EPISODE 201 | LSR Podcast

Stop! Drop The Props! | Sports Betting News


46 min
Video preview

Stop! Drop The Props! | Sports Betting News | LSR Podcast 201

Fantasy sports companies offering prop-style products are facing a fresh wave of scrutiny from state gaming regulators who compare the products to sports betting. Also, what’s going on with the Iowa college betting investigation, the NFL’s ask to a congresswoman on offshores, and earnings season producing profits.

Full transcript

Matt Brown (00:10):

Hello and welcome to episode number 201 of the LSR Podcast. My name is Matt Brown, joined each and every week by the brightest minds in all of the gaming industry. With me, I have my dudes, Adam Candee and Dustin Gouker. You can follow them on the Twitter machine, absolutely free, and you should smash the button, @DustinGouker, @AdamCandee, two E’s, no Y. If you hate yourself, you can follow me, @MattBrownM2. All the things that we say each and every week do apply. Everything we do is free.


So, if you want to go ahead, hit the subscribe button, give us thumbs up, all the things, comments, et cetera, we do appreciate all of that. It helps us climb the chart. So, we like that a ton. We’ll talk about a lot of DFS stuff here, or if I hold up, if you’re watching on the video side of things, “DFS.” I’ll do the little air quote stuff. Iowa, we’ll talk some NFL as well and earnings have come out for some of these books as well, but let’s kick things off here. Adam, listen, this is something we’ve talked about, I think, three consecutive podcasts now, just about what is, what is not daily fantasy sports. Some of the states are starting to decide for themselves what is and what is not daily fantasy sports.

Fantasy sports companies offering prop-style products

Adam Candee (01:14):

Yeah. If you think that you mistakenly got episode number one, instead of episode number 201, because we are here talking about all of these DFS operators, no, it is the year 2023. We are talking a lot about what is and is not fantasy sports, what is and is not prop betting. This is one of the wildest weeks I’ve ever experienced at LegalSportsReport in terms of the pace of some of the news that’s been coming down. So let’s recap what has happened this week alone. We reported at LSR that the state of Wyoming sent cease and desist letters to Underdog and PrizePicks, telling them that what they had in the state essentially qualifies as sports betting, right? Saying under statute, it’s sports betting. We thought that would be the wildest thing that happened this week.


Then when we looked up the next day, we found out that the state of Maine had sent a complaint letter to Underdog about the exact same thing. Then just yesterday, we reported that the state of New York has updated its register because they got a question from someone saying, “Hey, can we make clear that these prop markets are under fantasy sports?” New York’s response essentially was, “Forget about it,” when they said, “Yeah, no, these are essentially sports betting. Let’s be clear, these are sports betting.” So now it’s Wyoming, Maine, and New York, and I’ll give everybody a little bit of a preview of a story that’s going to publish very soon at Legal Sports Report.

Matt Brown (02:50):

That’s why you come to the pod. See, you’re getting the inside info right here. See that? That’s why you come to the pod.

Adam Candee (02:58):

Scoop de loop right here with us on the pod. The letters were dated July 5th from Wyoming, signed by Charles Moore, the executive director of the Wyoming Gaming Commission. The first word that we got, it was almost identical from both PrizePicks and Underdog, was that they never received any letters. So, we went back to Wyoming and said, “Hey, we have letters in our hands that have your letterhead that are signed by your executive director.” The executive director said, “Yup, that’s my signature. Yup, we sent them.”


Now we’re going back to PrizePicks and Underdog, and the company line has become, “We are working with regulators.” So now we’ve gone away from the whole idea of we never got the letters. So one of them is headquartered in Georgia. One of them is headquartered in Brooklyn, New York. I’m guessing the postal service did not fail in both cases, but we will leave that up to the regulators to figure out.

Matt Brown (04:07):

So Dustin, we take a look at this and I think anyone listening to this podcast probably is aware of the business model, but I guess we can do a little bit of a refresher here with all of this. So this was PrizePicks’ business model from day one, right? This was basically what they did. Underdog started as just a best ball company, and then they evolved into some of this other stuff, as well. But what we’re looking at here is, I guess in their eyes, technically, it’s daily fantasy sports because you have to take multiple different ways. You can’t just bet one single outcome.


There are multiple outcomes, and they all have to hit in some way, shape, or form in order for you to win some money. So I guess that’s how they are viewing this as being some daily fantasy sports contest, but from any of us that are in the industry and have ever sports bet before, it just looks like a parlay to us. So, just to give people the quick and dirty here of the business model that we are talking about that these states are coming after.

