Caesars CEO Sounds A Responsible Gambling Alarm | Sports Betting News | LSR Podcast 233
Comments from Caesars CEO Tom Reeg at a recent gaming conference raise the specter of federal regulation around responsible gambling. Also, the crew talks about a win for DraftKings in court, a major concern for a Las Vegas casino in the Ippei Mizuhara gambling scandal, and a familiar fate for sports betting legislation in Mississippi.
Full transcript
Matt Brown (00:09):
Hello and welcome to episode number 233 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 Adam Candee. You know him, you love him, and you can follow him on Twitter for absolutely free. Adam Candee. That is two E’s, no Y. If you hate yourself, you can follow me @MattBrownM2. We will talk about some state updates, what’s going on in Mississippi, what’s going on in Alabama. We’re going to see, some of the Shohei Ohtani stuff is getting a little bit interesting as well. And then what’s the latest on that whole DraftKings and Fanatics squabble that is going on. But Adam, kick us off here with what the CEO of Caesars had to say.
Comments from Caesars CEO Tom Reeg
Adam Candee (00:51):
What I found most interesting about this story that came out of Mike Mazzeo’s trip to East Coast Gaming Congress a couple of weeks ago is that we don’t often hear the CEOs of the major gaming companies talk about responsible gambling in the way that Tom Reeg did at this conference. So let’s start out with the quote that came out of Atlantic City, directly from Tom Reeg’s speech here: “Responsible gaming is not just a PR problem that we throw some money at and hope it goes away. This is something that, as gaming becomes more and more a part of daily life and people’s lives that don’t gamble. That’s a new development.”
(01:29):
And in part, he’s talking about this in response to the letter that Senator Richard Blumenthal sent out asking gaming operators about the responsible gaming practices. And also he discussed the fact that he sees a lot of sports betting ads on television, much the same as everybody else sees a lot of sports betting ads on television. Now, important context to that: Caesars notably pulled back on its marketing quite a while ago, right? They went very heavy in the early days of New York more than a couple of years ago, and they have pulled back. You do not see Matt’s friend JB Smoove.
Matt Brown (02:05):
I was about to say, Adam, much to our dismay, right? I mean like a podcast favorite, in JB Smoove, right?
Adam Candee (02:10):
JB is gone. Carl, Carl’s not around anymore. We don’t even get Cooper Manning.
Matt Brown (02:16):
I was going to say, we don’t see the Mannings. Where the hell are the Mannings?
Adam Candee (02:20):
What happened to Cooper? You don’t ever see him on an Omaha podcast. Cooper, Cooper’s just gone. So Caesars has pulled back a lot on all of its celebrity push and marketing, but more importantly to the quote that Tom Reeg was talking about, I think that part about how it’s affecting the lives of people who are not directly involved in gambling is notable in terms of what he expressed overall, which is the concern that federal regulation could be somewhere out there on the horizon for sports betting, for iGaming when it comes to how people are feeling about not only the responsible gambling concerns that you’re hearing, but also that marketing advertising blitz that has been out there.
(03:02):
Now, those of us who’ve been in and around the industry for a while, we understand that responsible gambling concerns have always touched people who are not directly involved. That is the central tenet behind the idea of how gambling addiction works is that this ultimately has effects on loved ones, on families, on friends, on jobs. However, it’s getting attention in a much different way now in the legal sports betting era with so much push out there for sports betting operators. And, of course, as we continue on here, as we see companies pushing for iGaming expansion as well. And I think it also stands in stark contrast to what we’ve seen from some other CEOs recently where the quotes haven’t been really, I think, as prescient in a way that Tom Reeg’s was.
(03:53):
So Matt, I’m curious what you think. You’ve obviously lived in Las Vegas a long time. You’ve been involved in these industries for a long time. I just found those comments very interesting.
