EPISODE 172 | LSR Podcast

Breaking Down The New York Times Series

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28 min

NY Times Sports Betting Stories | Account-Hacking at DraftKings and BetMGM | LSR 172

The crew dives into the recent series of stories by the New York Times about US sports betting. (02:35) We also talk about why the account-hacking situation at DraftKings and BetMGM requires a serious response. (14:34)

Full transcript

Matt Brown (00:15):

Hello and welcome to episode number 172 of the LSR Podcast. My name is Matt Brown, joined each and every week by the brightest mind in all of the gaming industry. With me, I have Dustin Gouker, I have Adam Candee. You can follow them for free on the Twitter machine over there. All you got to do is smash the button @Dustingouker, @Adamcandee, two E’s, no Y, and if you hate yourself, you can follow me @MattbrownM2. We are not going to keep you guys long this week. Just a tidy little two topics that we are going to hit here on the pod this week. Though, I am going to make it three, Adam, because there’s a fancy new redesign over at legalsportsreport.com. And if people have not seen it yet, they better head over there and take a look.

LSR changes its look

Adam Candee (00:54):

They should. They really should get a load of the hard work that a lot of people, too many to mention, at the LSR team put in to get us our fancy new looking design. Even though only Dustin’s picture and my picture are there to break cameras. There are lots of people who went into the lab and came up with this brand new design for Legal Sports Report, and we’re pretty excited about it. And let me put the word out there, to everyone who has asked me about the search bar and the search function of the site, I promise you we’re working on it. I know you miss it. We miss it.

Matt Brown (01:34):

Yes.

Adam Candee (01:35):

We need it, but you can’t have everything all at one time, and we’ll get it back soon.

Matt Brown (01:39):

It is not a finished product yet. We’ll just say that. Yes, if you have not gone below the fold, please do that, because you will be greeted by these two fellows’ faces if you do that. So just roll right there below the fold and, there they are. And you’ll see what Dustin and Adam look like if you are not watching us over on the video version of this, which by the way, we are on the YouTube, so please go over there and subscribe to the LSR YouTube channel. And if not, hey, if you just like the audio version, subscribe, rate, review. We really do appreciate that, helps us climb the charts, and more people can find this thing. So, Dustin, let’s kick things off here. First topic being The New York Times and them taking a look at sports betting and writing a piece in which, hey, look, maybe we don’t agree with all of the things that were written there on The New York Times. That being said, it is something for us to maybe, at least, bring to light here, and it is a good discussion topic.

New York Times series

Dustin Gouker (02:35):

Yeah, and you said there are only two topics, might be tidy. I don’t know. We could talk about this one for a while in addition to the other one. We could talk for a while on all these things, but yeah, New York Times did a series of pieces. The main bar, let’s say, had a pretty cringy headline and also, they made a big deal of saying they spent a year doing this. And the reporting on this ranges from good to, I didn’t learn anything, all within the same thing. There wasn’t a whole lot super new. It did aggregate a lot for the masses, I think, that you maybe not know. This huge lobbying effort that went into sports betting that, I’d say, that regulators, how dedicated are they to regulating sports betting? I don’t know. Not much maybe across the … But I think when I heard The New York Times, they had this large series of pieces coming and they said they spent a year on it, I kind of expected more out of it.

(03:31):

It did feel like they parachuted into the sports betting industry and maybe only did service level. Again, we’re a big believer in journalism, New York Times, but I’m not sure they did this justice. And this also comes with the backstory of, first when I started doing this back in 2015, man, they did an amazing job covering the offshore business and daily fantasy and everything going on. It was an amazing bunch of reporting that they did back then. And I’d say this was not quite as good as that. Still interesting, still lots to unpack, but I also, I don’t know. I expected to learn a lot, and I’m not sure I did. And I’m curious what Adam’s thoughts are after he read all of it too.