Dustin Gouker (05:11):

Yeah, I mean, I think the simplest way I’ve come to about describing it is there’s a Venn diagram of fantasy sports and sports betting, and you could be both. You could be in this interlap of like, “Oh, it’s fantasy sports legally under the definition of the Unlawful Internet Gambling Enforcement Act.” Obviously, some states are now pushing back whether that definition of fantasy sports covers this, but it can sometimes be both things at the same time. Sometimes there’s just fantasy sports over here, sports betting over here. But yeah, the rules, the UIGEA says it has to be players from two different teams.


So that’s why you could place a fantasy sports contest entry on last night’s Hall of Fame game by picking over/under the number of receiving yards for the quarterbacks of both teams. That’s, again, “fantasy sports,” based on the legal definition that some of these companies are using. So, yeah, I think we’ve been talking this for a while. I’ve been saying this for a while. It’s clearly sports betting, just using a legal interpretation of fantasy sports laws, game of skill laws, and UIGEA. We finally have some evidence of several states now saying, “If it walks like duck, it’s duck” and pushing back on this. At the end of the day, there’s a couple things that we’re watching for these companies that I think. This has all been very bad news for them.


Obviously, the model is being questioned, but the two big things are the three big states. They’re operating picking contest in California, Florida, and Texas. Three biggest states that don’t have sports betting. Until any of those states shut them down, it doesn’t matter, because New York, not great that they’re losing access to New York, but they’re up against actual sports betting where you can just place actual parlays and all of that. The other part is payment processing. We’re going to get into the history lesson of DFS. DFS 1.0, the problem in the background was always payment processing, whether that was going to continue with the legal climate around everything that’s going on. Payment processors, I think they may have already been getting cold feet, and now I’d imagine they really are.


Now, we have three states within a space of a week saying this DFS product is actually sports betting. I would be starting to get worried about continuing to process payments, because now we’re triggering the Wire Act, federal laws, things like that once we have that out there. Again, this is what I was living through circa 2015 and 2016 when we were doing this the first time with DraftKings and FanDuel. Like Adam says, everything’s been compacted into a short time now, and the speed of it and the velocity of it’s just been a lot faster than the first time around.

Matt Brown (07:57):

So Adam, we look at it. I mean, listen, on the surface, if you look, I mean what we consider to be fantasy sports, let’s talk about when we were children. We know what fantasy sports are there. Now there’s been evolution of fantasy sports along the way. Of course, DFS is still fairly easily recognizable to a fantasy player. It’s taking those guys’ results for that week as opposed to an entire season, but I mean, it’s a pretty easy learning curve with all that. Then you look at this, and again, it’s very hard for me to get there as to how in the world this would be considered fantasy sports. I mean, I don’t care if you have to put multiple things together and you can’t just do a singular outcome. If you’re betting over/under, an over/under is freaking sports betting, right? It’s like any way you look at it.


I understand why some of these lawmakers are questioning this. I understand why DraftKings and FanDuel were pissed off about it. I understand actually why these companies were doing it until they were told they couldn’t do it. Because if you can toe that line and you can offer something to these major states, like Dustin said, that these other companies can’t do, I understand why they were doing it. So, it’s like I look at the whole thing and just go, “Wow. I mean, this was the inevitable conclusion of it all, but I see all the angles.”

Adam Candee (09:17):

If I said to you here, “Matt, here’s a hot dog.” And then, OK, Matt, here’s a second hot dog. We’re going to put the two hot dogs in a bag. But once they’re in a bag, they’re just a bag, right? It’s not a bag of hot dogs. It’s just a bag. No, it’s hot dogs in the bag and hot dogs are over/unders, right? Just because you put two over/unders in the bag does not mean it is no longer a sports bet, that you’ve created an entirely different product. That’s just not the case. So, now we look at what’s going on, and I think the natural question … It’s fair if you’re asking this if you’re just listening to this for the first time.


It’s fair if you’re in the Underdog and PrizePicks offices to ask the conspiracy theory question of, “Why is this all happening right now and why is it happening so fast?” So we’re with you on that. This is a story that we’ve talked about on this pod for quite a long time. I think there are a few theories that can hold some level of water. Mind you, these are just theories. These are not things that we’re reporting as fact. We’ve done plenty of that already this week. California failed miserably at the ballot this last time around. Texas had a chance of legalizing.


It didn’t really go anywhere, and I think all of these sports betting companies can look and say, “We’re not getting into California anytime soon. Our next chance at Texas is in 2025. We realized that these other companies have a huge advantage on us now.” They were willing to wait a little bit maybe to see what was going to go on with those two states. Again, all in theory, and maybe they don’t want to give the DFS companies that are offering a sports betting product a two-year free run, knowing that they can’t do anything with it right now. There’s also been my conspiracy theory for the longest of times that PrizePicks, Underdog, et cetera, companies like this that might be built to sell and that maybe the sale isn’t going quite the way that some on either side would have imagined.