Matt Brown (04:04):
I’m glad you brought up the iGaming part of this, Adam, because I’m glad that we are laying the groundwork for all this stuff now. We know, maybe not in the very near future, I think you and I both know how this works. Sometimes it’s just a slow process, but it eventually gets there. There will be iGaming expansion, right? We are aware that whether it’s two years from now, three years from now, five years from now, 10 years from now, there will be iGaming expansion. And one of the things about sports betting and iGaming that do differ a little bit with all of that, Adam, is that sports only happen when sports happen, right? Sports are not happening 24/7, at least not the popular sports in the United States. I suppose if you wanted to, you could find your fix with cricket and darts and whatever and all the stuff that’s going on all over the world.
(04:51):
But for the vast majority of bettors out there, games start at 7 Eastern and they end at some point and your window of when you can actually be participating in all of this is finite. As to where iGaming, right, is always on. You can literally sit there and you could be playing slot machines or craps or blackjack or whatever it is at any hour of the day, all the day long and whatever. And so I’m glad that we’re getting out in front of the responsible gaming stuff from a baseline standpoint. And, for me, hearing those comments, I’m like, is this really addressed to today or is this addressed more down the line and towards the future? And honestly, it doesn’t matter either way, right? I mean, as long as it is and long as whether it’s for today or whether it’s for the future, it’s a good thing regardless. And so I’m in on all of this. I think it’s more of a long-term play.
Adam Candee (05:46):
Understood in that regard. From Caesars’ perspective, also, I think that they see that this is something that they as a legacy casino operator probably understand and feel on a different level than some of the newer operators into the space, right? They’ve been dealing with this for a long time now. We do have the new Responsible Gambling Alliance that was formed by a number of operators, notably Caesars not part of that one, but doesn’t mean they’re any less invested in alignment when it comes to self-regulation from the industry. And we’ve had a lot of discussions on this podcast about what self-regulation looks like. And I think the point when it comes to what we’ve seen in Congress with Paul Tonko’s bills that have been introduced but haven’t gone anywhere is that Paul Tonko has discussed the fact that he sees these bills as starting points. However, I think he’s gone too far in some of what he sets as the parameters for starting points, but they are at least the sort of bell that has been sounded to say there should be discussions from those who know better, like casino operators, like sports betting operators.
(06:56):
There should be discussion on that level about what reasonable self-regulation looks like before the discussion gets away from you, before the discussion gets out of your control. Because I was actually just watching the White House Correspondents’ dinner set that Colin Jost did recently, and he brought up the idea of, we hear so much when it comes to the election, are you better off than you were four years ago? And his joke was, of course we are – we have online sports betting now. The narrative is out there, right? And the narrative is running to the point where it might not be able to be so easily controlled in the long run. It might be beyond that point already, frankly, when it comes to all the Ohtani stuff that we’re going to get into here in a minute. But I do like the fact that the discussion was at least raised and hopefully continued.
Matt Brown (07:51):
A couple of things to talk about that just come off of this discussion here, Adam, you and the team, how much do y’all love saying ECGC when y’all are talking about the East Coast Gaming Congress? ECGC has to just be something amongst y’all that is a thing now, right?
Adam Candee (08:06):
ECGC, easy-peasy. It just kind of rolls together.
Matt Brown (08:11):
It has to be that. And then the other thing is, is JB Smoove, I will say this as we tip our hat to the end of Curb Your Enthusiasm, I assume you’re a Curb Your Enthusiasm watcher. It seems like you would be, but maybe I’m jumping the gun here.
Adam Candee (08:26):
I have to be honest, I am so far behind on pop culture in general that I am fully aware of Curb. I have seen Curb. I am not as dedicated of a watcher as I know a lot of people are. However, it’s not like we’ve lost our JB Smoove fix. He was on those AT&T ads during the NCAA tournament, and I have to say big letdown from being Caesar.