Matt Brown (04:09):

Yeah, Adam, I kind of got the same as Dustin. I don’t know. I didn’t really … And maybe we’re super … Well, we are. We’re certainly super inside the bubble here, and we know probably more than most people do about the industry and the comings and goings and stuff. But again, if someone takes a deep dive into anything, I feel like I should be able to pull something that I didn’t really know or that there would be some sort of nugget that I come away with, and I didn’t really.

Adam Candee (04:39):

So just for the people who don’t follow this as closely as we do, in art and in the journalism world, the way that we are, when we talk about a parachute job, it’s a derogatory term within the journalism industry for someone who doesn’t regularly cover the space and just shows up out of nowhere and tries to make sense of a subject that, those who’ve been following that subject for a long time have a much greater understanding of. And I think parachute job applies pretty well to what happened here with this New York Times series. Look through the set of articles and take the first one about the lobbying effort and saying, “Oh, cigars and alcohol went into lobbying legislators over the course of years to legalize sports betting.” OK, so I’m going to come at this from both someone who covers the industry and someone who worked in politics.

(05:28):

Is there anything new to the idea of an industry, or a vice industry in the perception of some, lobbying state regulators, legislators, et cetera, to legalize their industry? No, there’s nothing unique about that. Now, to the average person who might not know anything about it and might just be seeing all of these ads on TV and saying, “But I don’t understand, there was none of this five years ago. And where did it come from?” Yes, there’s value in understanding that it took a major push at the legislative level in many different jurisdictions to make it happen. So then I move on to another piece, and I see the part about, they have a sports betting deal at LSU. Yes, we covered it. Frankly, we got a fair amount of blowback about our coverage of it. And I’ll talk as someone who spent a lot of time covering UNLV, it’s not new.

(06:23)

William Hill has had a deal with UNLV for many, many, many years. This is not a new thing, it’s a new thing nationwide, and it might be a new thing in front of people’s eyes if you have it at multiple universities, University of Colorado, et cetera. So that, I understand. But here’s where they lost me when it comes to The New York Times piece. And overall, to what Dustin said, I’m glad that there is serious journalism being done around the space, whether it’s The New York Times, The Washington Post, whether it’s us, whether it’s our competitors, I’m glad that people are taking what is overall a measured and serious approach to covering the industry because there are plenty of people who aren’t.

(07:00):

And when you look at what they talked about in their overview piece of all of these articles, they had a part in there that said, “You know, the industry lobbied everybody on the idea that if you didn’t make tax rates low enough, that you would send people to offshore operators.” And that right there to me shows the fundamental misunderstanding in all of this piece, because you’re misrepresenting the argument. And when you misrepresent an argument, that’s where you lose me. And that argument fundamentally loses the idea that it was already on shore. This isn’t about a stick, this is about a carrot. This is about trying to bring people into the regulated market. And that’s the part that I think they got wrong, fundamentally, when they talked about how all this went down.

Matt Brown (07:45):

Yeah, Dustin, it didn’t seem like there was enough, giving the full … Like Adam just mentioned, if you don’t really play in the sandbox like we do, and you get the stuff that was unsaid, we already get the stuff that’s unsaid. So we’re kind of like, “Ah, you probably should have mentioned that, but whatever.” I think it’s easy for us to get right past that, as to where someone who doesn’t know exactly the other side of everything or how things exactly work, then you come away with something like a couple of different pieces in a couple of these different articles, where you come away with a skewed idea of how things work or a skewed idea of how things happen. And then that’s where the fundamental breakdown begins.

Dustin Gouker (08:28):

And again, subheads in there and recapping it, they make a big deal. They spent a year doing this. And again, lots of serious reporting went into this, but how do you do a year reporting, do all these stories and basically gloss over the offshore market? Which, again, regulated markets are competing against, and has existed in the United States for more. And again, New York Times did an amazing job. I can’t sell this short, that 2015 series, I guess was more just a really long enterprise piece on offshore, really, really captured what was going on. And that’s still there and that is still part of the market. And to just talk about the regulated market and forget that even exists is kind of wild to me. And again, just illegal bookies, just book makers on the streets, those are still out there too.

