Nevada pretty much has a monopoly on sports betting in the United States, but it is illegal for a casino in Nevada to take bets from out of state. The thing is, there are plenty of gamblers all across the country who want to lay down money on a game.
Enter Cantor Fitzgerald, one of the most respected firms on Wall Street. They specialize in high-volume, low margin businesses--think bond sales--where they make a tiny percentage on each trade. One Cantor executive wanted more. He went looking for extra business and found it in sports betting. He created a new company, Cantor Gaming, to run sportsbooks, places where you can bet on sports. It was Vegas betting, Wall Street style.
Cantor Gaming was known for two things: They could take real-time bets, while a game was underway, and they could take really big bets. Like, really big.
But there was a problem with Cantor Gaming taking these really big bets. If someone wagered say, $700,000 on a game, and not enough people bet on the other side, Cantor Gaming was taking on a lot of risk. Cantor, remember, came from the world of Wall Street trading. It was looking to make a lot of sales, and make a little money off each of them.
So Cantor Gaming went looking for people to take the other sides of bets. And it found them. But they weren't in Nevada. Things got messy.
KEITH ROMER, HOST:
It the other day I call up this guy Steve Diano. He lives out in Las Vegas. For three decades, he worked as a professional gambler, and I was trying to get him to explain a few things to me about sports betting, but we had to completely stop the interview.
STEVE DIANO: Could you do me a favor?
DIANO: Could you please tell my wife I'm not talking to a cop?
ROMER: Steve fumbled around for a second then put me on speaker phone. I - I am - as he pointed out, I am not a cop. I'm a journalist with National Public Radio. I'm very uncoplike (ph).
DIANO: That's exactly what a cop would say.
ROMER: It wasn't just paranoia that made Steve's wife think I might be a cop. A few years back, police were listening into a lot of Steve's phone calls, including one in which he arranged for a guy to meet him in a parking lot of the Palms Casino in Las Vegas with a bag filled with money.
How much money are we talking about?
DIANO: It was either $150,000 or $2,000,000.
ROMER: In cash?
DIANO: In cash.
ROMER: Steve got in trouble for that one. He was arrested. He spent a few nights in jail. And Steve says it was all a big misunderstanding. That money was just a loan from a friend of his - completely legal.
DIANO: People act like this is some kind of a nefarious transaction because people are meeting with sacks of money in a parking lot. But the nature of professional gambling in Las Vegas is you have to put up the cash to place your bet.
ROMER: The police, though, they had a different story. They say that bag of cash was not just your run-of-the-mill casino parking lot handoff but evidence of an international conspiracy involving not only a few gamblers but one of the most respected firms on Wall Street. Hello, and welcome to PLANET MONEY. I'm Keith Romer.
NOEL KING, HOST:
And I'm Noel King. Today on the show - bags filled with cash - a lot of bags and a lot of cash.
ROMER: All of these bags of cash, that is money people want to bet on sports. But it is basically illegal to bet on sports anywhere in the country outside the state of Nevada.
KING: Gamblers, though, do not always care so much about the law. They just want to get their bets down. Casinos in Las Vegas figured this out years ago. A couple years back, Wall Street figured it out too, and they wanted in.
ROMER: We've got a story about Wall Street guys trying to act like gamblers, gamblers trying to act like Wall Street guys and a cop from New York City trying to figure out just where all those bags of cash were going.
(SOUNDBITE OF ANDREW DUCK MACDONALD AND BRYAN NEW'S "PORK-N-BEANS")
ROMER: This story starts with a Wall Street guy named Lee Amaitis. Back in the 1960s, Amaitis went to a Catholic high school in Brooklyn, but he was just not that into school.
(SOUNDBITE OF ARCHIVED RECORDING)
LEE AMAITIS: I was enamored with the horse racing industry. I used to cut my classes and go to Aqueduct Racetrack to catch the last few races every day.
KING: Amaitis did that interview with a gambling expert named David Schwartz back in 2011. We left a bunch of voicemails for Amaitis, but he didn't call us back.
ROMER: Amaitis got a job as a horse trainer, but eventually he gave up on the ponies and went to work on Wall Street at a firm called Cantor Fitzgerald.