Maybe this is a negotiating tactic in some way. Again, I’m deep into the conspiracy theories on this, but I’ve actually had a couple of weird conspiracy theories play out this week, and so I’m going to go completely do my own research mode here and put them out there.

Matt Brown (11:36):

Dustin, I thought this through as well as we were heading into the pod. Do we think also at least maybe a 10% chance here that just lawmakers start paying a little bit more attention to sports betting stuff or fantasy sports stuff as we head into football season just naturally? It’s like we’re heading into the biggest part of the year, the part of the year where most of their people, their constituents, any laws, anything is going to be way more in the spotlight than in the doldrums of the summer. We’re honing the home stretch here. Hell, we played a fake real football game last night, so I mean, we are now in football season. So I don’t know if maybe just even if you’re just one of these states, you start to pay a little bit more attention as we head into the real hot part of the year.

Dustin Gouker (12:20):

I think what’s behind this is people just didn’t really know this category existed. That’s the big thing. We could say, “Oh, yeah, all of us, again, we’re always in the bubble. We’ve known PrizePicks and Underdog. These companies, the people behind them, we’ve known them for a while.” It’s a big leap to just assume, “Oh, this has got into the zeitgeist and people know what’s going on.” We know it’s around now. It’s just part of fantasy, and people in the sports betting ecosystem, people just know that it’s just more out there than it ever was. It’s again the same arc of regular fantasy. DraftKings and FanDuel were this cute little thing on the side. Oh, daily fantasy, neat. Then it started getting big, and there’s more headlines about it. There’s more people who are aware of it.


Because that’s the same question we were having. Why did it take till 2015, 2016 for anybody to say, “Oh, there’s a question about daily fantasy sports as sports betting”? It’s because nobody really knew what existed. Finally, these companies are pretty big. There’s just more talk about them. We had the Wall Street Journal story, I guess, last week. A lot of this action predates that, but it’s just more about this, right? It’s more about it out in the world, and I think that’s part of it. Everybody’s more familiar with it, and yeah, just assume that everybody’s like, “Oh, we know this is existing.” I don’t think that’s true. So I think what we’ve learned is, yes, regulators at least didn’t know this existed in a lot. That’s why we’re seeing these actions. I would love to see this.


This is a thought experiment that’s impossible to do. I’d love to put the Underdogs and PrizePicks pick them contest in front of lawmakers who passed daily fantasy sports laws over the years and say, “Is this what you thought you were getting out of that?” There’s nobody who’s going to say yes. I was like, “Yes, we want parlay betting. We’re OK with that.” Yes, the regulators on the other end might be saying, “Well, this is the law they wrote. This is what we ended up with. Maybe it’s OK,” but that’s it. So, I think it’s just the years of these companies existing.


Finally, again, with the background of the sports betting industry coming under all this scrutiny, we have this other category that’s not really under the same rules and being able to do more whatever they want. I think it was natural that we’re going to get some scrutiny on this. So, my last question is, is a hot dog a sandwich? Since we’re putting hot dogs in bags.

Matt Brown (14:47):

Absolutely not. A hot dog is just its own entity. It’s just its own. It lives in its own space.

Adam Candee (14:50):

It’s meat between bread. How is it not a sandwich?

Matt Brown (14:58):

Burger’s a burger. It’s not a sandwich. Burgers has its own little thing on a menu. It’s like there’s sandwiches and then there’s burgers on a menu. So it’d be the same thing. Under sandwiches on a menu, you’re not going to find hot dogs. That’s not going to be there.

Adam Candee (15:11):

But you often will find burgers listed under sandwiches depending on where you go.

Matt Brown (15:15):

Most menus, it’s sandwiches and then burgers. They got their own little area because they’ve earned that. Burgers have earned that.

Dustin Gouker (15:25):

Hot dogs is a sandwich, next topic.

Matt Brown (15:28):

Adam, real quick here though, one of the other things, this is just a complete aside with all of this, because we get so much of the hashtag gambling Twitter that goes crazy about the offerings and things that are available at some of the sportsbooks and how it’s like, “Oh, they’re pushing these things that are like negative EV,” et cetera, et cetera, blah, blah, blah, blah, blah. It’s like the only reason PrizePicks exists is because it’s multi-leg parlays, right? I mean, you’re like, “It’s a whole product based around bets.” Bets are bad for the consumer in general. That’s so in the weeds, in the weeds whenever it comes to other problems with all of this. But seriously, the whole product is people making bad bets, making bad gambling decisions.

Adam Candee (16:24):

I mean, do you think that they should change the tagline to the original same-game parlay? Maybe that would be better marketing. Look, if you’re not clear as to why it’s a thing, you might just ask yourself, “Why can’t everybody just be? Why can’t everybody just operate?” Well, it’s different sets of laws. It’s extremely different amounts of money that it takes to get into the space and be able to operate in the space. Because right now, as they exist today, if PrizePicks and Underdog had to try to compete with DraftKings and FanDuel on the same playing field, they would get blown away the same way that everybody else who’s trying to compete with them is getting blown away.