Matt Brown (08:48):
What I was going to say is if I don’t get him in the Caesars commercials, getting him in that environment in Curb Your Enthusiasm, Adam, as you end up catching up on this show, at some point down the line, you will see as brilliant a writer as Larry David is and how he’s able to connect these weird stories together and all these, you can tell that JB Smoove’s character, he is just winging it. He is literally, whatever’s going on, he is just saying whatever comes to his brain in this crazy comedic thing that’s going on, and you even catch every now and then, Larry David or Jeff, they are genuinely laughing. You can tell it’s not a fake laugh. They’re genuinely laughing ’cause they had no idea he was going to say what he said and then came out and there’s like, that’s funny. You’re just a funny dude.
Adam Candee (09:33):
Matthew, I cannot believe that you, Matt Brown, would connect to someone who’s just winging it and coming up with stuff off the top of their head and loving the good stuff that comes out.
The crew talks about a win for DraftKings in court
Matt Brown (09:43):
Oh, it’s so good. All right, so let’s get back to the serious stuff here, which is we told you guys, I’m guessing this was a couple of months ago at this point, Adam, about DraftKings coming after Fanatics for what was allegedly at the time, went on behind the scenes of the acquisition of their head of VIP. And you and I made a very, I think a point that isn’t really talked about a ton of stuff in the other articles that are written out there. And this isn’t just like, oh, let’s pat Matt and Adam on the back. But the case in and of itself and the stuff that went on is just bizarre.
(10:19):
But I don’t think people realize just how valuable someone who holds the keys to your VIPs is in a business like this. And so when people look at this and go at it and say, whatever, I get it, it kind of sucks, but what’s the big deal? And I think that some of the articles I read don’t even mention about why this is such an incredibly big deal. But as we said, and I truly believe this, outside of the intellectual property of the code to the app, whatever and stuff like that, this might be the most important information in that company.
Adam Candee (10:55):
It is the most important information in that company. Without question. If you understand the amount of money that is flowing through your VIP customers and the fact that when you look at it not only as those customers potentially leaving your business but going to a direct competitor, it is a double hit when you think about it in that regard. So let’s get to the news of what actually happened here this week.
(11:18):
DraftKings was victorious in winning a preliminary injunction against Michael Hermalyn, its former head of VIP who left suddenly during Super Bowl week to go to Fanatics in a scheme that you have to read about at Legal Sports Report to truly understand the movie level of plot that went into this move. It’s beyond anything I’ve seen in my years of covering this industry. But what does that mean for us practically right now?
(11:52):
It means that the District Court in Massachusetts in giving that preliminary injunction essentially said that there is a likelihood that DraftKings will succeed on the merits of its case when this is finally heard. In the short term, it means that Michael Hermalyn is enjoined from using any of the information he might have potentially gained or doing anything that he would’ve done in a similar role at DraftKings for the six months prior to him leaving DraftKings for the term of his non-compete. So long as that non-compete stands in the future of the legal case here, because Michael Hermalyn is challenging that non-compete in court. Now, what does that mean in practice? It means that from the spokespeople that we’ve talked to, the people behind the scenes at Fanatics, they’ve said, you know what? It’s a big business. There are other things that he can do in between the time when he is enjoined and when he’s ultimately allowed to move on here.
(12:56):
I have questions about how the enforcement of any of this ultimately works, like who talks to who behind the scenes and how does information about a client who might potentially be interested in moving from one sportsbook to another come across. There’s so much here involved. Matthew Waters has been following the case for us at Legal Sports Report. I encourage you to take a closer look at the article that he put up this week for the latest on what’s going on. But it is notable at the very least that DraftKings has won that preliminary injunction and the court has at least said, OK, based on what we’ve seen so far, we believe the DraftKings side more than we believe the Hermalyn side. There is, of course, much legal wrangling still to come here.
Matt Brown (13:40):
Muddying the water even more, the FTC coming out in the last week and saying that non-compete clauses cannot be enforced except they did put a carve out, something for senior level executives and all that, Adam, and this is an aside to all of this, and I understand whether you’re on the side of non-competes or not. I think if you look at it rationally and say, look, a guy 10 rungs down the ladder, if he needs to improve his position in life or something like that, he should be able to do that freely. I don’t think that we should be going in and trying to prevent that from happening. However, I do think that there’s merit to some of these people who as we laid out at the top of us talking about this, that literally could cripple a business with what they do with the knowledge they have with the Rolodex that they have and all this stuff.