(SOUNDBITE OF ARCHIVED RECORDING)
AMAITIS: You know, I started getting into entry level as a clerk in the back office but eventually became a broker and then a manager and then wound up at Cantor Fitzgerald as the second to the, you know, second-highest CEO to the chairman.
ROMER: In every picture you can find of Lee Amaitis, he looks kind of exactly like what you want a Wall Street executive to look like. He's balding. He's got his hair slicked back.
KING: He's not a big smiler.
ROMER: He's not really a smiler.
KING: (Laughter) Cantor Fitzgerald has been around since the 1940s. They've always been a really big player in the bond market. And about 10 years ago, Amaitis started thinking about how to take the lessons he'd learned buying and selling bonds and apply them to other businesses.
(SOUNDBITE OF ARCHIVED RECORDING)
AMAITIS: Cantor has always taken a look at low-margin, high-volume businesses aided by technology.
ROMER: What he's saying there is if you're selling bonds, you're only going to make a tiny percentage on each sale, and so the idea is to sell a lot of bonds.
KING: Amaitis finally found another business that follows this same model. It kind of went back to his days at the horse track in Brooklyn. The new business was bookmaking.
ROMER: Couple quick definitions here - bookmaker, also known as a bookie - that's the person who takes the people's bets on a football game or basketball game. Sportsbook - that's the place where those bets get taken.
KING: So in 2009, Amaitis created a new bookmaking company out in Las Vegas. He called it Cantor Gaming. And before too long, Cantor Gaming was up and running in eight casinos around the city.
ROMER: They got their signs made up. They got some sweet new ads.
(SOUNDBITE OF CANTOR GAMING AD)
UNIDENTIFIED ACTOR: What happens when Wall Street technology hits Las Vegas? You get instant sports betting throughout the game - freedom - a huge breakthrough with Cantor technology.
ROMER: It's like a beer ad from 1985. There's all these women in tiny bathing suits.
KING: Yes, and they are power walking around a pool holding tablets. At Cantor sportsbooks, betters didn't have to go to the window anymore. Now they could just bet on a tablet right from their casino accounts.
ROMER: Before Cantor, you could only bet before a game started. Now with the huge breakthrough in Cantor technology, you could bet on games as they were happening.
KING: And people in Las Vegas loved this. Cantor had a long term plan that was to get its technology up and running in case gambling lobbyists ever convinced Congress to legalize gambling outside of Nevada. Because right now, that's the only place it's legal.
ROMER: Right - only in Nevada. And by setting up computer betting outside Nevada, Cantor would be ready to expand to the entire country, which is every sportsbook's dream. You want to maximize how much money is flowing in. You want to capture not just the Nevada market, but the entire country.
(SOUNDBITE OF ARCHIVED RECORDING)
UNIDENTIFIED MAN: Transactional betting in the United States on sports illegally is $200 billion-plus - goes offshore, goes to people in shady corners of the world. Makes perfectly no sense to me why we would allow that money to leave the United States.
ROMER: But Congress never changed the law. So since it was still illegal to take bets from outside Nevada, Cantor found a simple way to bring in more money. They let people bet more.
KING: In most sportsbooks, you could only bet 5,000 or $10,000. Cantor would let you bet 50 grand on a game.
ROMER: Or more - every so often, the boxer Floyd Mayweather would post on social media pictures of betting slips for 200,000 or 400,000 or million-dollar bets he had made, all with Cantor.
KING: Here is the problem with taking a million-dollar bet. If you don't find a million dollars' worth of bets on the other side of the game, you, the sportsbook, are essentially just betting against Floyd Mayweather.
ROMER: And you might be tempted to start looking outside Las Vegas to find somebody to take the other side of the bet.
KING: It turned out the solution to Cantor's problems was in New Jersey.
ROMER: To explain why New Jersey, we brought in former NYPD detective Gerard McNally. He's been retired for a couple of years, but he still speaks in perfect cop speak.
GERARD MCNALLY: It was something going on with an individual that was in trouble.
KING: (Laughter) I love it. It's, like, no proper nouns here - no names, no places - just an individual that was in trouble.
ROMER: Yeah, do not give away any information you do not have to give away. So in 2011, McNally was busy investigating a couple of local bookies.
