The Tumultuous Rise of American Sports Gambling

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1:31And when losses do happen, the Hartford can pair that risk control work with insurance coverage grounded in underwriting, risk engineering, and claims experience developed over time. Learn more at thehartford.com slash risk mitigation. Bloomberg Audio Studios. Podcasts. Radio. News. You're listening to Bloomberg Business Week with Carol Masser and Tim Stenevek on Bloomberg Radio. The story on the Bloomberg Terminal last week getting our attention, it's kind of where all this stuff comes together. Totally. U.S. states that have legalized sports betting have seen a rise in delinquency rates on consumer credit products and a decrease in credit scores.

2:12This is according to a new report from the Federal Reserve Bank of New York. Here's what they said, Carol. Our findings suggest that sports betting can have dramatic implications for household financial stability. Yeah, this can't be good. Yeah, the author is putting that out right this week. We're sure this comes as no surprise to our next guest, to sports journalist Danny Funt. He is the author of a new book. It was out in January. It's entitled Everybody Loses the Tumultuous Rise of American Sports Gambly. We are delighted to have him here in our Bloomberg Interactive Brokers Studio. Welcome, welcome.

2:42Congratulations.

2:43Danny Funt:Thank you. Thanks for having me. You know, it's kind of disturbing and blown us away, the gamification of our society. And sports gambling, and especially college sports, like you just think these things were sacred, and things have changed. Tell us about why you wanted to write this book. And as you kind of started to dig into it, what more kind of came out? Well, I've been covering it for several years for The Washington Post mainly. and I felt like I was scratching the surface, particularly this fundamental question of why it was that the pro leagues went from calling gambling an evil and the deadliest possible thing that could happen to sports, that's something the commissioner of baseball said barely a decade ago, to becoming the most aggressive evangelist for gambling.

3:28Danny Funt:Had my head spinning, I didn't feel like we'd gotten to the bottom of that. The other reason was just these brands like FanDuel and DraftKings have become household names. They're so dominant across sports. And yet a lot of us have no idea what it's like to work there, how they talk about customers behind closed doors. So spending the time to cultivate sources at places like that was of great interest to me. You mentioned the commissioner of the MLB. You note in the introduction that you spoke to 300, more than 300 people for this book. But the commissioners of the NFL, NBA, WNBA, NHL and MLB all declined to participate and didn't as did the top current executives at FanDuel and DraftKings.

4:10With that as the backdrop, what was the turning point for these leagues to say, OK, we're going to oppose something like this to Adam Silva writing that op ed in The New York Times that was like, it's time to legalize this.

4:24Danny Funt:That was the turning point because his predecessor, David Stern, I've learned was about as anti-gambling as they come. So within a year of taking over for his mentor, Adam Silver publishes this shocking op-ed. That sets in motion a campaign behind closed doors where the gambling industry was trying to persuade the other leagues to get on board. And the thing that really got their attention was what gambling could do for their TV rights. Knew it. It's always about the media rights. Yeah, they were worried, you know, audiences aging, young people not wanting to sit through three or four hour games, people canceling cable subscriptions.

5:03Danny Funt:And thinking about that in the long term, the Gambling Industry Commission studies from Nielsen that showed gamblers watch more than twice as many games. They watch till the ends of blowouts to see how a bet plays out when normal people have changed the channel. And so looking at that and then projecting what it would mean, both in a direct sense for partnerships with these gambling companies and indirectly by growing their TV audience, the NFL, for example, was told it would make more than$2 billion every year if gambling were legalized. So this was happening before the Supreme Court struck down a federal ban on bookmaking.

5:40Danny Funt:When they did, the leagues had already been converted behind closed doors and they were ready to cash in. You know, so where's, hmm, it's always like follow the money, right? It always comes back to like it's about making money. I mean, is this a problem that you think better regulation could change the situation or no? It could help on a sort of incremental scale, but fundamentally, online sports betting is a beast. It's a whole new ballgame. And this might sound - The cows left the barn or the horses left the barn, whatever the expression is. I mean, is it just done? Like, it's out there. Yeah, and again, there are other countries, and I think the U.S.

