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Volume 21 No. 1
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Gaming industry, leagues differ on integrity guards

Photo: getty images

Walking a guest through the U.S. headquarters of sportsbook William Hill, nestled in a well-manicured office park a half dozen miles from the Las Vegas strip, CEO Joe Asher is amused by the contrast between its cubicle culture — with sections devoted to customer service, finance, marketing and HR — and the Runyonesque image often attached to a bookmaking operation.

 

William Hill’s neighbors aren’t named Knuckles or Lucky or Big Sam. They’re Wells Fargo and New York Life.

 

“This is about the most boring corporate environment you could find,” said Asher, a former Skadden Arps attorney who helped Wall Street firm Cantor Fitzgerald enter the gaming business, and then started his own licensed bookmaking operation that he sold to William Hill in 2012.

The London-based bookmaker now accounts for about 30 percent of Nevada’s $4.8 billion in sports betting revenue and operates about 60 percent of its sportsbooks, ranging from 10,000-square-foot spreads in Las Vegas strip hotels to small storefronts in rural towns and airline-ticket style kiosks spread throughout the state.

 

“To the extent that there’s any uncertainty about who these bookmakers are, it’s time for people to let go of that old-school image of the greased-back hair and the cigar,” Asher said. “I used to practice law for a big New York firm. What we have here is about the most professional environment that anyone could imagine.”

 

When the professional leagues and the NCAA pressed for federal legislation that would restrict sports betting to the states that already had it 25 years ago, they were driven by the fear of corruption. College basketball teams were exposed shaving points. Pete Rose bet on baseball. The sports industry saw gambling as a threat to the integrity of its games, and the core of its businesses.

 

Twenty-five years later, the environment, and the tone of the discussion, have shifted dramatically. Increasingly, the prevailing argument is that legalizing and regulating sports betting is the better way to ensure integrity.

 

“There’s a massive black market where there’s no transparency and no insight into what’s happening,” Asher said, pointing to oft-repeated but impossible to verify casino industry estimates that Americans wager $150 billion each year through illegal bookmakers and offshore websites. “And if there is something fishy going on in the black market, what’s the bookmaker going to do? He’s not going to pick up the phone and call the FBI because he is a criminal.

 

“The idea that somehow a black market is more protective of integrity than a highly regulated market as exists in Nevada today has no basis in common sense.”

 

To the leagues and teams, the economic potential of an expanded U.S. betting market is evident. From the creation of a new and lucrative sponsor category to the promise of increased engagement at a time when ratings are in decline, the consensus across sports is that the introduction of gambling would provide a windfall to leagues, teams, networks, data providers and other sectors spawned as the market evolves.

 

The question is, at what cost?

 

The revelation that eight Chicago White Sox players conspired to help mobsters fix the 1919 World Series still stands as the greatest scandal ever in baseball. Seventy years later, gambling brought down Rose, shattering his legacy.

 

The NBA endured its worst scandal ever in 2007, when the FBI caught referee Tim Donaghy selling inside information to bookmakers and betting on games. One of the NFL’s worst moments came in 1963, when future Hall of Famer Paul Hornung was suspended for the season for betting on NFL games while playing for the Green Bay Packers.

 

In college basketball, the greatest blows have come from point-shaving schemes, most notably the CCNY scandal of the early 1950s, which led the defending national champion to de-emphasize its entire athletic program. It also shut down the basketball program at blueblood Kentucky for a year. While it was the largest scandal, it wasn’t the last. Tulane, Boston College, Northwestern, Toledo and San Diego State all have been implicated in point-shaving schemes that led to criminal convictions.

 

The first indication that a league might be willing to relax its flat-out opposition to sports betting came in 2014, when NBA Commissioner Adam Silver penned an op-ed suggesting that shifting societal norms and improved tactics to detect corruption had led him to support the acceptance of sports betting, so long as the integrity of the games was protected.

 

Not only was the NBA the first of the leagues to publicly relax its opposition, it also was the first to dive deeply into how sportsbooks work. In the last two years, the league has spoken with gaming operators in Nevada and abroad, gaming regulators in several states and sports properties in countries with robust, legal sports betting operations, collecting information and establishing points of contact.