MCNALLY: One of our first targets was a guy out of Jersey. We had information that he was operating - illegally - a sportsbook.
ROMER: Again, reminder - if you are not in Nevada...
KEITH ROMER AND NOEL KING: Running a sports book is against the law.
KING: (Laughter) All right. So McNally got a couple wiretaps up, and he tailed these guys. He was actually following them around.
MCNALLY: We learn a lot about them. We start to learn their daily routines, their actual activities, what they do and stuff like that. Yeah, sure, we learn their whole lives.
KING: And while they're learning about their whole lives, McNally and his team start to figure out that they are onto something much bigger than they first thought.
MCNALLY: We tracked a guy from Jersey all the way to New York, and we're - we have our guys watch him. And they're saying - not going believe this. This guy's walking down the middle Manhattan, and you can see the bag. You can see the money on top of the bag.
ROMER: His bag was so full, it was overflowing with money?
MCNALLY: You could see - you could see the money. (Laughter) They were like - this is crazy. He's walking right in the middle of Manhattan. No one's even thinking anything of it. He's walking right down the street.
ROMER: Over the course of his investigation in 2011 and 2012, Detective McNally's team would track a lot of guys with a lot of sacks of money. Through this vast network of people, someone would get paid off in Manhattan, and the next day someone else would get paid off in Las Vegas. Or money would appear in offshore betting accounts in Curacao - hundreds of thousands - millions of dollars.
KING: McNally says the trail of dollar bills led to this boring, little office park in New Jersey, where a man named Gadoon Kyrollos - his friends called him Spanky - was running a very sophisticated betting operation.
ROMER: Through a group of employees and associates that police started to call the Jersey Boys, Spanky placed bets worth millions of dollars not just with local bookies, but with shady offshore bookmakers and Las Vegas casinos.
MCNALLY: He was the guy that got up early in the morning. He was always thinking about the numbers. He just did it like a normal person. He would get up. That was his job.
ROMER: Spanky was an investor, a math guy. But instead of trying to figure out whether Apple was going to hit its quarterly earnings target, he was trying to figure out if the Chargers could win one on the road.
MCNALLY: I think he was just trying to make money for himself. And he had a knack for the numbers, and he was using that to his advantage.
ROMER: Spanky was always looking for more places he could get bets down, which was hard...
KING: ...Because the law.
ROMER: ...Because the law, right?
ROMER: It's illegal. It was not legal for Spanky to be betting with the offshore bookmakers. And it certainly was not legal for him to be placing bets in Las Vegas from his office in New Jersey.
KING: But remember Cantor Gaming and how desperate they were to find people who could help balance out some of their big bets?
MCNALLY: Cantor Gaming - they had an individual at that time who was an executive that was friendly with the Jersey Boys, and he would let them operate within the casino.
ROMER: Basically, Spanky had some guys on the ground in Las Vegas who he could call up and have place bets for him there.
KING: Now, Cantor Gaming was not supposed to be taking out-of-state bets, but the Jersey Boys were one of its biggest customers. Cantor wanted to keep them happy so they wouldn't take their business to the next casino down the road.
ROMER: Still - quick reminder - it is illegal for a Nevada sportsbook to take bets from outside the state of Nevada.
KING: And there's another little rule that Cantor is breaking here. When there is a big payout, the casino has to report it. But to keep Spanky and the Jersey Boys happy, Cantor was not filing a lot of these reports.
ROMER: Detective McNally says Cantor actually came to depend on the Jersey Boys.
MCNALLY: They knew who the Jersey Boys were because they needed their help.
KING: What they needed was for the Jersey Boys to do something called buyback. Sometimes Cantor would take too many bets on one side of a game, so they'd have $200,000 on the Chargers winning and not nearly as much on the Chargers losing. So they call up Spanky in New Jersey, and they'd say, would you be willing to put down 20 or 30 or 50 grand on the other side? And a lot of the time, Spanky would say yeah, sure. Now, part of this was he wanted to keep things friendly with Cantor.
ROMER: Spanky, though, was not just doing this to be nice. Remember, he's a math guy, and so - just really quickly - this roughly is what he's doing. Spanky is betting with the Vegas sportsbooks, but he's also betting with sportsbooks in the Caribbean. The Vegas sportsbook - they might have the Chargers winning by three points, while the Caribbean sportsbook - they might have the Chargers winning by seven points.
