Sports Betting On the Go
It was an NBA Sunday in Central New Jersey and Gadoon “Spanky” Kyrollos, one of America’s most prolific and successful sports bettors, was in his element. Some 88 miles away from the nearest casino, he occupied a conference room in the rear building of a suburban office park, placing tens of thousands of dollars’ worth of bets, all of them online, and all of them legal.
Two of Kyrollos’ employees stationed themselves inside an adjacent room, monitoring lines of data identifying the ever-changing odds of games set to go off during the course of the afternoon and evening. The advantageous opportunities were limited, making it a relatively light day for Kyrollos and his crew. Their big bet of the moment was $30,000 on the Charlotte Hornets to cover the spread against the Boston Celtics.
Kyrollos, who graduated from Rutgers University with a dual degree in computer-science and finance, designed his system, which is outfitted with an automatic bet feature, to maximize his returns. It searches on- and offshore books for wagering opportunities at the desired number—implanted after a big movement is spotted or critical news breaks—and places bets at split-second speed, allowing him to wager without even touching his keyboard. And while his setup is next-level advanced, Kyrollos is far from alone in favoring online sports betting, via computer or mobile app, over doing it the old-fashioned way. It’s a world apart from old-school betting, waiting in line at a casino sportsbook, eventually reaching the betting counter and ultimately laying down a big pile of cash. Today’s moves are fast, virtually instantaneous, and all done from the convenience of your home, office, even your favorite cigar bar.
The interest level is astounding: $21.5 billion was bet legally on sports in the United States last year, up 65 percent from the $13 billion bet in 2019 and nearly five times the $4.6 billion bet in 2018, according to the gambling-industry research firm Eilers & Krejcik Gaming. And that number is only going higher, expected to multiply by a factor of more than four by 2023, hitting $90 billion, as more states open up and even more companies join the industry. D.J. Leary, director of business development for Eilers & Krejcik, says that 85 percent of these bets are currently placed via mobile options, and he expects the mobile element to only increase. “I think it’s likely to move more toward online over the next two years,” he says.
This is a gargantuan growth market that many entities want a piece of, driven by the widespread legalization of sports wagering that began in 2018 and has gained steam each year. As this story went to press, sports betting was legal in 22 states, but technology and capitalism have taken it far beyond the casino. Most bets occur on phones and tablets, and the blowup in interest has led to a host of new players emerging as powerhouses. Operations such as DraftKings, FanDuel, bet365, 888sport and the upstart Barstool Sportsbook are all taking big-budgeted stands. Barstool alone, spun off from the irreverent sports content site, is part of a $450 million deal with gambling-entrenched Penn National Gaming. Even the famously staid Professional Golfers Association has set itself up to accept action—pending final legalization of sports betting in Arizona, DraftKings and the PGA will partner on a sportsbook at TPC Scottsdale, while representatives from Illinois recently bragged about hitting record-setting handle: $633.6 million in March was a high-point for the state.
Those bets translate into revenues for the companies taking them, $1.5 billion worth of gross revenues in 2020, up from $920 million in 2019 and a mere $334 million in 2018, when only seven states allowed sports bets.
“The adoption across the United States has been electric,” says Mike Raffensperger, chief marketing officer of FanDuel, an industry leader in revenue that grossed $896 million last year. “We are in 10 states, covering 23 percent of the U.S. population. We’ll probably have another 10 soon.”
Arizona, Washington and Wyoming all recently passed bills for the legalization of sports betting; California, Hawaii and Ohio are among more than 20 states that have introduced similar bills. And in states where such wagering opportunities remain elusive, bettors are simply hitting their cars to cross state lines, finding a spot willing to take their action. Residents of New York City drive over the George Washington Bridge to New Jersey and lay down their bets via smartphone or tablet, from the parking lots of nearby Starbucks coffee shops. Sports betting is legal in New York State, but mobile wagering has not been put into effect and in-person betting is limited to upstate casinos.
Most every brick-and-mortar gaming company—including the big ones like MGM Resorts International, Caesars Entertainment and Station Casinos—is getting in on the action, using their expertise to gain a foothold in the online sports betting market. Derek Stevens, the owner of Circa Resort & Casino in downtown Las Vegas, has had his Circa Sports betting app going in Colorado since July of 2020, and has plans to expand in Iowa and more states. “It’s convenient,” he says. “People sign up from their couches and make bets immediately.”
Right now, in fact, there are dozens of legal sportsbooks stateside (some operating in conjunction with well-known casino brands) that maintain hard-wired nerve centers, generally referred to as “trading rooms.” They participate in a ’round-the-clock business—after all, somewhere, at just about any given moment, points are being scored and races are being won—where fortunes ebb and flow with sporting outcomes. Employees track movements of betting lines, inflows of cash, sides being taken, changes initiated by competing teams.
ntil the mid-1990s, sports betting was strictly a hand-to-hand, cash transacted business. If you lived outside of Nevada (the only place in America where it was legal to bet on sports until the spring of 2018, when Delaware and New Jersey jumped into the game), you knew a guy who knew a guy, he told you the line and you made a wager. Then, as now, the books earned revenue by taking a 10 percent fee known as vigorish, or vig.