(09:11):

How do you not cover any of that? If you’re really saying, “We’re into a deep dive on sports betting,” you just put out the regulated part and you just ignore all this rest, which really informs the regulated part of it as well. And what’s trying to happen and building this with that … Again, sports betting is not new in the United States, not even just as a regulated thing, it is not new. It has this huge backstory, and to skip that and gloss over it, I know is very focused on the regulated market, but I don’t know. It feels like there’s stuff missing in there if you’re trying to tell the whole story.

Matt Brown (09:44):

And Adam, look. We’re obviously legalized sports gambling advocates because again, we know the stuff that can come with getting involved with all the other things. Of course, aside from your local bookie down the street, if you get too far in debt, we actually never really even talk about any of that stuff here on this podcast, which I think is maybe, again, we just assume people know all that stuff, and we talk more about the offshore market and all that because it does have such an incredible influence and stuff over the industry in general. But I mean, as Dustin there’s still the bookie on the corner.

(10:18):

And so there’s still the dude that, “Hey, you don’t pay me, I’m going to show up at your front door” type stuff. That still exists as well. We’re not saying that the legalized sports, the sports betting market is perfect, certainly not. And that’s not what we’re getting at with all of this. And when things are bad, be pointed out and all that. Of course, and we try to do that as well here on the podcast and of course over on the site. But again, I’m not going to say it was an attack or anything like that, it certainly wasn’t. But to ignore all of that other stuff, to me, is, I’m not going to say shoddy reporting, but certainly suspect at best.

Adam Candee (10:56):

So, I’m not going to push back on the idea that either of you are putting out there about what the depth was or what the clarity was or this or that. Because ultimately, yes, we cover the regulated industry, we talk about what are the clear distinctions between the regulated industry and the unregulated industry, whether it’s offshore or whether it’s bookies, no series from a national outlet like The New York Times is going to be able to capture all of the nuance, but where you lose me is where you get it wrong. When you straight get something wrong. And that, to me, if you take a year on something and you fundamentally misunderstand what the difference is between saying we need to entice people into the regulated market versus, you are going to now drive them — from what, I don’t know — into the black market. That to me is where you lose me ultimately.

(11:49):

Now, there are good parts of this, obviously. There was serious journalism done around the idea of, promo deductions are costing states tens of millions of dollars in revenue that was promised. And you know what? That needs to be talked about. That needs to be discussed, that the industry was able to successfully lobby for breaks that are allowing them to keep millions of dollars that probably should be going into tax coffers. And obviously, there needed to be some serious journalism done. I’ll raise my hand as someone who wrote about this years ago, how is Penn letting Dave Portnoy be the face of their operation? Words like misogynists and racists are ones that I wrote at LSR probably three or four years ago at this point, about Portnoy, not that that makes me unique in any way. So when we talk about the New York Times, when we talk about this regulation piece, ultimately, all we’re saying here is, take it all with a grain of salt. There was good journalism done, it just needed to be a little bit more, I would say, layered. Maybe a bit more researched, and maybe a bit more thoroughly explained.

Matt Brown (12:58):

And I guess more than anything too is, anyone who’s listening to this who maybe isn’t inside the bubble as heavily as we are, if you are working on things for the future, if you have ideas about stories in the future or something like that, hey, by the way, Dustin and Adam are really great resources if you need someone to reach out to make sure that all angles are getting covered and different things like that. Because again, we’re all fans of good journalism. We’re all fans of people outside of just us in the niche industry covering this industry, covering good things, bad things, whatever it might be and everything in between. There are resources out there to make sure that you’re covering all of your bases. And yes, I’m going to beat the drum for us and things like that. But hey, it’s an email away, it’s a DM on the Twitter machine away, and it can kind of, at least plug some of the gaps and some of the holes that I think from future content.