 

“One thing that I took away from those discussions is that there are many areas of common interest and alignment of incentives between sports leagues and sportsbook operators,” said Dan Spillane, senior vice president and assistant general counsel at the NBA, who has been the league’s point person on gambling. “It’s in everyone’s interest to avoid manipulation, to avoid betting using inside information, to avoid integrity incidents from occurring.”

 

“The gaming industry and the leagues are in lockstep when it comes to protecting the integrity of sport,” said Geoff Freeman, CEO of the American Gaming Association, the leading casino industry trade group. “Neither of us can have a viable product that appeals to the American consumer if there are any questions about integrity.”

 

Where they have differed is on the way in which to accomplish that.

 

••••

 

During hearings in front of state legislators, representatives of the NBA and Major League Baseball have identified a core of five proposals that they say are crucial to their interests as states develop laws and regulations around sports betting.

 

Two of those deal directly with protection of game integrity: The real-time sharing of betting data between bookmakers and leagues, and the final say over what sort of bets bookmakers can offer. Not surprisingly considering the stakes, the leagues and casinos have crossed swords over both.

 

The sharing of consumer data has been a prickly point from the moment that the leagues introduced it during state lobbying efforts that began in January.

 

Their proposal calls for a data stream of all bets placed through any licensed sportsbook, with names and other identifying information masked to guarantee consumer privacy. By aggregating and then monitoring the time, amount and location of every bet, the leagues hope to identify suspicious patterns that might indicate game-fixing or, more likely, the use of insider information that might indicate a security breach.

 

American Gaming Association CEO Geoff Freeman says leagues and the gaming industry agree on protecting the integrity of sports. But the parties differ on how that can be done.
Photo: getty images

“I think it is a no-brainer that casinos should share anonymized betting data with us or with our designee so that we can aggregate that data and spot abnormal betting patterns,” said Bryan Seeley, senior vice president of investigations and deputy general counsel at MLB, who since last year has overseen the matter for MLB. “There is no question the best way to protect the integrity of the game is to get data from all the casinos in all the states and look at it for patterns of abnormal betting activity.”

 

At the outset, the casinos called it a nonstarter, suggesting it was a poorly veiled attempt to market to their customer base. The leagues insisted that the data could be anonymized to address those concerns. Of late, the two sides appear to have moved toward a compromise.

 

“We’re working through the details right now as to how we build a system that protects the private information of bettors while also ensuring the integrity of sport,” Freeman said. “We’re working to better understand all the concerns that leagues have. And I think they’re working to better understand all the complexities that gaming companies confront … With both of us learning from one another, I’m confident that this is an issue that can be addressed.”

 

Like many in the gaming industry, Asher sees most of the league proposals as unnecessary, arguing that the state regulatory model in place in Nevada could sufficiently serve the same purpose in all states.

 

Rather than supplying account-level betting information directly to the leagues, Nevada casinos provide it to state regulators, either on their own or by request. If a league has suspicions, it can ask for an investigation through the state’s gaming control board, which is guaranteed access to all information about every bet and who placed it.

 

“Sharing of information directly with a sports league is a complete nonstarter for me,” Asher said. “But I’m certainly going to share anything we have with the gaming control board.”

 

Another of the league’s integrity-related asks is an opt-out — the ability to have final say on what games sportsbooks offer and, more importantly, on the specific bets that they can take.

Each presents a different issue.

 

The NBA and MLB say the opt-out of specific games is meant to keep states from offering bets on minor league or G League games, where players are paid less and might be more susceptible to bribes to throw games or shave points. But the casino industry worries that an opt-out could be extended to college sports, where the NCAA might use it to block wagering entirely.

 

The other integrity question may well be more difficult to address to the satisfaction of both sides.

 

Both the leagues and the casino industry agree that certain bets present a greater integrity risk than others, particularly since the advent of in-game wagering, which allows customers to wager on individual events within a game at odds that change with the situation.

 

The most popular of in-game wagers are simple and present no greater risk than a standard wager. In football, it’s a bet on whether a trailing favorite will come back to win. In baseball, the top sport for in-play wagering in Nevada, the most popular bet is on whether a run will be scored in the current inning.

