An NBA Betting Scandal Postmortem

0:00Hey, it's Bill from the Bill Simmons podcast. FIFA World Cup 26 fans, listen up. As the official beer sponsor of the FIFA World Cup 26, Michelob Ultra is giving away$1 million worth of FIFA World Cup 26 tickets and prizes. Enter now at MichelobUltra.com slash superior access slash FIFA World Cup 26. Michelob Ultra FIFA World Cup 26, superior access, no purchase necessary. Open U.S. Residence 21 Plus begins on December 1st, 2025, ends on July 31st, 2026, multiple entry periods. Visit www.micelobUltra.com slash superior access slash FIFA World Cup 26 for free entry, entry deadlines, prizes, and details.

0:30And we're live on Match Day as Doug reaches for a Buffalo wing. He's got it! Oh, and he's gone for a can of Pepsi, too! What a finish! There's no doubt about it. It just tastes better. Match Days deserve Pepsi.

0:49Congratulations! You made the Varsity, the podcast. My name is John Arand, and I am Puck's sports correspondent and the host of this pod. And today, Matt King joins us. Matt is the CEO of Fanatics Betting and Gaming, and in a former life, Matt was the CEO of FanDuel. So Matt joins the pod just a week and a half after a sports betting scandal hit the NBA. That's when a bunch of federal indictments were handed down against an NBA player, Terry Rozier, and coaches, Chauncey Billups and Damon Jones. So I am excited to talk to Matt about how the scandal has affected his business and have him outline the path forward for sports betting companies.

1:32The legalized gambling business, they really have been largely quiet since the indictments were announced. So I'm happy to have Matt on to talk about all of this. But before we get to Matt King, today is Sunday, November 2nd, and here's what I'm watching. I don't know yet who won the World Series, but I do know that regardless of who it is, whether it's the Dodgers or the Blue Jays, Shohei Otani has emerged as the biggest star that baseball has had in decades. I'm not talking about the best player, although he's clearly in that conversation. I'm talking about the biggest star. I was fascinated to listen to Bill Simmons' podcast last week.

2:12Bill Simmons, he's, of course, the GOAT podcaster over at Spotify. And he taped last Tuesday, the day after the 18-inning Game 3 marathon. That was the game when Otani reached base nine times. He went four for four with two home runs and was walked, get this, five times. So on his pod, Bill spent a lot of time talking about Otani's celebrity. He talked about how the Dodger Stadium crowd couldn't miss any one of his at-bats and how the crowd's expectation level, whenever Otani came to the plate, was that he was going to hit a home run. That hasn't happened since those days of Barry Bonds. But Bill said something else that really kind of made my jaw drop.

2:58Baseball has its biggest star on one of its premier teams in one of its biggest markets. It's a dream scenario. But Bill, who really is more of a basketball guy, also said, and this was his quote, I wrote it down, this is what the NBA is so desperately searching for right now. They have all these great stars. They don't have Otani. That was an amazing statement to me. The NBA has stars, of course, but LeBron, KD, and Steph, they're all long in the tooth. And the next generation, they just don't have that aura yet. Simmons did suggest that Wemby could become the water cooler guy for the NBA. But my bigger point is, seriously, when was the last time a Major League Baseball player achieved this type of celebrity?

3:47Maybe McGuire and Sosa back in the home run races of the late 90s? Maybe. I don't know. It's been a while. Anyway, I remember vividly when I first noticed this type of celebrity from Otani. It was last season, the 2024 season, and the Dodgers were playing an early season series in DC. It was toward the end of April. It was the first game of the series. And I recall a decent-sized crowd in Nats Park. And it was really a rather pedestrian game. The Dodgers were going into the ninth inning with the commanding lead, but nobody left. Everybody stayed in their seats because Otani was due up in the ninth inning.