Adam Candee (13:49):

And Matt, just to add to that point, I won’t name the outlet or the reporter, but I had a national outlet who has covered this space before, have a new reporter who’s coming in to cover it, who reached out to me this past week, and all he wanted was a background call. And we talked for 20 minutes on background about, here’s the industry. And I know Dustin’s done it plenty of times as well. And yeah, we’re not the only source for it, talk to anybody about it. But at the same time, there are people doing it the way that we are talking about.

Matt Brown (14:20):

Dustin Gorker, that dates back to your piece from three years ago as well. So, yes. Who’s this Dustin Gorker guy that’s talking here?

Adam Candee (14:31):

Either you do the accent or you don’t do it at all, Matthew.

Targeted attack on online gambling

Matt Brown (14:34):

I only have one accent. I only have one, and that’s after a few cocktails. All right, so our second topic that we’re going to talk about here is, and again, this probably is a little bit more inside the bubble here, if you haven’t been paying attention to the stuff, super in the weeds, it’s an interesting story. And there has been a very targeted attack on online gambling. Now, we’re going to talk about it from a sports betting standpoint, but it doesn’t stop there. This has been targeted: high dollar DFS players, high dollar online poker players and, of course, online sports betting as well. But there’s a very sophisticated hack that has been going on that has been not only figuring out … Adam and I actually over the holidays were able to get together and we were just, our jaws drop sometimes at the sophistication of some of these guys and how they’re able to get the stuff done.

(15:28):

But you go to the black market essentially, and you buy just millions of email addresses and passwords, and you basically just sit there and start over and over and over again, trying to make any sort of combination work. And I guess it does, I don’t really get the nuance of how it all goes down and stuff, but that’s been happening in the gambling space. And there have been some people who have had a lot of money taken out of their accounts and funneled into this hacking scheme. And guys, look, I don’t know exactly how the sportsbooks handle something like this because when I hear of how it goes down, I don’t really know how you can get around it. I just think that maybe there’s a way that you could have plugged the hole a little bit quicker and all that. But it’s a very interesting story. And again, Adam, you and I talked about it a little bit over the holiday.

Adam Candee (16:15):

Yeah. And you and I had a good discussion, I think, about some of the sophistication of the amounts that were extracted from some of these accounts. And if you don’t know about it, the high level of this is that this login and personal information, more the personal information, that was stolen from third-party sites was used to create accounts on a couple of sportsbooks. We know DraftKings and we know MGM, we’re not sure about others, and used to create accounts that essentially had a bunch of money put into them and then very quickly had a bunch of money taken out of them. And this is one of those things where I look at The New York Times pieces that were done and say, “OK, they wrote about some issues that, all right, I talked about the lobbying and what’s the big deal with the lobbying. This is an invitation for The New York Times to be digging in on something that could be massive within the industry.”

(17:03):

And I know, people who listen to this podcast are probably sitting here saying, “Ah, Dustin are always talking about the sky falling.” If you look up in the sky and you see all these accounts come raining down and say, “What is the regulated industry doing about it?” The response to this from sportsbooks and regulators is the fundamental litmus test for why the regulated market exists. If this is not handled properly, you lose the credibility of the entire argument as to, well, if something goes squirrely with your account, your money is safe with a regulated sportsbook. Well, is it? This is what the test of it is. Now, with the DraftKings situation, they said it was about $300,000 in funds that were taken out, and one of their co-founders said, “You know what? We’re going to make everybody whole.”

(17:50):

Perfect. That’s exactly the response that needs to be there. The second part of the response that regulators need to cover and that we need to cover is, how exactly did nobody notice that this much money was going into accounts and then coming right out of accounts, never having been played? It’s money laundering right on the surface that is not being hidden particularly well, and I know Dustin has thoughts on this too, so I’ll step off my soapbox and give him room to jump up.