(14:31):
I think there’s some merit to all of this, right? I think there is merit to some non-compete clauses. I don’t think the vast majority of them probably or anything that need to be in place. Like I said, if you’re way down the ladder, if you’re trying to move up in life, who am I to try and keep you from doing that? But dudes who do put themselves in situations where you are now holding the keys to stuff that could in theory, I know we’re talking, it’s a bit hyperbole when I say that, but in theory, cripple a business or at least really dig into a business’s bottom line. I think that there is some merit to some non-compete stuff and not being able to just jump ship and go and do that. So again, that’s just my, adding a little personal opinion here to our news podcast.
Adam Candee (15:17):
For more legal advice, go to brownandcandee.com where we will represent your interests for the low price of free. Adding a little bit of context here, also, the court did note that what Matt mentioned about the carve out for senior executives applies here, the non-compete is still valid in the case of Michael Hermalyn. So even though we saw the FTC essentially say these are all null and void going forward, it does apply in this case.
Major concern for Las Vegas casino in Ippei Mizuhara gambling scandal
Matt Brown (15:46):
Well, we thought we might be done with the Shohei Ohtani stuff here, Adam, and then, I guess we’re not done with all of this as some of the details start to roll out. Some ties to some other places start to come out as well, one of which is down the road from me here in Las Vegas at Resource World. But this thing just keeps getting more interesting.
Adam Candee (16:10):
We should be fair to Shohei Ohtani and say that yes, it’s still related to the Ohtani tangential investigation. This is really about how the money …
Matt Brown (16:20):
We attach the big name for the headlines. We attach the big name for that.
Adam Candee (16:24):
It is how the money flowed from Ippei Mizuhara to Matthew Bowyer and more importantly, what was in the middle of that? This is getting pretty ugly for a couple of casino companies at least in how it looks. So ESPN reporting that, and I’ll point you to Tisha Thompson’s very good article over at ESPN.com. Go read it for the full details because there’s more that we could possibly get into here. And I’m going to tell you that even the very last paragraph of this story has details that are going to make your eyes pop. There are so many interesting pieces to this story. Now, most importantly, the accusation that is involved here from multiple sources is essentially that the money was going from Ippei Mizuhara to an associate of Matthew Bowyer, the reported bookmaker at the center of this investigation, but it was being washed through at least one Las Vegas casino potentially, as well, from one California casino where the money was going in, becoming chips, being played and then being cashed out.
(17:33):
And so that raises about, I don’t know, a million anti-money laundering concerns that could lead to Resorts World getting into some significant trouble. The circumstantial pieces of this that go along with it are that Resorts World was opened by Scott Sibella, an executive formerly with MGM. Scott Sibella is at the heart of the federal investigation into Wayne Nix, another illegal bookmaker from California who was the one we’ve been reporting on for the last couple of years. And he is facing potentially some criminal charges having to do with Wayne Nix washing money through the MGM over his time as a player there.
(18:16):
The article also gets into how Bowyer is one of a handful of major bookmakers in the state of California. He has a lengthy, lengthy history of involvement with casinos, major markers, some of which have been paid back, some of which have not been paid back. So, I think the most interesting part, Matt, about this story is how we are now dealing with a second large bookmaker from California who was using at least one Las Vegas casino to wash their money and bring it back out on the other side. Now, of course, Bowyer also had like $8 million in losses at Resorts World for a casino that hasn’t been open that long. Very impressive. But this is something that is going to touch the legal industry in a different way when it comes to how this money was flowing.
Matt Brown (19:05):
So when this came out, Adam, I mean obviously we knew this guy was a major player. You could hear about the type of money that he’s dealing with or something, but when this came out, is there a bigger advertisement for why there should be legalized sports betting in California than this story? I mean, seriously, if this guy has some way, shape or form, like you said, he was able to get these giant markers at all these casinos, he was able to validate some way, shape, or form that he was making this money. I don’t know, and this again, I assume we will figure this out and this will all come out at some point because me and you can walk into, they ain’t giving us $500,000 marker. This is not happening. There’s zero chance. And so he was able to validate this income in some way, shape or form.