So Spanky bets in one place for the Chargers to win and then the other place for the Chargers to lose. Most of the time, those bets are going to cancel each other out - no harm, no foul. But sometimes the game is going to finish with the Chargers winning by four points or five points or six points, and Spanky is going to win both bets.
KING: The technical term for this is middling, and it's a way for Spanky to make a lot of money without really taking much risk.
ROMER: Now, there's a part of me that wants to say - what is the big deal with all of this?
KING: I know. Are we supposed to be outraged that Spanky is taking advantage of a bunch of bookies?
ROMER: Like, if you leave out the sacks of cash, there's not that much different between what he is doing and what a stock trader or a bond trader is doing all day.
KING: But Detective McNally says gambling is like a gateway crime. It leads into all of these much bigger crimes.
MCNALLY: It's a backbone to other crimes. You know, now you're talking - I owe you money. Now what're you going to do? Now you've got extortion. Now you've got loans out. They may not do what they did like in the old days where people were disappearing or whatever. But it is - the backbone of organized crime has always been gambling, and it always will be. It's - it makes a lot of money.
ROMER: McNally brought an organizational chart with him - like, you know, in the cop shows that they got the bulletin board with all the red string connecting the different criminals. This one for the Jersey Boys.
So when I look on this list, and under some of these people's names, it will say Gambino Associate or Genovese Associate. And I assume those are crime families.
ROMER: Some of these Bonano guys are kind of a little scary-looking.
KING: We're not saying they're the mafia, but they're, like, on the fringes of the mafia.
ROMER: Like, the margins.
KING: (Laughter) But even Spanky, the math guy - Detective McNally says he started to go down this road.
MCNALLY: There was an individual that owed a large amount of money to him.
KING: Again with the individual.
ROMER: It wasn't like Spanky could go to the police for help. And on the wiretap, McNally could hear Spanky calling up a guy connected to the mob. Spanky wanted to send in some muscle to try to get his money back.
MCNALLY: I think he was actually asking for permission to hire someone else to do it. But that's a heavy thing to do to someone - say, I'm going to get someone to go after you. So, to me, at that point, I knew he wasn't Mr. Innocent anymore.
KING: After a couple of years of wiretaps and tailing people, Detective McNally and prosecutors were finally ready to move. In New York and New Jersey and California and Las Vegas, police rolled out in force. And in one day, they arrested 25 people and seized a lot of sacks filled with money.
ROMER: Along with Spanky, the bookmaker from Cantor, the mob guys, They also arrested Steve Diano, the gambler I talked to at the beginning of this show - the guy who got the bag full of cash in the Palms parking lot. The cops said that bag full of cash - that was part of the Jersey Boys operation.
DIANO: Well, I banged on my doors at 6 o'clock in the morning. We had a big dog. My wife said let me put him in the back yard, so - she didn't want him to get shot or anything.
ROMER: Steve got taken to jail and thrown in a cell for a few days until he could find someone to post his bail.
DIANO: I had a friend of mine in Philadelphia get a cashier's check for the amount of money and stick somebody on a plane with it and fly it out to Vegas that night. But that was a, you know - that was not a fun couple of days. I hadn't set my fantasy football lineup yet.
ROMER: (Laughter) That's the - that's the real - the real downside of being thrown in the clink is not being able to set up your fantasy football team?
MCNALLY: Well, my kicker was on a buy that week. I had to - I had to make some kind of a roster move.
KING: Even worse for Steve, the police seized over $300,000 of his money. He insists that money was just a loan from a friend. The cops say no, no, no, no - it was tied up with the Jersey Boys' gambling ring.
ROMER: Steve arranged to sit down with the DA prosecuting his case to try to clear all this up. And he asked him what to Steve seemed like the central question in his case.
DIANO: Is there any law that would prohibit me from borrowing money - a large sum of money - depositing it into a sports betting account and betting my balls off ***16:18*** with it? And he said no, there's nothing illegal about it.
ROMER: Still, the DA was not willing to back down. And rather than risk going to jail for 25 years, Steve eventually pleaded guilty to sixth degree conspiracy.