 

“Takes a three-hour game and distills it into a 20-minute game,” Asher said. “That’s what people bet.”

 

That’s precisely the sort of action that the leagues envisioned when they considered the potential for building engagement among fans and keeping them watching through a game. But there are other in-game bets that scare them — most notably, those that pay off on a single event, or choice, that is largely within a player, referee or umpire’s control.

 

“We’re not looking to exempt bets on the outcome of games,” Seeley said. “We’re not even looking to exempt bets on the next batter. We may be looking to exempt bets on what the next pitch is going to be — a fast ball or curve ball, a ball or strike. But these are things we want flexibility on. Maybe once those bets start being offered, we find it’s not a concern.”

 

The casinos argue that they can deal with those concerns by keeping limits on those bets so low that it would make the risk-reward ratio unpalatable for those willing to manipulate the outcome. Most books do that now because they perceive the bets as unpredictable and high-risk. They exist as a fun marketing ploy, not a revenue center.

 

The leagues are receptive to that argument but want legislation that goes beyond simply trusting the casinos to set low limits themselves.

 

“Our concern is that that standard and that practice may not be uniform across all operators,” Spillane said. “Operators are competing with each other for business. So in that environment, it’s easy to envision exotic bets that have greater integrity risks being offered at higher limits.

 

“Asking for a say in this doesn’t mean we’re going to give [casinos] a short list of the most plain vanilla bets that you can think of, because that’s not in our interest either. An important goal of this whole exercise is to shift people from betting in illegal markets to legal markets so it can be monitored and regulated. We understand that in order to do that, legal operators need to offer bets that are competitive with those offered on illegal markets.”

 

Again, Asher suggested that states handle the matter as Nevada does, offering sports properties the opportunity to appeal to state gaming commissions to prohibit certain bets.

 

“I have a lot of respect for regulators,” Seeley responded. “But the regulators in these states, outside of Nevada, have no experience regulating sports betting … I think we as Major League Baseball are in a better position to examine these issues and decide what bets pose integrity risks to us than a state regulator with no experience in baseball.

 

“To ask us to concede that to a state regulator is a big ask.”

 

••••

 

It was in-game betting that enabled one of the higher-profile match-fixing schemes in the world two years ago, a manipulation so obvious, and so egregious, that FIFA followed with an unprecedented response, requiring the replay of a World Cup qualifier between South Africa and Senegal. It also was in-game betting that alerted monitors that the fix was in. 

 

In a conference room in the New York offices of sports data provider Sportradar, the head of the company’s integrity services unit, Andy Cunningham, tapped at his laptop, calling up video from the game in question.

 

Footage showed referee Joseph Lamptey of Ghana incorrectly calling a hand-ball in the penalty area in the 41st minute of a 0-0 tie, leading to a penalty kick that put South Africa ahead 1-0. A few minutes later, Lamptey hastened a quick restart that led to a second South Africa goal. Senegal scored in the second half, making the final score 2-1 and — from a betting perspective — rewarding anyone who bet that the teams would combine for at least two or three goals.

 

“Referees make mistakes,” Cunningham said. “But in this case our system had predicted that something suspicious might happen.”

 

On a PowerPoint slide, Cunningham pointed out a graphic that showed what the in-game odds should have been as time progressed, based on a reliable algorithm that predicts in-game odds movement. Obviously, after 40 minutes of scoreless play the likelihood of the teams combining for two or three goals had decreased. The odds should have been going up as time passed. But, at one sports book, they weren’t. In fact, they were decreasing.

 

“The bookmaker was cutting their odds as they were taking this suspicious money, and yet the money kept coming in and the odds kept going down,” Cunningham said. “This is a classic example of how we detect suspicious betting.”

 

A Senegal-South Africa World Cup qualifier in 2016 had to be replayed because monitors detected suspicious betting activity and questionable calls from referee Joseph Lamptey (below).
Photo: getty images
Photo: getty images

Pairing the odds pattern with the bad call that its analysts saw on video, Sportradar reported its suspicions to FIFA.