It doesn’t mean that’s the case forever. Underdog has made clear in the past that it has ambitions of becoming a sportsbook. PrizePicks is strictly DFS, again, air quotes. But there are completely different sets of licensure, laws, entry fees, cost of doing business. That’s why this is a big deal because we’re talking about playing fields that are not level from state to state.

Matt Brown (17:29):

Dustin, just finally to put a bow on this, I mean one, DFS, as you and I have come to accept it over the years, I know you and I weren’t always on the same side of the fence with all of this, but DFS, as we have come to accept it, is at least peer to peer. Peer versus peer, right? I mean, this is player versus house. I mean that is the major difference in this there. I mean, it is still me versus you whenever we are going in and playing DFS. It is not that case with these other things, which is the most obvious thing ever for someone who knows what they’re talking about.

Dustin Gouker (18:01):

Yeah, peer-to-peer gaming, I guess at this point, I lost the DFS war. You win, I lose, but yeah, again, peer to peer, who cares? Yeah, again, it’s against the house. Like Adam said at the beginning, not all of their products are that, but this is the biggest category is fantasy versus the house. You break it all down. It’s just hard to … I totally agree with that, Adam. That’s my reason I am passionate about it, because we didn’t take down PASPA five years ago just to create unregulated sports betting. That should not be the outcome of what happened and that’s where we’re trending toward. Last one, I know there’s a lot of noise, and again, I think Adam alluded to this, DraftKings and FanDuel are making a lot of noise and that’s some of the maybe what is behind all this, but it’s immaterial to me that DraftKings and FanDuel are behind this.


Either it is or it isn’t. Yes. Again, DraftKings and FanDuel passed all these laws that led to all this. Again, I don’t care, and I don’t care that there’s sour grapes from them. I mean, I care. It’s funny, but it’s also immaterial. We just have this whole category that exists that arguably shouldn’t exist, and I reject the idea that everybody’s cool with unregulated parlays or quasi-regulated parlays across the country. I don’t think that’s what anybody really envisioned out of all of this. You can take issue with how it’s coming about, but I think it’s just not germane to the discussion.

Matt Brown (19:32):

Adam, we have jumped up and down and beat the drum, and the whole reason that we’re saying that this industry is actually a good thing and things that have happened is because it’s licensed and regulated and there’s rules that you have to follow and there’s money that has to be paid. All the things that we’ve preached is like that is not what’s happening here. At that point, why don’t we just say like, “OK, go bet offshore or whatever”? I mean, it’s the same deal, because if you’re not playing by the same rules as everyone else has to play for, then what the hell are we doing here?

Adam Candee (20:01):

First of all, shout out to Dustin for both zeitgeist and germane in one podcast.

Matt Brown (20:05):

In the same sentence, I think. That might’ve even been in the same sentence. I don’t know if there was a pause in there, a semicolon. I don’t know if there was a dot, dot, dot like whenever you’re texting, but yes. I mean that was something else.

Adam Candee (20:17):

Not even thesaurus. That’s a he-saurus. He is him right there. Very well done. Proud of that. Yeah. Let’s dig into a conversation that we had I’m just going to say with someone who operates in the DFS space this week. That person said to us, “Well, keep in mind that we’re talking about an American company that’s employing people and giving them jobs. Offshore is worse because offshore is working against the industry and it’s unregulated and this and that.”


My takeaway from that conversation is, yeah, you’re employing people, but if the operation is illegal, I don’t care if it’s happening against US law at a state level or US law at a federal level, because we talk about offshore violating federal law, we talk about these potentially violating state laws. You’re really grasping at straws if that’s the level you’re down to.

Dustin Gouker (21:16):

Well, I have one more point on all this. If DraftKings and FanDuel could do this, they’d be doing it in a heartbeat. That’s the other underlying part of this. If they thought they could do this legally and not get in trouble and keep their licenses and just start serving parlays to California, Texas, and Florida, they’d do it tomorrow. But I think they’ve come to the realization that’s not going to happen or there’s too much risk involved with it. So, that’s why we’re seeing them be allowed about it, because they would love to be able to do this. Don’t mistake that for anything else. If they could do this, they would, but they’re not going to because it’s a risk that they’re not willing to take.

Matt Brown (21:54):

The most popular long word in the English language is incomprehensibility. That is 21 letters, and that is the most frequently used whatever they describe as a long word. So, incomprehensibility, 21 letters.

Adam Candee (22:10):

Who says that? I’ve never even heard of that word.

Matt Brown (22:13):

I know, right? I know. The next one is interdisciplinary.