KING: Conspiracy basically means you know a crime is going to be committed, and you're in on it. Six degree conspiracy is the least serious version.
ROMER: What exactly that crime was in this case - a little harder to pin down.
DIANO: I had to allocute to having committed some crime - unspecified - during the course of their investigation, which - to my recollection, I went over the speed limit.
ROMER: The real punishment for Steve - he never got his $300,000 back. And because of that, he is no longer a professional gambler. He can't afford it.
DIANO: Now, because they took my money for no reason, I'm an Uber driver.
KING: Spanky, the chief Jersey Boy, ended up pleading to a felony charge of promoting gambling. He forfeited almost $700,000 to the government.
ROMER: For his part, Detective McNally is happy with how it all worked out. Still, he acknowledges that stamping out illegal gambling is a pretty impossible task.
MCNALLY: Did we change anything about it? I don't know. I don't know. Money does weird things, I guess.
ROMER: Spanky, Mike Colbert, the bookmaker from Cantor and Lee Amaitis all declined to comment for this story.
KING: So did CG Technology. That's the new name for Cantor Gaming. Last September, they settled with federal prosecutors. They agreed to pay fines of more than $22 million. They fired their chief bookmaker, and in August, Lee Amaitis resigned as CEO. Also, they mostly don't take those giant bets anymore - the ones that got their books so out of whack.
ROMER: All Wall Street wanted was for the rest of the world to be more like Wall Street - to have sports betting work the same way that buying a bond does. Money should be able to go where it can make the most profit, whether you're betting on a treasury bond or the San Diego Chargers.
KING: Yes, but much of the rest of society doesn't see it this way, and they keep writing laws that spoil the dream.
ROMER: But some good news for the Wall Street dreamers - in 2015, the Nevada legislature passed a new law making it legal for gambling investment funds to set up shop in the state. If you live in New York or New Jersey or anywhere else in the United States, now you can buy into one of these funds and let someone else gamble on your behalf.
KING: These funds will probably not satisfy someone like Spanky because investors can't choose what games to bet on or whether to take the Chargers or the Falcons. The fund manager makes all the decisions, which seems like it takes all the fun out of gambling.
ROMER: But still, it is now legal for a guy in New Jersey to allow someone else to gamble for him in Las Vegas. There's only one sportsbook company currently taking bets from these funds. That company is CG Technology.
(SOUNDBITE OF SONG, "WELCOME TO SIN CITY")
ROBERT J. WALSH: (Singing) Maybe you'd like a little time in the sun. You want to get away and have some fun.
KING: Any of you know something happening in Vegas that shouldn't stay in Vegas and should be a planet money show - hit us up at firstname.lastname@example.org or find us on Facebook and Twitter.
ROMER: Our episode today was produced by Nick Fountain. That interview with Lee Amaitis came from the UNLV Gaming podcast. Thank you to David Schwartz, who conducted the interview.
KING: If you're looking for something new to listen to, check out 1A. 1A is NPR's new daily news show inspired by the First Amendment. Super excited for this one. It is hosted by the awesome Joshua Johnson from WAMU and NPR. It's on the NPR One app or visit npr.org/podcasts.
ROMER: I'm Keith Romer.
KING: And I'm Noel King. Thanks for listening.
(SOUNDBITE OF SONG, "WELCOME TO SIN CITY")
ROBERT J. WALSH AND UNIDENTIFED SINGERS: (Singing) Leave me in Sin City. We're going to steal the show.
ROMER: Like, I just want a weekend that's sort of what seems like mob, mob, mob, mob, Like, these guys are, like - Joey (ph) isn't...
KING: But then you make the assumption that people are going to hear Italian names, like Gambino, and think that they're a mob.
ROMER: He says these are crime families, and he says yes.
KING: Is it?
ROMER: Yeah. (Inaudible).
KING: OK. Then I'm going to ask you - is it the mafia? And then you can explain.
KING: I'm not going to make an assumption.
ROMER: That's fine.
KING: I'm half-Italian.
ROMER: Noel King - full disclosure - is a part of the mob or the fringes of the mob. Continue.
KING: Nick, will you please put that in? My mother, who is never proud of me, will be so proud of me. Transcript provided by NPR, Copyright NPR.