The route to placing a wager began to transform when increasing numbers of people started using the Internet, thanks to the advent of browsers such as Mosaic and the launch of companies like AOL. In response, an outfit called Intertops—cooked up in Germany, based in the U.K. early on and ultimately moving offshore—took the world’s first online sports bet on January 17, 1996. The groundbreaking site went on to court players from around the world (including the United States) in a gray-area industry. Competitors—operating out of open-minded nations such as Curaçao, Antigua and Costa Rica—popped up and a new, underground industry caught fire.
“It was huge,” says Blair Rodman, author of the upcoming All About Sports Betting and himself a professional gambler. “Suddenly, bettors were provided with lots of different choices. You weren’t limited to the books in Las Vegas. It opened up a market for big bettors who couldn’t bet what they wanted to in Vegas, where books went from trying to take big action and trying to win money to taking bets as an amenity for players in the pit.”
Betting with the offshore sites could be high-risk and was clearly unregulated, but gamblers didn’t really seem to mind. Newcomers like NASA, Cascade and Hollywood soon jumped into the fray, often run by bookies who had fled the United States due to the strict anti-gambling laws of the time. Betcris, founded in 1994, by Ron “Cigar” Sacco, a convicted bookmaker from the West Coast, made waves when it surpassed Las Vegas’ Stardust casino as the first outlet to set betting lines. Sports-gambling supremacy moved to the offshore operators. From the Vegas casino bosses, who largely lost their collective stomachs for taking large bets from potentially knowledgeable gamblers, a sigh of relief may have been breathed.
Despite all of their technological savvy, though, offshore setups still followed traditional bookmaking models and most of their customers were serious gamblers, like Rodman, who cared about cultivating outs and were not going to be wowed by marketing gimmicks. That changed in 2000 with the launch of Bodog. Brainchild of a mischievously brilliant Canadian named Calvin Ayre, it was a marketing monster, complete with a snarling canine mascot, models wearing the site’s colors at World Series of Poker tournaments and a name designed to be search-engine friendly. Fittingly, it was driven by slews of come-ons and a good-looking interface.
Ayre appeared in Cigar Aficionado in 2004 and said prophetically at the time: “You can dominate this industry with an average bookmaker if your technology and marketing are world-class. But you will never dominate this industry with a world-class bookmaker and average technology. Make mistakes on the marketing side and you get lost in the chaff of the industry. Nobody will even know you exist.”
By 2007, however, offshore sportsbooks hoped that U.S. authorities did not know they existed. That was the year when the Unlawful Internet Gambling Enforcement Act kicked in. Passed in 2006, it kiboshed much of online poker in the United States and made it difficult for even the craftiest of offshore sportsbooks to process payments and do business. Some have found workarounds by opening thinly disguised skins for U.S. customers. Others turned into what some call “per head sites,” essentially processing centers with the names to match: PPH, for example, has the initials of Pay Per Head—that allows gamblers to wager online without having to wager online. “The bookie says to his customer, ‘Here is a website, account number and password,’” says Kyrollos. “Then he gives his customer a cap and they settle up in cash. The site just provides a place to wager. These places earn a fortune because the bookie has to pay them per head for his customers to bet on the site.” All the gambling settlements are between the bookie and his customers. “It used to be $25 a head and now the average is closer to $5, but they still make a ton,” says Kyrollos. “And a lot of people don’t even realize that they are betting with the bookie down the street.”
Groundwork was laid for future change in the field when FanDuel and DraftKings exploited a loophole upon launching in 2009 and 2012, respectively. They came on as sites specializing in daily fantasy sports (known as DFS), which allowed for gambling without offering opportunities to bet on specific teams. Federal law allows fantasy sports betting and individual states to decide whether or not they want it to go on in their territory. Nevada is among nine states that outlaw DFS.
But don’t feel bad for FanDuel and DraftKings. As locales began to legalize and license sports betting, both sites were perfectly positioned to capitalize on the scads of customers who wanted to bet games, have fun, be legal and, perhaps best of all, not take it too seriously. “We consider ourselves more of an entertainment company than a sportsbook,” says Raffensperger of FanDuel. “While sports betting is a huge part of our business . . . I describe FanDuel as a second-screen experience.”
Drive into Atlantic City, or simply watch network TV in the New York tri-state area, and the call of sports betting is irresistible. Commercials and billboards for the big online sites make lucrative promises for new customers. PointsBet offers $2,000 in free bets upon deposit, BetMGM shells out a $600 risk-free bet with your freshly launched account and DraftKings brags about a $1,000 deposit bonus.
