Las Vegas, Spring–Summer 2016
Leroy’s Horse & Sports Place was a yellow-and-blue-rinsed storefront that squatted in a derelict downtown strip mall, under a Chinese men’s club of Las Vegas. At night in the parking lot in front, under the yellow glow of the lamps, as young men in nylon athletic gear who spoke not a lick of English shuffled by, the fleas and wiseguys who’d spilled out from Leroy’s, bleary-eyed and blitzed from a full day of listening to games, stood wobbly while they quietly cursed their bad beats.
Through Leroy’s front doors was a parlor that smelled of cigarette smoke, gin, 50-cent pickled eggs, and desperation. Strewn with discarded tickets and beer bottles, the carpet on the floor was an indistinguishable color—if there was one sliver of advice from the Leroy’s regulars to abide by, it was that if you drop something, leave it there. In one corner of the room, if you could see through the smoke, was a whiteboard hand-scribbled with the daily lines. In another was a TV that weighed as much as a tank and hung from the wall; it had to be replaced the night Crazy Kenny lived up to his name when he reacted to a bad beat by taking out a gun and blasting a hole through it. The long oak bar, starting at seven in the morning, seven days a week, began serving the medley of sharps, wiseguys, and fleas: Crazy Kenny, Dick the Pick, Jerry the Hat, One-Eyed Scotty, Bobby the Midget, and the Hunchback, a group of degenerates who had seen it all. A man ramming his head through the wall after Pisarcik’s fumble in the Meadowlands; two men, settling a debt, crashing through Leroy’s front doors, one wielding a pickax and the other running for his life; a longtime regular dropping dead of a heart attack at the bar, his dear friends around him not skipping a beat when they carted him out the front door.
The casinos on the Las Vegas Strip catered to the wealthy out-of-towners who’d come chasing luck all the way; Leroy’s, the biggest independent sports book in town, was home to the transplant bettors from New York, Boston, Philly, and Chicago who arrived at the only place in the world where they belonged, the place where the search for destiny first came to life, a place that had a way like no other of separating the winners from the losers. And Vic Salerno, the man behind the bar, the man who scribbled the daily lines on the board, who took home the tickets every night from Leroy’s and sorted the winning ones from the losing ones, was always more than willing to help them find out which one they were.
By the time he was thirty years old, Vic had made it. He was a dentist serving wealthy patients in an office overlooking the sparkling Marina del Rey, pulling in $200,000 a year working four days a week. On Fridays he spent his afternoons at the old Hollywood Park racetrack, then headed across town to Los Alamitos for the evening races, then—if he and his pals won—drove to the airport to catch the 11 p.m. to Vegas. He found himself spending more and more time in the desert, at the craps tables, in the poker rooms, and, more than anywhere else, the dark and smoky sports books, until finally he decided that, like many before him, he was going to move to Vegas to reinvent himself. Vic decided to walk away from his career in dentistry, sensing an opportunity after Congress lowered the betting tax rate in 1974.
For bookmakers as much as gamblers, sports betting was an unpredictable business. Casino executives, mob-controlled and otherwise, knew for sure that the house won at blackjack or poker. Leroy’s was one of the independent sports books in the city, still decades before practically all the casinos in town were run by public companies, their fortunes tied to Wall Street, long before gambling was gaming and the mob was replaced by faceless corporations that were just as cold-blooded. Vic began working at Leroy’s as a bookmaker in 1978. Within two years he owned it, and by the early 1980s it was the largest independent sports book in the state of Nevada. Vic first began revolutionizing the industry by taking bets over the phone, which no bookmaker had done before. Then he created an electronic system to take bets, so that he no longer had to lug home trash bags filled with tickets to go through one by one at his kitchen table every night. By the late 1980s, there were Leroy’s affiliates all over the state.