Adam Candee (22:17):


Matt Brown (22:18):

Yeah. The next one is interdisciplinary, 17 letters. If you want to add those in at some point to the rest of this.

Adam Candee (22:24):

We are the arbiters of words. This is what we do for a living. We’re not good at real things, but we can tell you what happens with words.

Matt Brown (22:30):

I know. I can’t believe all this incomprehensibility, I mean, seriously.

Adam Candee (22:34):

Don’t try to get that into the zeitgeist.

Matt Brown (22:37):

All right. Adam, let’s head to college football. This is a story in which, look, again, inevitability of all of this happening. Honestly, this is another one of the deals too where we shouldn’t look at this as a bad thing and more look at it as a good thing, because again, this has always been going on. It’s just easier to catch people doing things now because there is a licensed and regulated market.

What’s going on with the Iowa college betting investigation

Adam Candee (23:05):

We’ve known for a while that there’s an investigation going on in Iowa that involves a number of student athletes at both the University of Iowa and Iowa State. I think what is most notable about this whole situation is not that the Iowa Racing and Gaming Commission was investigating. It’s that we’re talking about criminal charges, and that’s the big difference from what we’re used to talking about when it comes to, “Did college athlete X bet on sports?” Well, there’s some charges that have been filed here that have to do with destruction of records, that have to do with falsifying whose account was actually being used. Best to go read the story at legalsportsreport.com for all of the details here.


But the piece of this story that’s gotten the most attention is the backup quarterback at Iowa State, Hunter Dekkers, who placed a number of wagers, including on games in which he was on the sidelines, not participating, but on the sidelines. It covers football. There are baseball players involved in this. There are wrestlers involved in this. It involves parents and their accounts being used to try to cover up whose wagers were being placed. There’s NCAA discipline and we’ve covered the revised policy that could come and be in play here, but the bigger question is that we have charges that have been filed.


As you said, Matt, this is exactly the way that it’s all supposed to work, and to me, it’s almost like someone who says to you, “You’re going to have to get a shot tomorrow,” but it’s a shot that is going to protect you against disease in the long run. You’ve known for a while. You have to get the shot. You’re like, “I don’t like needles. I want to take it.” We are in the process in the legal sports betting market at the moment of the needle going in. In the long term, everyone will be better for this if we can get through what feels like the shock of this moment.


It’s going to be the shock of the moment right now because we’re catching the things that have been going on for a long time. They weren’t happening on apps. They weren’t happening out in the daylight. Players were betting with each other, players were betting with bookies, players were betting offshore. All of these things were going on. It’s just that now it’s happening in what is theoretically the legal market. Well, it’s not theoretically. It is practically. This is exactly what’s supposed to happen.

Matt Brown (25:26):

Dustin, it’s very easy, I think, for skeptics out there to take a look and start pointing the finger and say like, “Oh, well, OK, legalize sports betting. Now look at all this stuff that’s happening.” Listen, I can tell you this, just from experience, I sat in my first day of orientation in college. You sit in there with all the rest of people who were trying to play sports in college. Before they tell you to go get books, before they tell you to go to class, they’re like, “Do not gamble, do not bet.” This was over 20 years ago. I mean, that is literally the first thing that comes out of their mouth. So, I mean, it’s been going on. It’s been a thing for a while, and again, it was actually just probably happening way easier because we didn’t have ways to catch people doing this stuff.


So, I know, I see the stuff, I see what people are saying. Look, see what happens. You make it available and blah, blah, blah. It’s like, “No, this was going on. This was happening. They’ve known it was a thing for a long, long, long time, and now the system’s actually working.” It should not be a point-the-finger situation. It should be more of a golf clap situation. More of a golf clap.

Dustin Gouker (26:34):

Yeah, I mean, I think there’s probably some scale involved with the legal market coming, right? Because more people are aware. You have the apps in your state, all that. I think there’s a matter of scale, but 100%, this has been going on. People just keep really aggravating to all of us that sports betting dropped out of the ether five years ago and never existed before. That’s not the case. We’ve lived with this for all those things. Offshore, Nevada, all of this has happened before, and I have news for everyone, too. This is not just an Iowa problem. If you think this is an Iowa state problem, it’s not anywhere else, this exact same nonsense is going on everywhere. This is just the tip of the iceberg.


So, if you just think, “Oh, this is isolated to a bunch of Iowa athletes,” no way, man. This is going on everywhere. I say all this though, that there’s going to be a push to overreact to this, too, to try, I think, to ban college betting, to do all this other stuff. Again, not the answer at all, because then again, you just shove everything back into local bookies, offshore, whatever. It’s not the answer. The answer is the regulated market and to stop this, and I think the other part of it is definitely education. Even though you say it’s hammered into people, there’s obviously a big disconnect between the education efforts and what’s actually going on on the ground in NCAA programs.