Dustin Gouker (18:15):

Yeah, this is the one part of The New York Times piece, which we can dovetail this. They talked about states being unprepared for regulation, for sports betting regulation. And again, this is where I would expect regulators to, not maybe taking action publicly, but at least assuring people that things are being done. And I know we’ve reached out to regulators and we’ve heard basically diddly poo. We’ve heard a little bit, we’ve heard back from New York, but nobody’s really stepping up and saying, “OK, everybody’s safe. Here’s what’s happening. Here’s what needs to happen.” That should be coming from a regulator. They should be saying … Either taking action and making customers and sportsbooks secure or saying, “OK, yes, there is nothing to be worried about.” This is a third-party hack that, all this is going on… They should be diving into this and finding out. And none of that is happening.

(19:05):

That’s the problem I have. And yeah, the other part is that, yes, why is it not being caught? Once everybody caught on that this stuff was happening, everybody started taking a little bit closer, but money should not … It’s already hard to get money off. So why, in these cases that it’s happening, are people giving money on and off so quickly? That seems like a failure to me, and it’s not been addressed by anyone. Again, good on DraftKings for making but why? That’s what I want to know, I want to know why it’s happening.

Matt Brown (19:33):                

So this was the deal that I talked to Adam about, and look, so to be fair, I know a bunch of high, still high-level poker players. And so this happened to them on wsop.com. It happened to them on poker … So this game, so if you’re not familiar with it, you can go in and see how it all … It’s called credential stuffing, if you want to go in and read how this does, you go to the black market and you buy a whole bunch of things that have been leaked over time. And then they basically go in and figure out ways to get into people’s accounts and stuff. And this is just your quick little PSA. If you don’t have two factor authentication on any of your gambling accounts and all that, you need to do that ASAP. That is how this was only hundreds of thousands of dollars and not millions if not tens of millions, because a lot of people did have two factor authentications.

(20:23):

So when people were trying to get into their account, they were getting this notification, they’re like, “Hey, you need to verify whatever.” Hey, I ain’t trying to get in my account. So that actually saved so many people out there with all of this. But Dustin, honestly, the more that I read about this and the more people that I’ve talked to and some of the people that have actually had this happen to them, they figured out, I don’t know how they did it, and unless the black market information that they bought that, again, this was from one of the payment processors that apparently had some sort of leak back in the day or something. That they were targeting high-dollar gamblers, specifically high dollar. So that it wasn’t crazy for person X, Y or Z to deposit 5K, 6K, 7K, nine, whatever.

(21:04):

Because that’s the level of gambling that they have done in the past and that they do. And so I don’t know if there was even an automated, I don’t even know if there’s an automated system in place where once you get verified as being a dude who regularly puts in 5K or 6K into your account, I don’t know. I actually had this conversation, like I said, me and Adam talked about it for half an hour. I don’t know what they can do, because once you know your customer and once you get verified as being a high-level gambler, me personally, I don’t want them every single time I want to make a deposit. Making me call them and do all this stuff like that, especially if I’m trying to get down on a game that’s happening in an hour. And also, I don’t know. I think you probably have more of these people who ended up getting money stolen from them, say, “Yeah, but at the same time, I want to be able to get my money down on the account.” So I don’t know.

Dustin Gouker (21:57):

Yeah, this was very sophisticated. Let’s not sell that short. Whatever’s going on, and again, MGM also has been affected. Yeah, you talk about the online, basically … I saw on Twitter. And the same people, these high stakes poker players who are all targeted and basically hacked in the same way. It’s sophisticated, there is no doubt about that. Again, for me though … We have tons of stories of people who have a hard time getting money out. Right? Also, the other part of this is that there’s a lot of KYC and a lot of things going on, and I understand your point about people, once you’re flagged as, oh, this is not an unusual transaction for this person. But money going in and instantly out, man, that’s a red flag. Doesn’t matter. All these other things.

(22:44):

The sophistication of it, notwithstanding, I feel like there’s something else to be done. And again, I want more from the operators. They’re obviously still working with it, their pay processors, all of this. We don’t have the whole story, but I want to hear from a regulator to assure people that this is being looked into. I don’t need an outcome; I just need that you’re looking at it. Because again, back to The New York Times story, I’m not convinced … We know regulators in several states. I’m not convinced a lot of the places that have regulated sports betting that anybody has any expertise to look into this and understand even one ounce of what’s going on. That’s probably my problem. And again, The New York Times piece brought to light that, how much are regulators, really … They’re just trying to make this easy across state lines and not reinvent a wheel.