When, in 1991, his old friend at the Stardust, Art Manteris, told him about his plan to install sports books at racetracks across the country, linked through Vic’s computer line and connected to a hub in Nevada, Vic thought it was brilliant. He was aware of the stigma associated with gambling outside of Nevada; he knew the enormous uphill climb they faced, primarily because of the professional sports leagues playing the public charade in their stance against legalized gambling, going back all the way to the most powerful man in sports, NFL commissioner Pete Rozelle. During his tenure, the commissioner would declare that legalized gambling was “destructive of the sports themselves and in the long run injurious to the public,” while at the same time never cracking down on the publication of point spreads in media publications or on TV analysts’ habit of mentioning betting lines more and more often as interest in betting rose nationwide. Vic also knew the realities of the business; the vast majority of interested parties had no sense of how bad a moneymaking enterprise sports betting could be for the bookmaker. “People don’t understand the exposure”—the amount that a bookmaker could stand to lose—“that we have on an NFL Sunday,” he would say, in his low rasp. “It’s in the hundreds of millions of dollars. Nevada’s a tiny, tiny state, and if you extrapolate that with PASPA, the exposure would be in the billions of dollars. And then you’re talking about these low margins, 3 to 6 percent, to begin with. And if it’s legalized, every state will want a cut of that. We give 6.5 percent of our revenue to Nevada. Not every state would be that reasonable. New York Lottery came to me and said they want to get into parlay cards, and they said that a 50 percent hold”—the amount kept by the house—“wasn’t high enough. Fifty percent! People don’t understand, and people are greedy. And greed kills.”
Of course, Vic also believed in everyone’s right—in everyone’s fundamental drive—to gamble. He saw the ridiculousness of the tired debate between what was gambling and what was a game of skill and the necessity to draw a line between them. Poker, blackjack: sure, people gambled with their money, but hadn’t Hollywood, in countless, albeit clunky, portrayals, sufficiently established that those were games of skill? “What, exactly, is gambling?” Vic would say. “You and I can play horseshoes and compete against each other, and it’s an innocent game of skill. I bet you $5, and that game of skill just became gambling, didn’t it? It did just because there’s money on the line? The essence of the game is still the same.”
He saw the passage of PASPA in 1992 as the best thing that ever happened to the illegal bookmakers and the underground gambling world. He watched as betting in the Caribbean and Asia boomed, watched as others cashed in, like a bookmaker he knew in Singapore who controlled a handle that was in the billions. He watched as online gaming boomed too, not in a legal, regulated environment in the United States but only in quasi-legal enterprises that made gambling available to anyone who wanted to partake in it, their US dollars drained by internet rogues through twisted virtual wires buried deep underground, well beyond the reach of the authorities.
As the years passed, Vic became sure of something else: he would not see legalized gambling nationwide in his lifetime.
Then, in the spring of 2012, someone sent Vic a link to a page on the Philadelphia Inquirer website. Vic didn’t need to scroll all the way through the page to know what his friend wanted him to see: the banner at the top that read “FanDuel: The Leader in One Week Fantasy Football Leagues. Win a Million Dollars Today.” After calling his friend to say “What is this?” Vic immediately clicked on the banner and signed up. His reaction was the same as Art Manteris’s reaction to the sign he saw at McCarran Airport, touting a company called DraftKings. Like Art, Vic was stunned that this company FanDuel was permitted to operate, as well as shocked by its audacity in flaunting its business. Clearly a sports gambling business, it had nevertheless somehow stayed out of the legal and regulatory grasp of the government.
He knew that in Vegas the Mirage and other casinos had looked into similar games, called daily games, and that their lawyers had concluded that it wasn’t worth the risk: occupying a gray area that would be considered gambling, they were games that simply wouldn’t stand up under legal scrutiny. And yet these companies were hawking these games in plain sight—flashing a big middle finger to any regulated, legal sports gambling enterprise playing by the rules.
“Obviously, I’m in favor of legal sports betting in America,” said the man at the table. “I’m opposed to illegal and unregulated gambling.”
His voice echoed across a cavernous chamber at the Las Vegas city hall, a room that was grand. Joe Asher, the CEO of William Hill US, the leading sports betting company in Nevada, continued: “When we talk about daily fantasy sports betting, we need to be clear and call it what it is. It is gambling and needs to be regulated as such . . . The classic definition of gambling is that you put down something of value to win something of value, based on an uncertain result. Clearly daily fantasy sports is betting.”