I can’t believe this is just an NFL problem. The NFL is the only one we’ve heard problems with. You’re telling me nobody in any other sport has placed a bet somewhere? Come on. I just don’t believe any of that. Now, everything’s gotten real. We have to be better with the education and be more clear because now we have criminal charges. We have people losing years of eligibility or suspended for a year. I think, hopefully, we’re at this inflection point where we’re going to talk about this a little more real matter and not just pretend that it doesn’t exist.

Matt Brown (28:35):

Adam, to put a bow on this, again, everybody wants to point the finger. Everyone wants to make a reason for why something happened. I think sometimes we can just look at stuff just on the surface level and just say, “You know what? Sometimes people do stupid things and then they’re just going to have to pay the consequences of doing said stupid thing,” right? I mean, I don’t think there has to be some deep-rooted reason for something, and this is exactly why this is going down, and this is how we have to fix everything. It’s like, “You know what? Sometimes people do dumb things.”


You could ask this kid on a lie detector test, “Do you know that it was dumb, that it was wrong to bet on your own team, whatever?” He’s going to fail that if he says no. Of course he knows. He just did it anyway, right? I mean, sometimes people do dumb things and you have to pay the price for it.

Adam Candee (29:16):

I know someone who used to work for one of the largest school districts in the country, and they worked in communications. They often were the first person to get the phone call when a teacher would be arrested for doing something lewd or something that they shouldn’t be doing with a student. If two or three of these happened in a week, then all of a sudden, the TV headline would be crisis in the school district. Whereas my friend who’s dealing with it said to me they would say to reporters on background, we’re an organization of 20,000 people. There are going to be bad actors. We cannot expect that among that many people, everyone is going to do things the right way at all times.

NFL’s ask to a congresswoman on offshores

Matt Brown (29:56):

Exactly, and that’s just what we’re dealing with all of this. Dustin, let’s go to our friend David Purdum and a tweet put out by him that is getting super intelligent comments on it. I can see already, really great comments from it already, but a letter to Congresswoman Titus.

Dustin Gouker (30:19):

Yeah, a congresswoman in Nevada, long been a proponent of legal sports betting, obviously with Nevada having sports betting for a long time. NFL is calling for “federal engagement” to address the illicit sports betting market, which still has the power of incumbency. There’s a lot to unpack here. Number one, OK, great. We’ve been talking about federal enforcement for five years. Why are we thinking it’s going to be a priority for the Department of Justice? Unless a sportsbook or all online casino is engaged in terrorism or other things, it’s not going to be the point. There’s way bigger fish to fry in general at the federal level to try to stop this stuff. If they could stop it, great, but I just don’t like NFL calling on it and a congresswoman saying, “Let’s go do something.”


Great, I would love for that to happen, but I think it’s wishful thinking that it’s going to happen. The other part about this that I find it very funny is that the NFL is doing this, the reason we have a robust illicit market is because of the NFL and not just the NFL, obviously the other leagues. They are the ones who pushed for the federal ban and PASPA. They’re the ones who continue to try to keep sports betting out of the US in the federal court case against New Jersey. It exists because of you. I know they’re not going to admit that in this, but that’s the backstory of this is that we have a robust illegal market because the sports leagues stopped a legal market from happening for decades.


So, it is just funny to me to hear this. Again, great that the NFL is coming out for this. I think it’s probably much ado about nothing and we’re not going to start seeing crackdowns on illegal sportsbooks tomorrow because the NFL sent a letter to a congresswoman.

Matt Brown (32:10):

Yeah, I mean, Adam, listen, all this is great in theory, and we’ve talked about we’d like to see at least something tried or done or whatever, but listen, the only way to really shut this stuff down as we know is make it to where people can’t get their money on and off these sites. But the problem now with cryptocurrency is you just can’t do that, right? I mean, they’re always going to be able to operate if they want to. I mean, that’s just the way that we’ve gotten now. I mean the majority of these are now deposit and withdraw in Bitcoin as it is anyway. So, it’s not like when Dustin and I went through the whole Black Friday thing in online poker.


You go in and you cut off how you can get money on and off of these things, and they’re like, “It’s donezo,” right? I mean, it was like there’s no industry anymore if people can’t get their money on and off, but with Bitcoin, it is what it is. So I’m sure there is something that could be done at least to seize the domains or whatever. They’ll just pop up another one. There’ll be shell sites or whatever, but I don’t know now what the real path to, again, “victory” is for the legal side of things.