 

The fact that five integrity services alerted FIFA to the suspicious activity is an indicator not only of how closely the markets are watched, but how many people see the business potential of a global betting market that is expanding exponentially, and a world of regulatory agencies trying to keep up.

 

Sportradar is one of two such companies that have planted flags in the U.S., well ahead of any predicted market expansion. It has deals to provide information, including alerts regarding suspicious activity, to the NBA, NHL and MLS. London-based Genius Sports provides similar services to MLB and the PGA Tour.

 

That’s because whether bets are placed legally in the U.S. or not, the properties know that there’s big money wagered on their games — not only with illegal bookies, but through betting sites around the globe that the services monitor.

 

With a staff of about 50 analysts monitoring 280,000 matches a year in 17 sports, Sportradar regularly identifies matches that it says bear further investigation. Since 2016, it has made clients aware of more than 1,000 matches that it described as “suspicious and likely to have been manipulated,” Cunningham said. Information provided by Sportradar has led to 24 criminal convictions and 213 sanctions by sports organizations, he said.

 

The alerts the company provides to clients are based upon the monitoring of odds from about 550 betting operators across the world, which together account for about 5 billion odds movements a day. Using proprietary algorithms, Sportradar’s software predicts how and when a line or set of odds should move, based upon a series of factors. When it finds an outlier, it flags it.

 

But that’s only the start of the process. From there, the information is reviewed by an analyst who follows the sport closely. Typically, when the numbers move in an unpredictable manner, it’s driven by an easily explained factor, such as an injury. When analysts can’t discern a reason, they make the sports property aware of suspicious activity.

 

In many cases stemming from Sportradar’s detection methods, inexplicable odds patterns coupled with suspicious play have led to sanctions against players and clubs, even when there was no supporting evidence, such as financial transactions, phone records, or even a record of specific bets.

 

“They’ve compared our monitoring detection system to the blood passport in the doping world,” Cunningham said, “because of the forensic nature of our work.”

 

It is impossible to sift through the stories of betting-related corruption from across the globe, compare them to the relative quiet of U.S. sports in that regard, and not wonder whether the promise of expanded, regulated sports betting that beams like a beacon over the horizon is, in fact, a glowing nuclear reactor.

 

The U.K. is thought of highly when it comes to its regulation of sports betting. Since 2005, many of its leading bookmakers have worked together as members of the European Sports Security Association, a nonprofit watchdog that gives bookmakers a vehicle to share information about suspicious betting activity which, if confirmed, can be passed along to sports organizations and regulators.

 

Premier League player Joey Barton was suspended for betting on soccer over 10 years.
Photo: getty images

The strength of the system is that it can track betting patterns using actual bets, rather than simply relying on an external examination of odds and point-spread movement. The weaknesses are that it trusts the bookmakers to self-report and that it doesn’t provide the opportunity to look for similar activity across multiple bookmakers until one has notified ESSA.

 

The model is one that the U.S. gaming industry points to as a possible solution to some of the concerns of the leagues. Last year, ESSA notified sports organizations of 266 incidents of suspicious activity, with 111 of them coming in the final three months.

 

And yet, a year ago, 34-year-old EPL veteran Joey Barton was suspended for 14 months after it was revealed that he placed 1,260 bets on soccer matches during a 10-year span of his pro career. Thirty of those bets were on games involving his own club. In half of them, he bet against it.

 

Barton placed those bets through an account bearing his name, paid for through his credit card, using his passport to verify his identity. His most recent bet was placed less than a year before his suspension, well after most of the U.K.’s current controls were put in place.

 

“That shows that the system has not been completely effective,” said Emanuel Macedo de Medeiros, an attorney and former Portuguese soccer executive who now heads the London-based Sport Integrity Global Alliance. “There is no doubt that the U.K. is well-advanced in this field. And also there is no doubt that English soccer leagues are well-resourced and have been playing a very active role in protecting integrity for the sport. But this shows it’s not enough to have pretty regulatory frameworks if there is not scrutiny; to have advanced legislation if there is not vigilance. And a zero tolerance.

 

“In a market where there is fragmentation and a lack of collaboration between all organizations, failure is inevitable.”