6:20Danny Funt:could have benefited from looking at places like the U.K. and across Europe and Australia that have had sports betting a lot longer than we have and have seen the damage that it does when you trust these companies to self-police. So there are things that they've done that we could learn from. But the bottom line is when you make it possible to bet on thousands of things within every game, in real time, wherever you are, 24-7, That is such a game changer. There's this really weird thing happening right now amidst the rise of sports betting, and that's prediction markets. So CalShane, PolyMarket, and what you can do in an environment that, you know, FanDuel and DraftKings, it's not legal in every state, and it's regulated by the states.

7:02The winnings are taxed by the states. They're revenue generators for the states. That's not the same with prediction markets. So you could be in a state where you can't actually make a bet on DraftKings or FanDuel but make a bet on Cal sheet on a sports outcome.

7:15Danny Funt:How do you look at that? The whole debate, and it's not a new one, because there have been a lot of companies over the years that tried to circumvent gambling laws, including Fandle and DraftKings when they were so-called daily fantasy operators. The same debate played out a decade ago. What is and isn't gambling? I think if we're being real, obviously this is sports gambling, even if it's described as trading event contracts, and thus it's regulated by the CFTC. From a consumer standpoint, the experience is almost indistinguishable. And I think the motivation is the same. I can leverage my knowledge of sports to try to make money.

7:54Danny Funt:And a lot of states seem to think that and they're cracking down. How much do the companies, whether it's DraftKings or FanDuel, know exactly what they are doing to individuals? And I bring that up because earlier this week, we saw Google and Meta held liable for addiction to social media platforms. It's just the start of a lot of litigation against these guys about addiction. Does that decision in your view, from what you found out, what you've learned about these companies have implications for sportsbooks? Absolutely. I think it was one of the most striking takeaways from all the reporting I did for the book was hearing from people in the industry about how concerned they are of the state of their business and where it's headed.

8:35Danny Funt:There was one former executive at a sportsbook who said, when you think about it, my job was essentially to slowly bleed customers dry. And he said, if you're lucky enough to be an executive at one of these companies, you can make good money, but you don't feel good about it. That's for sure. I don't think he's alone in feeling that way. So the internal documentation, like there is a great awareness of how to make it sticky and keep people there and make it, you know, dangerous, essentially. Yeah, Sticky came up. I was speaking with an executive at a company that was soon after acquired by DraftKings.

9:09Danny Funt:And they provide these so-called micro bets. You can now bet on, will the next pitch in a ball game be a ball or a strike, all that stuff. And I said, a lot of people feel like this replicates a slot machine, and it's a road to compulsive behavior. And he said, no, no, sticky. Sticky is how we think of it, that it's especially sticky. But to a layperson, that sounds like getting people hooked on gambling. real quick um just some of the people you spoke to who've been affected by by this who maybe weren't even doing this stuff before it was easily to do on on their phone what was the story they told you a lot of them just sound so relatable you might think of a person with a gambling problem as wow they must be really out of control and greedy and reckless i remember speaking with a fifth grade teacher in connecticut who said gambling was suddenly everywhere i thought i could use my knowledge of sports to make money.

10:03Danny Funt:Before long, he'd lost more than$100 ,000 on FanDuel. Another person, also in Connecticut, coincidentally, was telling me that he got all this VIP treatment. I devoted a whole chapter of that to my book because the things they'll do to keep their biggest losers happy is extraordinary and a little risky, to put it mildly. He was telling me he lost six figures betting on sports and he was hooked on the betting but also on that VIP treatment it made it so much harder to walk away because you don't want to give up all these freebies and white clothes service and I said so what were you doing for a living when you lost all that money because these companies insist they're vetting customers losing at that level to make sure they can afford it and he said I was a server at the Cheesecake Factory making 65 grand a year.

10:54Danny Funt:And obviously, FanDuel, who was giving him all those VIP perks, did not check to make sure he could afford to lose that much money. And they basically told me that. Yeah, it sounds like questions about the vetting process there. Danny, we've only scratched the surface with you. I hope you can come back. I'd love to. We'd love to continue this conversation. It's certainly a big, big part of our world now. Danny Funt, he's the author of the new book, Everybody Loses, The Tumultuous Rise of American Sports Gambling. Yeah, we've been talking about it in the newsroom in a big way.

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