason for that?
David Hill [00:30:50] I think that the reason is that there’s this is it tracks with the fans of a lot of these sports that these people are also betting on. But also I think that the new sort of wave of sports bettors, people who are betting for the first time tend to be young men because they’re discovering it through things like daily fantasy sports and they’re discovering it through apps on phones. You know, a generation ago, if you wanted to bet on sports, you bet with a bookie. A bookie that you might have met, you know, at a bar or a pool hall or maybe somebody at the Pro Club where you played golf or or maybe at your fraternity house. So people had a much different relationship to sports betting and to the bookmakers that took their bets. You know, you were up in up in betting with a person who you knew rather than with this sort of big corporation. It’s a completely different animal now, and it’s something that I think is much more gamified and it feels much more akin to to playing a game on your phone than anything that people would do in person face to face with somebody. And so that’s why I think we see a lot of young people getting into sports betting for the first time. That maybe never would have gotten into it at this age before.
Krys Boyd [00:32:02] Are these companies creating a whole new generation of addicted gamblers?
David Hill [00:32:09] Well, they’re definitely creating a generation of gamblers. The question of how many of them will be addicted is one that I think is still being figured out. It’s clear that the numbers are on the rise. The numbers of problem gamblers are on the rise. I think in the story, the stat that I got from Keith White was that they’ve had one call to one 800 gambler every minute of every day for the last year. So they’re seeing a huge spike and they do attribute a lot of that to sports betting. The other problem is that young men under 35 are much more susceptible to some of these behaviors as well, problem gambling behaviors. So, yeah, this is a problem. How much of a problem it’s going to be? I think we still haven’t figured out yet because it’s still relatively new. But I think there’s plenty of people that are worried about it.
Krys Boyd [00:32:59] So you mentioned the New York state legislature made a sweet, sweet deal for itself, establishing online sports betting for the first time, 51% of revenue from the companies operating in this space is taxed in New York. What about other states? Are those revenue deals bringing in as much as lawmakers hoped for?
David Hill [00:33:19] Well, the example I use in the story is Colorado, where they did not make very much money at all from the tax revenue that they brought in after they legalized sports betting there. And they’re now reconsidering. They’re considering rewriting the law and rewriting the tax structure there to see if they can get more in in every state that has come on. This has always there’s always been a real push and pull here about how much of a how much of what kind of a tax rate they’re going to end up getting. I think that states look at what’s happening in New York and their eyes get real big and they’re excited because, you know, with with with the kind of money that New York’s been pulling in, they could probably do a lot of good in their states. But the industry is unwilling to go that high ever again. And they make that pretty clear in each new state that they go into. So there it becomes a real struggle over, well, what will the number be? You know, how high or low can we get it? And it’s been different in every state.
Krys Boyd [00:34:11] Are states paying for help made available to people who develop addictive gambling behaviors?
David Hill [00:34:18] It’s that also is different in every state and in some states. The there is money tax revenue that’s being set aside for these types of programs. In some states, they make the sports books provide for and pay for those types of programs and run them themselves. And there are some states that are silent on it. So this is something that’s also a problem that we have that the approach to problem gambling is different in every single state. If you ever watch an ad or hear an ad on the radio for a sports betting company, you might notice at the end that they read off sometimes as many as a dozen one 800 numbers that people should call for problem gambling. And the reason that they read out all those numbers is that so many states have their own number and their own hotline that they’re operating within that state. We don’t have one federal, one centralized problem gambling hotline. So this is a real issue that we the fact that we’re doing this so patchwork across the country means that we’re not adequately addressing the harm.
Krys Boyd [00:35:16] Did you learn anything in your reporting about how gambling addiction is treated? I’m curious specifically about relapse rates in an era when we all walk around with devices that effectively can be used as pocket casinos?