(23:32):

But that also comes with it. Are you just piggybacking on the efforts of a couple regulators who are really going to look at this? I’m sure New Jersey is looking at this. They haven’t said anything, but they are the ones who are looking at this constantly and trying to be the gold standard in the online gambling space. So I just want more, I want more information. And going back to Adam. Between this and The New York Times piece, I’m like, maybe your sky is falling, but there’s … this was not a great week for sports betting. Let’s put it that way, and online gambling. And I’d like some more accountability and a lot more communication. Just more communication. Even if it’s like, we screwed up; this is what happened. Just tell people what happened. That’s the part that we’re missing. Even MGM is not really … There was a statement early on, we still don’t know a whole lot. Maybe we’re still figuring out, but I just want more information, I want more accountability.

Matt Brown (24:21):

And Adam, really at the end of all this, I think the more curious thing for me will be how something like this gets prevented in the future. Because like I said, even for me, over the years, I’ve had to figure out ways to get more money on if I want to get more money on or get more money off and different things like that. And the KYC process, which I’m perfectly fine with, but once I complete all that, where I’m sending in amounts of documents to prove who I am and all stuff like that, if I want to get 5K on, you better not … You know what I’m saying? If I want to bet $5,000, I want to get something in and I want to get it done, I don’t know. It’s just a weird line to tiptoe, and whoever — I’m never going to hat tip hackers or something — but how they figured out how to isolate these high-level guys, it’s crazy to me. It blows my mind.

Adam Candee (25:13):

And I think we, again, to go back to highlighting, it’s not about the in, it’s about the out. Right? The in is what it is when it comes to high-level gamblers, right? The fact that 10K is going in, the fact that 20K is going in, that can be something where, whether it’s your VIP service person, whether it’s someone who is maintaining the algorithm, et cetera, who gets a flag on it. And you might look at that and say, oh, OK. Right? If that same money is coming out 24 hours later, never having been played, that has to raise a flag, right? Because you’re talking about getting 5K in to get down on something.

(25:50):

Well, if that 5K goes in, let’s just say even only a thousand of it gets played, the other 4K comes out, right? Maybe that doesn’t raise the same flag as, 10K went in, and I’m using information from …

Matt Brown (26:03):

From Twitter.

Adam Candee (26:05):

Well, from David Purdum’s report on ESPN. And saying, $7,500 came out immediately, $2,500 came out the next day, never having been played. That’s basic. That’s 101 kind of stuff that even someone like me who doesn’t know a line of code to save his life, would know needs to be examined further.

Matt Brown (26:23):

I don’t think any of us know a line of, actually on this podcast, we might go 0 for 3. If somebody was like, “I will give you an hour to write one line of code,” we would just be like, I don’t …

Adam Candee (26:32):

Mine would just say durrrrr …

Matt Brown (26:33):

Yeah, you could just give me infinity. Yeah, you could give me infinity. There would be nothing that you’d be able to get out of all that. Guys, listen. We had two big topics that we wanted to take on this week, which is why we went a little bit longer. Listen, we’ll talk the ESPN stuff next week here on the podcast. Churchill Downs and DraftKings ended up making a partnership that’ll happen down the line, but we’ll talk all of this stuff here next week on the pod. But wanted to give some proper time to these two issues here, two stories, as we come back out of the holiday and then head into another holiday season as well. Again, everything we talk about here, head over to legalsportsreport.com. Be sure and head down below the fold. If you’ve only heard the audio version, you can see what these two guys look like. You can follow them on the Twitter machine, too @Dustingouker, @Adamcandee, two E’s, no Y. For Adam, for Dustin, I’m Matt. Talk to you guys next week.

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