It’s alluring to arrivistes but costly to the sites, at least initially. FanDuel, which had $896 million in 2020 revenues, posted a $237 million net loss last year for its U.S. business. Even though DraftKings posted $312 million in revenue during the first quarter of 2021, it generated a net loss of $346 million. “They are spending so much in customer acquisition,” marveled one competitor. Another insider, ignoring the rise in DraftKings’ stock after the quarterly announcement, described this costs-be-damned spending to woo customers as “a race to the bottom.”
But these sites also represent the new face of sports betting in a world where old-line gamblers can look downright dusty. “We offer something called Name A Bet,” says Jay Croucher, head of trading for PointsBet, an online company that originated in Australia and has gained traction in the United States with its endlessly customizable wagers. “You can put in any market you want,” he says, and PointsBet will make a line for it. “Let’s say you want to bet on Mark Trout to hit a triple. You can request it and our traders will come up with odds.”
Smart bettors might be able to use a combination of knowledge and superior mathematics to find edges in those wagers. But there are other new offerings, such as the splashy Same Game Parlay, that are trickier to button down. It allows gamblers to select several different components to wager on within a single game and the site spits out odds for it. So, you might bet on the Lakers to win, LeBron James to score more than 30 points and Andre Drummond to get more than 10 rebounds. Raffensperger calls it one of FanDuel’s most popular bets.
While it may be fun to play, with a giant payout at the end of the rainbow, sports-betting software creator Ed Miller (whose clients include old-school Circa Sports) says: “The probability of winning such wagers is fundamentally unknowable.”
“What are the chances of somebody scoring 30 points?” says Miller. “He has to be part of the gameplan and to have not woken up on the wrong side of the bed. Put that into a seven-play parlay and you are making a best guess that can be messed up with one variable. They make their best estimate at the probability and put in a large margin of safety. They might think it’s 150-to-1 and pay out 70-to-1. They are not trying to give the bettor the best price. They are trying to create a fun gamble that makes the game more entertaining to watch.”
A FanDuel spokesman responded, “We don’t comment on people’s opinions.”
But maybe that is the point for some gamblers. It’s not necessarily about winning, it’s about having the same good time provided by obviously tilted casino games such as Ultimate Texas Hold’em and Mississippi Stud. And there are plenty of attractors for those who want to join in. PointsBet has enlisted ambassadors such as Alan Iverson and Shaquille O’Neal, FanDuel did a content deal with sports analyst Pat McAfee and DraftKings aligned with such stars as CC Sabathia and DJ Khaled.
But what about people who simply want to place wagers without all the shimmer? Stevens, who made bets long before he booked them, is looking to give value to those customers and recall simpler times. “We’re not playing that game of deposit 300 and get 300. We think our product is very good and we think we offer better odds than the other sports book operators. We celebrate sharp bettors,” he says, the opposite of the bigger, more commercial sites, which are said to be intent on limiting that treacherous end of the business. “We think we’ll keep people coming back. What we’re doing is totally different.”
Then there’s bettors like Kyrollos. The walls on his office are plastered with screens, but he doesn’t even bother to watch the Hornets game after throwing down his $30,000 bet. (Heck, when he referenced the bet he couldn’t quite remember the team’s moniker.) Leaning back in a rolling desk chair, Kyrollos chats it up while running a gambling enterprise that he tends to describe with all the romance of an actuarial table. Numbers on monitors occasionally flashed from white to red, indicating changes in point spreads and money lines, as he explained his modus operandi: “There is the bottom-up approach to sports betting. That involves creating a computer model, coming up with a number and executing a bet if your number is better than that of a bookmaker. We use the top-down approach. We assume that the market number is correct. But we still look for missing pieces of the puzzle. They could include news of late-breaking injuries and movements created by the large betting syndicates,” presumed to be the sharpest of the sharp handicappers. “My system alerts me to discrepancies and arbitrage opportunities.”
That’s what led him to the Hornets. The line opened overnight at plus 10 for Charlotte, but in the morning his team noticed an offshore sportsbook known for taking large wagers from sharp gamblers at 7.5, making Kyrollos believe it was a response to a wager from a knowledgeable and winning bettor. “We knew it would go down everywhere and grabbed all the plus-10 we could get,” he says.
In the end, Kyrollos won his bet on the Hornets—even without the points. Making money as a sports gambler, he explains, is not so different from figuring out ways to beat the stock market. He employs computer models, analysts to distill numbers, online technology to monitor social-media chatter and more.
His move was just one drop in the immense, legal and extremely hot $20 billion world of online sports betting. “This is the future of sports betting,” says Croucher of PointsBet. “It’s in America and it is massive.”