David Hill [00:35:29] Yeah, it’s really hard. I mean, often what people have to do is place themselves. They have to self exclude. They’ve to put themselves on a list and ban themselves from the provider. The the one of the issues is that in some states there can be over a dozen different sportsbooks. So you may find yourself in over your head and and self exclude from that sportsbook, but then you can always just go to another sportsbook and open another account. And even if you self exclude from all of them, a new one may pop up. You could also go to another state and make a bet in another state. So it becomes very hard. One of the people I talked to in the piece, this woman name Liz Thielen is a counselor, and she’s also was a former athlete. And a lot of the work that she does is with athletes themselves, particularly young athletes and collegiate athletes, to talk to them about the dangers of sports betting. And, you know, she and a lot of other professionals in this and a lot of other professionals in this particular area of addiction say that this is one of the harder things to treat because it’s something that really requires the gambler, the person to take a lot of these steps to put themselves in the list. It’s very hard for where whereas a bar might refuse to serve you if you’re drunk. A sportsbook is never going to do that. They’re never going to refuse to take your bet because you’ve lost too much money already. That’s just not something that we have and it’s not has not become the norm at all. And so that makes it really tough because they’re happy to take their money and they’re happy to look the other way if they even suspect that you might be a problem gambler. Although I suspect that some of the sportsbooks would take issue with that characterization. I think the proof is a little bit in the pudding because we don’t see the programs or these types of practices in the in the in the sports books today where they will cut people off.
Krys Boyd [00:37:17] You mentioned that a lot of casinos historically were reluctant to get into sports betting because it was kind of a loss leader, but they didn’t have much competition. I’m curious about the effect on casinos. Now, it may be that they’re not making a lot of money off sports betting, but maybe money that people are spending on online sports. Betting is money they’re not spending. Flying to Las Vegas and playing the tables as well.
David Hill [00:37:42] Well, I interview a casino executive in the piece, Derek Stevens, who is the CEO of Circa, which is a huge casino resort in downtown Las Vegas. It’s been a real success story down there. It’s a really interesting place, and it’s one that has made sports betting the kind of centerpiece of the casino and has really embraced it as what he you know, Derek Stevens thinks that this is the future and that sports fans who like to bet on sports are kind of his customer base. And one of the things we talked about was that the casino industry has really learned its lesson on this, being afraid of the Internet. Right. There was a big poker boom that happened in the early aughts, Mid-aughts, where online poker led to a big boom in people playing poker around America. And the casino companies really opposed online poker and did everything they could to get it shut down and succeeded at passing a getting a law tucked into the Patriot Act that shut down online poker in the United States. And what they found after they shut it down wasn’t that those poker players all came to their casinos to play poker. They just found that people stopped playing poker. And so it turned out that the Internet was actually feeding, you know, seeding and feeding new gamblers into the casinos, people who learned to play poker online and then won it. We’re excited to go to Vegas and play in person, sort of like, you know, go go to the big show. And the same thing is true about sports betting, where people are, you know, discovering sports betting on their phone. But they are excited and enthusiastic to take a trip to Las Vegas to see the circus sportsbook in person, to watch a game in this really exciting place that Derek has built in Vegas, the biggest sports book in the world. So I actually think the relationship between brick and mortar casino companies and sports online sportsbooks is much different than you would would think. It’s also the case that all these sportsbooks have to have a license and they often are partnering with casinos to to get those license.
Krys Boyd [00:39:35] I think one reason sports betting was long illegal in most of this country was this concern about athletes or coaches being corrupted by a motivation for a particular outcome. Is there any evidence this has been happening more often since sports betting has become more widely available?