Adam Candee (33:16):

I mean, this is complicated in so many different ways. I mean, if you want to talk about the Bitcoin side and the crypto side, you’re now talking about people taking on a much, much higher level of risk given what’s happened in the cryptocurrency over the last six months. That is risk that I don’t think a lot of people are willing to take if they do not … Rephrase that. Those who need the outs that offshore provides are going to be willing to take that risk because they’re liquid enough that they can afford to absorb the loss that might come with the value of their cryptocurrency going up and down.


The average person is probably not going to get themselves involved in that, but the offshore market is going to allow wagers of the size and of the frequency that this is something that makes sense for certain people. Now, when we get into the idea of what can a crackdown do, it probably has to be a 5Dimes situation where this operator has some desire to be clean in some way. We know that 5Dimes settled for $48 million because it was being investigated for a number of years for potential violations of federal law. We know that 5Dimes did have some desire to go clean.


So, for those that don’t have the desire to get into the white market in some way, yeah, it’s going to be really hard to ever do anything real, because most of these operations, because they’re headquartered in places that have much more lax laws, you could pretty much shut down the office in Curaçao and show up in Antigua tomorrow and start the whole thing over again.

Matt Brown (35:00):

Dustin, this one was great. LMAO, run a proper book then. The legals are 10 times shadier than the offshore, and it’s not even close. Basically, this is a letter written on behalf of crooks in parentheses, legal books to a bunch of dirty crooks, parenthesis, politicians. So, that’s the kind of comments we’re getting on this. So, again, just guys that are totally informed in all this that are waiting.

Dustin Gouker (35:28):

Again, everything we’ve been talking about today all comes together. This is part of the cost of doing business too. Yes, it’s much easier to run an offshore sportsbook. You don’t have to pay taxes.

Matt Brown (35:41):

We agree. We’ve said that since day one. We agree. We get it. We understand.

Dustin Gouker (35:44):

So it’s no wonder they have a better product for you, right? This is not rocket science, but the other part of it is you really want to come out to the illicit market. Again, you open up California, Texas, and Florida, and then all of a sudden, again, you have the access to 90 million people if you’re offshores, that do not have any legal options other than PrizePicks and all. So it’s all full circle. I’m not saying that ends offshore online sports betting in the US, but that makes it a lot harder to do business because you still have this huge population that you’re serving to that doesn’t have access to a legal option.

Earnings season producing profits

Matt Brown (36:22):

Adam, let’s close things out here. We used to talk numbers, and we would just talk handle numbers and different things, stuff like that, but listen, there’s too many states to report on that. Sometimes the reporting isn’t all that great anyway, so we talk different numbers now, and let’s talk the dollar, dollar bills that are actually going in and out of the bank account for these big companies.

Adam Candee (36:39):

Well, we can talk about them differently than we used to be, because it used to be a whole lot of dog bites man of sports betting company X loses $500 million in this quarter, but they say, “Everything’s right on track. Don’t you worry about us.” It turned out that they were wrong about that. Everything was not right on track. There were major course corrections in terms of marketing spend. Some companies laid people off or eliminated positions. Wouldn’t you know that once a more rational environment came around that we are talking about Q2 of 2023 earnings where multiple gaming operators are reporting profit in their sports betting segments?


Caesars is reporting profit. We know the DraftKings is reporting profit and no mystery, right? Caesars at one point lost up to a billion dollars when they were out here offering $3,300 to every person who signed up in a 51% tax market in New York. Now, that ended-

Matt Brown (37:39):

Well, in a $100 million contract with JB Smoove as well. I mean, that was at least a nine-figure contract with him for sure.

Adam Candee (37:45):

You better watch out, because if you draw too much attention to that, JB is going to lose his job and he has to go back to pitching seltzers or whatever he is doing up on the billboards that I’m looking at. Ultimately, what we saw is that companies made smarter decisions, and that led to more profit. I hate the fact that it means that customers in the legal market didn’t get the same offers that they have been in the past. I hate the fact that it means that for a company like DraftKings, they cut 140 positions.


We have to talk about these things, honestly, if we’re going to talk about the whole story. It’s sad, but it speaks to the irrationality of the market over the course of the first three-ish years and the fact that we’re now coming into a saner environment and that it’s more possible to make money in that environment. With this caveat, a lot of it is being done on the backs of pushing parlays and the fact that hold is up around 10, 11% for a lot of these companies when historically in Nevada over the course of 50 years, 5.4 is the hold number because it’s all coming out of same-game parlays. It’s all coming out of these multi-legs that are being pushed.


So, how long are people willing to do it? Maybe the answer is a lot longer than we originally imagined because people like the lottery ticket aspect of this. If Mega Millions is up at a billion dollars, people are still willing to throw 20 bucks at it because they’ve got shot. Maybe they don’t want to go in and grind -110 sides or -115 or -120. They don’t care about it in the first place. Maybe they just want to keep firing off 20 bucks at a four-leg parlay in the hopes they hit this one.