4:25Well, that game, Otani hadn't had a hit. He was 0-4 going into the ninth. But in the ninth, he hit a home run that I think is still going. And the crowd went nuts. Dodgers fans and Nats fans alike. And after he touched home plate, he went into the dugout and then everybody left. There was a mass exodus from the ballpark. There were still six outs to go. I don't know if I've ever seen anything like that. So I will be watching to see what MLB does with this kind of player that has this kind of popularity. I mean, already the league has made inroads into Japan with media rights deals and marketing outreach, but this postseason has made it clear to me that baseball finally has that crossover star that it's been looking for and trying to develop for decades.

5:14Okay, now let's get to Matt King, the head of Fanatics Betting and Gaming. So Matt King, thank you for joining the pod, I think my first question to you is, it was about a week and a half ago when we woke up to the news about Chauncey Billups and Terry Porter and the federal investigation, the indictments that were coming down. And when I first saw that news, I thought, okay, this is that big scandal that I was sort of waiting for. Since I've realized it's mainly allegations that we've known for a while just the fact that the feds are involved i think are pretty crazy but my my first instinct was like oh my goodness here we go can you paint a picture where were you when you first found out that these indictments had come down and what was your instant reaction to it just not not not um 15 minutes later but like your instant reaction so um my instant reaction So I was in my office on a Zoom call and you're on your Zoom paying attention, as we all do, paying 100 % attention to whatever we're talking about.

6:25And I saw something come through on my phone. And look, I think obviously the headline was related to your point, something that's been known for a long time in terms of the Terry Rozier bets. and then from there obviously the feds had kind of lumped in the poker allegations against Chauncey Billups which really have nothing to do with sports betting I think that one it's a good reminder don't play poker with the mob and two you know that the mob is alive and well but on the sports betting kind of on the relatively small aspect that was related to sports betting As you noted, those had been issues that had been known and frankly was largely evidence that the system works.

7:18Because if you think about the chronology of events, those suspicious bets were flagged and reported within about five hours of them actually happening. And then investigations were kicked off. And really what you're seeing now in terms of the timing of the allegations is the league kind of forcefully went through an investigation and a very thorough investigation. But the reality is the leagues lack subpoena power. And so it was really collaboration with the feds that allowed subpoena power to be utilized. And that allowed the full scope of what had happened to come to light. And from my perspective, the way I think about the issue in general is it's a lot like insider trading in the stock market.

8:04You know, any financial market at any point in history, there is a relatively small number of industry participants that try to use either unethical or criminal means to gain an advantage. Right. It's why crime has always existed. and in that light, the only way to keep a market healthy, the same way the stock market does, is very active and robust surveillance, which we have in this industry and was evidenced in this case by how quickly the bets were reported. And then also aggressive enforcement, right? Because the deterrence aspect of it is actually really important as well. And the reality is, I think part of what we're seeing here is this market is still new enough that you really haven't had the enforcement side of the equation kind of play all the way through and demonstrate to people the deterrence.

8:54And I think you're going to start to have more and more people that are even tempted but to do something like this understand the severity of the consequences such that, you know, I think you'll have a lot more people think twice about doing it because they'll understand this, you know, will potentially result in jail time for them. And I don't think a lot of people realize that. So all in all, it was obviously a very sensational story. But the sports betting part was well known. And in my mind was frankly evidence that the surveillance side of the equation worked very, very well, as well as the collaboration across all the parties to make sure that the perpetrators were caught and brought to justice.

9:33Which is every time a scandal like this comes to light, and I'm thinking about Shohei's interpreter. So friends of mine who are not in the business are seeing all these headlines and all these scandals. And then friends of mine who are in the business always say, look, this is evidence that the system is working. We're seeing a lot more scandals now than we did, say, a decade ago or certainly before sports betting was legalized. I do want to make note that you're coming on this pod, which I appreciate. You know, FanDuel and DraftKings, I didn't ask them to come on the pod, but they're taking a much more conservative approach to this.

10:17Is there a messaging aspect to this that should change? Or are you good with how the messaging from your side is sort of getting out on this? So I'd say a couple of things. I think one is on your messaging point, I think just the nature of the fact that I think a lot of people don't understand how the system works is evidence that we need to spend more time out there. And we need to spend more time educating people. Because, again, the reality is this industry is a regulated industry in the U.S. is seven years old. It's still very nascent. It's obviously grown significantly over that time period.