(19:51):
As you mentioned over a little over a year’s time, lost $8 million in a casino. He lost that, which means, what is he making, being a bookmaker, per year over in California? I mean, this is insanity, the type of numbers that we’re talking about and dealing with here. And the first thing is, I’m reading this, I knew big numbers were going to be attached. I didn’t know this big numbers were going to be attached to all this, and I’m just going, dude, they should just take this, walk into, this is why we need legalized. This is it. This is it, right? This guy alone is pumping through 10 fig, sitting here pumping through 10 figs. How many other of these guys exist that we don’t know about? There are many more, trust me, that are going on over there. I mean, Adam is just like, this is it. We make a flier, we walk in, we hand it to people and be like, this is it. This is the case study.
Adam Candee (20:42):
If one method of communication has ever been shown to be the most effective at getting change when it comes to regulation, it’s a flier. It’s well known, make good fliers, you will get good change. This situation brings out a number of things that we’ve talked about in a way to say, hey, it’s going on, but there are more details attached to it. In the ESPN investigation, Tish Thompson talks to one person who is a bookmaker who spoke on anonymity, who said that there are 10 major bookmakers in the state of California, and everybody else is essentially running money for them. So if there are 10, and we are now dealing with just two of them, right? In Wayne Nix and in Matthew Bowyer, that would mean that there are eight others doing what? Similar numbers, we assume, if they’re being referred to as bookmakers on this scale, right? It is no exaggeration. We are talking about billions of dollars flowing through the illegal market, if that’s the case.
Matt Brown (21:47):
It’s crazy when I saw that attached to me because again, this guy’s not broke. So if he’s losing $8 million of it, Adam, over the course of a little over a year, what is he making? How much money is coming through this with all that? It was wild to me to see that figure attached. And again, there will be more details and as more details come through, we will certainly keep you up to date on all that. And as Adam said, Herbert ESPN, it really is a very interesting article. As we do, most podcasts, I can’t say each and every podcast, but most podcasts, Adam, take us home here with a couple of state updates.
A familiar fate for sports betting legislation in Mississippi
Adam Candee (22:22):
I’m going to sound all the doom and gloom here at the end of episode number 233. Whither the south, maybe it shall rise again, but it shall not rise again this year. Mississippi, which looked like it had taken the steps in the direction we thought was going to lead to expanding the market to online, finally died. Another situation similar to Alabama, one chamber passed it, other chamber did not, goes to conference, does not get out of conference. What happened in Mississippi is that every year since 2018, when it was one of the first states to go live with in-person legal sports betting, there has been some bill introduced to try to expand the market to online. But what happened last fall was that we saw legislators do a task force, essentially a study, to go and look at how would this benefit casinos in the state. So that seemed to be the step in the right direction of, OK, we’ve done the study, we’ve gotten the information, now we know what the bill should look like.
(23:24):
However, what we ultimately see here in Mississippi is that the local casinos, obviously not talking about the ones who have ties to major operators like MGM, but the local casinos have a lot of sway with state legislators, and they express concerns about how that would affect them if sports betting were expanded to online and benefited the major operators more than them. And that ultimately was part of why Mississippi is done for this year.
(23:50):
Now, over in Alabama, we already thought it was done and then all of a sudden a conference committee involving the sports betting bill popped up. Our Pat Evans, who watches a lot of legislative sessions. Just if you ever see Pat out at a conference, just give him a little pat on the back, buy him a drink, tell him you know how hard he’s working, watching all of these sessions. Within the first five minutes of this conference committee hearing yesterday, the chair of the committee said, just want everyone to know we are not talking about the sports betting bill. This is not going to be part of this. It is not passing. So, Alabama looks like it is going to be without sports betting again this year. We saw that that was a comprehensive gambling package. A lot of it got stripped. Looks like that what they’re ultimately going to do is try to advance a state lottery. It was one of only a half dozen states that does not have a state lottery as of right now.