In the front row behind Asher, listening to him speak, were Jason Robins and Nigel Eccles and if the two CEOs didn’t know what kind of day they were in for, they were quickly beginning to sense it.
The piles of money that FanDuel and DraftKings had raised and spent had compelled every venture capitalist and investor to ask, How are we missing the boat on that? The vast sums were compelling lawmakers across the country to ask, Where’s our piece of the pie? But just as significantly, the most powerful casinos and sports books in Las Vegas had been compelled to ask, Are they taking our customers? Are they coming for us?
The two CEOs faced a podium that was as long as an aircraft carrier, and gazing down on them were twelve of the most powerful men in the state—among them, the head of MGM; the chairman of the state gaming commission; and the governor of Nevada. Anyone who’d never been in this room and suddenly found themselves facing those men couldn’t possibly have a thought other than: These are men I don’t want to mess with. It was early March 2016, six months since the companies had been shut down in Nevada because they’d been deemed, in October 2015, illegal gaming organizations. The CEOs had flown across the country to convince the men in front of them to allow them to open up shop again. It wouldn’t be easy.
Daily fantasy games had arrived in Nevada at an uneasy time in the industry, a time when the city at the center of sports betting in America had serious questions about its place in the world. In an age when everyone was on their phones, where did Las Vegas, the ultimate tourist destination, fit in? For big casinos, investing heavily in mobile didn’t necessarily seem like a winning proposition considering that casinos wanted people physically inside their sports books, not in their hotel rooms or away from the Strip. Casinos had begun developing smartphone apps tied to their sports books, but early attempts at a product were clunkily engineered and full of bugs—the state wasn’t exactly a hotbed of tech—and of course they were accessible for browsing only from inside the state of Nevada. Even if daily fantasy games weren’t a perfect product, if people across the country were getting their gambling fix from those games, that was a direct attack on the sports book business.
As the daily fantasy companies’ profiles rose, Nevada gaming regulators began to see every move by their CEOs as a threat to their state’s livelihood. The word among the Nevada regulators was that these were two disrupters—two “kids,” as more than one of those regulators would put it—from the East Coast who didn’t have any interest in complying. “The word we were getting from Washington D.C., was that there were two companies starting to meet with people but they were either clueless or not serious,” said one Nevada regulator. “That, for me, was the moment I realized, Okay, we got some disrupters here, and let’s not anticipate them coming in and playing by the rules—certainly not our rules.”
The operators’ sudden hiring of an army of lawyers and lobbyists beginning in the summer of 2015 sent up red flags. A. G. Burnett, then chairman of the Nevada gaming commission, said: “The lobbyists and lawyers they were hiring were the über-lobbyists and lawyers. The minute I saw that, I knew that either we were going to get run over by them or we had to do something to speak to the law and keep the regulatory scheme intact. You can have those celebrity lawyers, but you have to dig deep into the law, and just comply.”
To “just comply” meant that the CEOs would admit, on record, officially, and once and for all, that they were gambling operations. The problem was that they couldn’t exactly admit that while they were in Nevada—and then declare themselves not the instant they stepped foot outside the state. Their situation wasn’t necessarily the result of a failed strategy, but it did shed light on just how preposterous it was to try to fit into the fifty different legal frameworks set by the different set of rules of each state.
Then there was the little problem of Jason Robins having already alluded to DraftKings as a gambling operation. Burnett had commissioned a research memo into the legal designation of daily fantasy sports and circulated its findings among lawmakers and gaming officials. The memo included a Reddit online thread in which Jason had said:
“The concept is almost identical to a casino . . . specifically poker. We make money when people win pots.”
“This determination is consistent with how certain daily fantasy sports operators describe themselves,” the Nevada gaming commission’s memo read. “The DraftKings CEO also states that DraftKings’ ‘concept is a mashup between poker and fantasy sports. Basically, you pick a team, deposit your wager, and if your team wins, you get the pot.’ Additionally, the DraftKings CEO repeatedly refers to the payments on his sites as ‘wagers’ and ‘bets,’ and the activity as ‘betting.’”