Matt Brown (39:24):

Dustin, I’ve actually come around on this from where I was whenever we first started going on this. I have to understand, I think we do this at least fairly well. We realize how in the weeds and in the bubble we are, and having to take a step back and look at this from the outside in, and certainly myself try to look at it from a non-gambler aspect. Again, I’ve been a longtime gambler, done it over 20 years and stuff. So, I get the whole EV and negative EV and all that. Well, I’ve done just little basically my own little straw polls, going around. I’m fortunate enough this summer, I’ve gone to several different legal sports betting states. I’ve been down to Arizona, I’ve been to Illinois, I’ve been to Tennessee, I’ve been to Colorado.


When I see people betting around, I’ll ask them little questions here and there and just try to get a beat of what’s going on. Even my friends in Louisiana who just have had it for about a year now and things that they were doing when we were all together this past summer, I’m going around and I’m asking them, “Hey, what’s going on here with this and what do you do and all that?” I’m actually past saying that the books are pushing the parlay and stuff. I’m just saying they’re just giving these people what they want, because literally, I talk to all these people and that’s all they want to do. There is no betting 110. They don’t give a shit about that. It is straight up … Like Adam said, they want the $10 to turn it into $250.


They want the $5, that if you hit the nine legs, it’s going to be $1,000 and they’re all doing it. I’m literally sitting in this room with 10 of my friends going, “But don’t you lose these things way, way, way, way more often than you win?” They’re like, “Yeah, but when you hit them …” That’s the answer I’m getting. It’s like I’ve made a different opinion on this, and I think that I’m not weak. It’s not a weak mindset for me to change my thought and change my opinion on stuff like this. I actually think they’re just giving people what they want more than anything else.

Dustin Gouker (41:27):

100%. It’s an entertainment product, right? Yes, yes. It’s gambling, but people want to be entertained. People are way more entertained, like you said, on that lottery ticket, on the $5 same-game parlay or $1 to win $100,000. Oh, I created this crazy thing. It’s probably not going to hit, but maybe I’ll win. It’s the same as the lottery. You’re not going to win the lottery or you’re probably not going to hit your huge parlay all the time, but that’s more exciting to somebody than, like you said, grinding out, betting $100 on a 110 side. That’s not what the average bettor wants. It’s pretty clear at this point. Yes, it is chicken and the egg. Do we have the sportsbooks push it? Yes. Do people want the product? Absolutely, yes. There’s really no doubt about this.


This is what people want to bet right now. They don’t want to bet tons of money on sides. They’re more happy losing parlays and hitting that one every once in a while all the time. The other part of the earning season to get back to that is we don’t talk about it on this podcast because we’re more about sports betting. Online casino is behind all this, too. FanDuel and DraftKings are two of the biggest operators in that part of the segment, even the limited amount of states that online casino is, and that’s where we’re going to turn right next year because we’ve talked about California, Texas off the board next year. Online casinos is the next push for lobbying for these companies and for the whole ecosystem because that’s the next generation.


You don’t have a ton of states where you’re going to legalize sports betting next year, even if you really wanted to. You might have a handful at best with a legitimate chance of passing some sports betting, so you’re going to see more eyes on casino trying to get that customer and all of that. So that’s in the background of all of this, even though these are forward-facing sports betting companies. The MGM, Caesars, FanDuel, DraftKings, these are online casino companies, which is a more profitable business for them, as well.

Matt Brown (43:16):

Yeah, Adam, I think that’s a good point, and Dustin, right there. That’s how I was going to follow up with you too, is I think we’ll probably see more of this or more at least iterations of this, because look, California isn’t happening. You already said that. Texas, we know it isn’t happening until earliest 2025, right? The old stuff going on in Florida. So the big focuses on these other states isn’t really necessary currently. As we head into football season and certainly as we head into March Madness and all these other things, I imagine we’re going to see all kinds of different versions of this and new ways to go about it and all that, and that’s probably where the focus is right now as opposed to expansion.

Adam Candee (44:01):

This is going to be a much more fraught issue. Legislators and regulators take a much more cautious approach to it. Now, you’re going to start to really encroach in the area where tribal interests are not going to be happy with the potential loss of business. There’s a lot that’s going to come into play, and there’ll be plenty for us to talk about.

Matt Brown (44:21):

Yeah, it’s going to be great, guys. Everything we do, absolutely free over at legalsportsreport.com, so go over and read all of the great words Adam and team are putting down over there. So, please go and do that. Of course, you can follow Adam and Dustin absolutely free over on the Twitter machine, @AdamCandee, two E’s, no Y, and @DustinGouker as well. If you’re listening to this on the audio side, if you want to hit pause and hit the little five star, we would certainly be appreciative of that as well. For Dustin, for Adam, I’m Matt. Talk to you guys next week.

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