(24:42):
There was a bill introduced in Missouri. Our intel says, don’t pay attention to that. You’re only paying attention if you care about this to what’s going on in the situation with the ballot measure that’s being pitched. Also, report out there about North Carolina having a bill to ban prop betting about to be introduced. Only interesting, I think, beyond the obvious because that market just launched. That law is brand new, and we could be potentially looking at some restriction there. That’s coming from a representative who was against the expansion of sports betting in the first place.
(25:17):
So not a great map in terms of more sports betting states coming online this year, but that was, of course, expected at the beginning of the year. It has become a much more difficult task in the remaining states that are left. Frankly, they were the ones that weren’t low-hanging fruit in the first place. Keep tuned in to our podcast legalsportsreport.com for all the latest as to what is going on in all of those states.
Matt Brown (25:42):
Adam, it is the biggest stretch of land across the United States now at this point that doesn’t have some form of online legalized sports betting. You go all the way from Mississippi all the way to the coast and there in South Carolina where you’re passing through Alabama and Georgia as well. You take a look at a US map, and we love maps here on this podcast as you guys that have listened for 233 episodes well know, you will not find a stretch of America that far where you do not have some form of legalized online sports betting except for that chunk of land right there in the south. And obviously up until recently, Florida was a part of that too, and you just had that whole area that was down there with that. So it’s just super interesting that we can’t get anything done in any of these states as to where, again, you cannot go that far between borders to find a chunk of states that don’t have legalized sports betting past that.
Adam Candee (26:38):
Question for geography Matt, though.
Matt Brown (26:40):
Yes.
Adam Candee (26:40):
And this is going to require a little bit of creativity of thinking: What if we turned California 90 degrees? Would we then have a similar stretch of land where you have no legal sports betting, right? Like geography Matt is also becoming geometry Matt.
Matt Brown (26:57):
But here’s the thing though, then we would have to, but then it would bisect Nevada and Arizona, which both have it. So then you would be able to ping-pong own …
Adam Candee (27:08):
It’s like a bridge. You could take the lower level under the area that doesn’t have it.
Matt Brown (27:15):
So if you rotated it, you would still have Nevada on one side and Arizona on the other. So no, that’s it. That’s the hunk of land. Sorry. That’s the way we’re going with that. We’re done. We’re just going with that. Get it done, guys. Come on man. What’s going on? Why are you leaving this on the table. If we think that the money, this is how we end it here, Adam. If we think that the money is really big running through California, actually we know that it is. We’re starting to see the numbers attack. What do you think is happening in Alabama and Georgia and South Carolina? Do you think that there are no bookies there? Do you think that everybody is just going about this and just going, well, we can’t bet so I ain’t betting. No, it’s happening there, too. There’s a lot of bookies probably in Atlanta right now who are praying that none of this stuff passes. I mean, there’s bookies everywhere that doesn’t have legalized stuff, so come on. It’s happening there, too.
Adam Candee (28:03):
So wait, Matthew, you, an SEC graduate, you’re telling me that there is gambling on college football in the South. I am shocked.
Matt Brown (28:10):
I hate to break it to you. I’m peeling the curtain back a little bit there for you, Adam. But yes, it is, in fact, a thing. Guys, as we talked about everything here except for one story that we are going to give our props to over on ESPN, but you can find over on legalsportsreport.com. So head on over there, be sure that you’re taking in all the great words that Adam and team are putting on the site. And if you haven’t done so quite yet, go in. If you’re watching us on video, subscribe to the channel. If you’re listening to us on the audio side and for whatever reason you haven’t subscribed yet, hit the subscribe button. See, boom. Done. There it is. Look at that. It took you one second to do it. One second to go in. Follow Adam on the Twitter machine, @AdamCandee. Two E’s, no Y. Or follow me if you hate yourself @MattBrownM2. For Adam, I am Matt. Talk to you in two weeks.