The report was damning. And yet here they were, front and center, still refusing to acknowledge that they were gambling operations—a designation that would allow them to operate in Nevada while being taxed and regulated, just like any other gaming operation in the state.
“We’re up for any discussion that does that in a way that doesn’t significantly damage the business,” Jason said into the microphone, his voice echoing across the room. “I do acknowledge the need for regulation is there—I believe everyone in the industry acknowledges this. We’ve joined hands with FanDuel. We’re all for regulation.”
One of the men at the podium leaned forward. His nameplate said TONY ALAMO. CHAIRMAN OF THE NEVADA GAMING COMMISSION. Alamo had a desert-tinted face and wore a purple tie as wide as the Hoover Dam. He gazed down and said: “I think you see a theme here today: we know how to regulate gaming, and I think we do a very good job at it.” Then he asked a simple question of Jason Robins: had DraftKings tried to start the licensing process in Nevada? Jason’s response was that he wasn’t aware of whether they had or hadn’t.
Alamo asked the CEO of FanDuel:
“Have you looked into the details of what it would take to try to fit in as is and the licensure process—calling our local expertise and trying to get that advice?”
Dressed much too well for a public flogging, Nigel shifted in his seat. “I personally have not—but we will do so.”
Staring at Nigel, Alamo huffed, “If I could just be a little critical, I think that needs to be done.”
In the audience, a few rows back, a large man sat by himself, amused. “They made fools of themselves,” Vic Salerno would say of the CEOs who were getting called out for not doing their homework. How could they have flown across the country not knowing whether their people had even glanced at the guidelines spelling out the state’s process? Clearly, these two companies were run by two CEOs who simply didn’t have time for details.
Still, Vic also had another thought as he watched the two CEOs get undressed: as much as the guys rubbed him and the others the wrong way for their lack of interest in conforming to Nevada regulations, their companies were turning the tide of the national conversation outside of Nevada. What the companies had done was to put the topic of sports betting at the forefront.
Vic got up and walked to a lectern, faced the twelve men, and began to speak. “I think Nevada is the greatest state, we are the gold standard, and everyone should go through the regulations,” he said. “Frankly what I hear today is that the people in the business somehow want to avoid going through our rigid process . . . That being said, I believe this is the way to go. I think it’s fast, it’s fun, it’s easy. It could benefit the state tremendously. We would pay taxes. If other states legalize sports wagering and have pools, we can merge pools here in Nevada, into megapools that really benefit the state. We could extend our position in sports books . . . It is a game of skill. And it is gambling.”
Given how all the Nevada men had spent the morning piling onto the daily fantasy operators and their CEOs, perhaps not everyone in the room saw the unexpected turn taking place. Suddenly, the old bookmaker wasn’t just making an argument for daily fantasy games. No, Vic Salerno, in a roundabout way, was explaining why he was getting into the business of daily fantasy sports.
He still put his left shoe on first. He still did not carry $50 bills. He still drove the same route to work until a winning streak ended, when he changed his route entirely. Vic Salerno was still as superstitious as ever, still the old bookmaker at heart, even if the world around him was changing. In 2012, he had sold Leroy’s to William Hill, the bookmaking giant based in the United Kingdom, for $18 million. They razed old Leroy’s within a year and put in its place yet another glimmering hotel and casino, some fifty stories high, in a city full of glimmering hotels and casinos. He’d lost track of Leroy’s fleas, the high-stakes bettors in town who’d been displaced by quants armed with Wall Street algorithms. Vegas, with its colored fountains and magic shows and roller coasters and $60 buffets and Cirque du Soleil shows, had long since become a playground for wealthy out-of-towners. Where longtime bookmakers like him now fit in this Vegas, Vic didn’t exactly know. He didn’t know how they fit into the world outside Vegas either. The world was changing. Now commissioners of sports leagues were softening their stances against gambling. The tipping point was when NBA commissioner Adam Silver came out with his op-ed in the New York Times in 2014, saying that he believed that gambling should be brought out into the open and regulated. Then other commissioners followed suit, albeit slowly: “All of us have evolved a bit on gambling,” said Roger Goodell in 2016—this comment from the same NFL commissioner who had been as adept as any of his predecessors at playing the public charade. And then, at the NHL owners’ meeting in June 2016, Las Vegas’s expansion bid for a hockey team was approved by a unanimous vote; signing on on the approval was Commissioner Gary Bettman—the man who had been at the forefront of successful lobbying to Congress to pass PASPA twenty-four years earlier.