David Hill [00:39:50] It’s a good question. It’s one I asked a lot when I was reporting the story. There’s not really any evidence that it’s that it’s more frequent now. And the reason there’s not we can’t prove that is because we don’t know how often it was happening before. There is evidence that they’re finding more of these types of situations. And what the industry will tell you and I actually don’t think that it’s all B.S., is that these sportsbooks are able to identify shenanigans pretty quickly because they have so much data and because they’re able to track their players and because they’re looking for things that might be off and they’re taking on a lot more bets than were ever taken on before in regulated sportsbooks in Nevada prior to pass for being repealed. Once upon a time, a lot of the big money that was being bet on sports all happened offshore. There was no regulation and if a play if there were players who were throwing games or there was any kind of like any of those kinds of things going on, it all kind of it was almost impossible to catch it. And now we’re catching people doing it because these these regulated sportsbooks are the ones finding it and they’re the ones that are calling the authorities and reporting it. It’s also the case that gamblers, professional gamblers have been identifying some of these things that are happening, and they’ve been reporting it as well. So what I think was told to me over reporting the story and I think there’s some truth to it, is that regulation of sports betting and the growth of sports betting has made it easier to catch people who are cheating or who are, you know, somehow on the take. And that’s why the public is seeing a rise in these cases, because we’re finally catching them, rather than this is a new thing that just started.
Krys Boyd [00:41:25] So I think it’s fair to say the repeal of PASPA, the legalization potentially of online sports betting, has not quite delivered what any stakeholder hoped for. Could it be that we’re just in an era of growing pains in the same way that, like those meal prep services lost a ton of money in the beginning and are no longer giving away so much free product and maybe are now making more money?
David Hill [00:41:52] I think that’s probably true. Yeah, I think that that like any startup company or startup industry, that there’s some growing pains that are that we’re going to have to get through. But I think that you are you already see the writing on the wall about where this industry wants to. These companies are already lobbying the states that have given them permission to book sports. They’re asking those states now to give them permission to operate online casinos. And so a casino, an actual casino, and maybe your listeners don’t understand the distinction, but, you know, a bet on sports is a fundamentally different type of bet or gamble than casino gambling with slot machines and craps and things like that where the odds are fixed and they’re always fixed in the house’s favor. So the money is pretty much guaranteed is just about how much you can get people to bet. And this is where they want to move to because if they can operate mobile casinos, they can basically pay any tax that the states want to put on them because their money is going to be guaranteed. And we see this with the tremendous success of gaming corporations in the United States prior to this. So the big sports betting companies want to become casinos. And I think that that’s maybe a good sign that they don’t believe that these growing pains are something that they’re willing to suffer through and outlast, to see what’s on the other side of it.
Krys Boyd [00:43:11] Not making a moral judgment here. But it is a little terrifying to think about online casinos, how easy it would be to lose money every single day if you’re just playing slots on your phone.
David Hill [00:43:24] One of the people I interview in the story is Roxy Roxborough, who is a bit of a legend in the world of gambling. He was maybe the most America’s preeminent bookmaker for many decades out in Las Vegas, and Roxy told me that he wasn’t too worried about sports betting becoming a big problem, that America had sort of been. People have been betting on sports in America since there’s been sports. It’s sort of always been with us. And he didn’t think that there would be too bet, too big of a deal to see it expand. But he was he was terrified about the prospect of casinos in everybody’s pockets. And he wasn’t sure that America could survive something like that. So to hear that from somebody like him really gave me pause. I think that I share your feeling that it’s not necessarily about gambling, being gambling or anti-gambling. It’s really what we know about technology. And a lot of these slot machines that we will have in our pockets will operate the same way that a game like Candy Crush operates. And we know already how addicted we all are to that. So those of us who spend too much time on our phones, I think are well aware of how addictive they can be and how how good the technology is at holding our attention and not letting go of us. And so when we’re actually pumping money into these things and playing these games for money, we combine those two things together. It is very terrifying to think about what that future could look like.
Krys Boyd [00:44:42] David Hill is a writer for Rolling Stone magazine, which published his article “Is the $11 billion Online Sportsbook Bubble About to Burst?” David, this has been so interesting. Thank you for making time to talk.
David Hill [00:44:53] Well, thank you for having me on the show. This has really been a pleasure.
Krys Boyd [00:44:57] Think is distributed by PRX, the Public Radio Exchange. You can find us on Facebook and Instagram and anywhere you get podcasts, just search for KERA Think. If you’d like to learn about upcoming shows or sign up for our free weekly newsletter. You can do that at our website think.kera.org. Again, I’m Krys Boyd. Thanks for listening. Have a great day.