In the following months, there would be louder murmurs that the US Supreme Court was considering hearing arguments in a case that could challenge PASPA, some twenty-five years after the law went into effect. Anyone paying close attention had already noticed that suddenly, everywhere, there were companies positioning themselves to flip the switch when laws started going their way, from conglomerates like William Hill—which had gotten a license in West Virginia and opened an off-track betting site in Iowa, getting a foot in the door of those states—to startups offering new kinds of games that would have raised red flags for authorities before FanDuel and DraftKings came along.
In fact, FanDuel and DraftKings themselves were offering new, simpler variations of games: single lineup, pick ’em, contests that would have attracted the wrath of state attorneys general everywhere. “They’re moving closer to our model, and we’re moving closer to theirs,” Vic said. “They accelerated the conversation. And it’s driving us to ask, ‘What else is in sports wagering, and what is the natural takeoff from that?’”
Months after the Nevada hearing in which his friends on the podium stared down those hotshot innovators from the East Coast, Vic was sitting in a sterile office in a business complex a few miles away from the Strip. Just above his head was a plaque that read: “1991 FANTASY FOOTBALL. THE WINNER: SONNY’S SUPPERS.” Below that was “THE REST: . . .” followed by a list of names. In the 1990s, Vic was part of a fantasy football league that got together once a year for a draft. This wasn’t exactly twelve old friends meeting up over wings in a sports bar. This was the type of league where a personality like Roy Firestone emceed the draft, held in a grand hotel ballroom. And it included some of the most powerful players in Vegas: bookmakers, regulators, high-stakes gamblers. Salerno’s partner on Sonny’s Suppers, proud champs of the 1991 season, was famed Nike executive Sonny Vaccaro. He won’t divulge how big the stakes were, only that local law enforcement caught wind of the league and quietly asked them to shut it down.
Perhaps the models on opposite sides—Old Vegas’s and the daily fantasy operators’—had never been that far apart. Perhaps now the world was finally going to see fantasy games and wagering as one and the same.
Vic could have been enjoying retirement, but just as he had thirty years earlier, he sensed an opportunity to position himself for a world that twenty-five years ago, after their plan was crushed, they never thought was possible. A day that he and others had dreamed of but given up hope on was about to arrive: the day he would be able to take every bet, not just from Nevada but from anywhere in the country. Vic suddenly felt the same energy he had felt many decades earlier when sports betting was about to explode in his state.
As the future began to come into focus, Vic wasn’t going to be left behind. On this day in the offices of US Fantasy, Vic was dressed in blue jeans and a red Dri-FIT polo emblazoned with the logo of a new venture. A few weeks earlier, Vic and a few business associates had traveled to Cupertino, California, the home of Apple. Interested in launching an app, they were formally applying for inclusion in the Apple iTunes Store. “It was a real clash of cultures,” Vic said. “We were in suits. And we walk in, and there’s this girl who looks like she’s fourteen. She has holes in her jeans. And she explains that she’s the attorney. Then she asked why we were legit, and we had to explain that we’re regulated, an SEC traded company. We might as well have had a target on our backs.”
Within weeks was the launch of US Fantasy, a fantasy sports site that offered variations of the game. Vic Salerno was the founder of Vegas’s new tech startup.
These new fantasy games were doing something miraculous: they were actually moving the needle. Everything was changing. The lines that had been drawn and then remained untouched for decades, lines that had seemed permanent, were suddenly, miraculously, disappearing, like lines in the sand.