11:01And there is a lot of educational catch-up that needs to happen. And frankly, a lot of seasoning about just how the ebbs and flows of this industry work. And what I will say is, because I've worked with the leagues and I've worked with, frankly, my competitors in terms of building First Daily Fantasy Sports and the sports betting industry now for over a decade. everybody in this industry wants to build it the right way. And so there has always been from day one a real commitment to how do we build an industry that will endure for the long term, a market that will function and have trust for the long term.

11:38But the reality is in this kind of era of, you know, Instagram and Twitter news, you know, sensational headlines provide the click through. And when you have like, we could educate till we're blue in the face, but until something like this happens, You know, people aren't really that interested in better understanding the issue. You know, we've spent years thinking about how do we protect against these things and how do we create these surveillance mechanisms? But the reality is it was very kind of an, you know, pardon the pun, but an insider baseball topic until something like this happens. And now's the step in the process where we need to get out there and educate people.

12:12So certainly, like, we're in the early part of that journey and we need to continue to do that. I think on kind of the broader topic, though, I think the thing that's really important for people to understand when you talk about we're seeing more of this now is the reality is you have to think about the world through the lens of sports betting is going to exist no matter what. and the real question is whether you have a legal market or an illegal market and the reason that i say that with such kind of confidence is i would challenge you to find me a country in the world a time in history where people have liked sports anywhere near as much as they do here and there hasn't been some form of sports betting going on it just doesn't exist and so these things are are two sides of the same coin.

13:08And that's not a bad thing, right? Most people use it as a way to enjoy themselves, to amplify the experience. And so a vast majority of sports fans that are also sports bettors, it's simply a compliment to the experience. And so that's totally healthy and it's totally okay. So if you do look at the lens and the world and accept my kind of premise that you're going to have sports betting no matter what, the reason you don't see issues like this when you have an illegal market is there is no surveillance. By the way, there is also no consumer protection. So you also don't hear the stories about people having responsible gaming issues or getting out over their skis because there's no consumer protection.

13:51There's no ability to report things or anything like that. And so the benefits of the legal market are you actually have the surveillance mechanisms in place to catch issues like this when they happen. And again, you know, in the most recent incident, the reporting chain was literally within the same day. And so the activity was flagged and kind of in pursuit. And so I would argue in a world where you know that sports betting is going to exist, you're far better off with the legal market because then you can put the surveillance mechanisms in place, prosecute the offenders, create the deterrence element.

14:33that actually reduces the amount of activity. And over time, again, I think you'll see that scandals like this will always remain a possibility, but I think their frequency will reduce over time as the kind of industry infrastructure matures so long as there is a legal and robust market out there versus pushing it back into the illegal market where it will go unseen and unreported. Matt, let me take a quick break and I want to come back and ask you a couple of questions about the path forward.

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15:44You know, even before the indictments came down and the headlines were made a week and a half ago, Adam Silver had gone, I think he went on that Pat McAfee show with an ESPN bet advertisement underneath him talking about wanting to call the number of prop bets or even in-game bets that are going on. Where do you stand on something like that? From our perspective, we, again, we look at, I started Fanatics betting and gaming about four years ago. And the way, you know, I've always thought about this is like, this is a multi-decade kind of business that we're trying to build. So we want something that will endure.

16:26and in light of that, the way we've always approached it is we want to continue to learn and evolve what we do to incorporate lessons learned. And so like in the case of the Jonte Porter issue last year, that highlighted an issue that the NBA flagged that we shouldn't be taking bets on two-way contract players. Kind of based on that conversation, we immediately did it and you stopped taking bets on those. And they were very, very small fraction of the bets that we were taking. So that was an easy decision to make. But look, I view this business to be one that we can only build in partnership with the leagues.

17:07And so as the collective view of ourselves, the leagues, the regulators evolves, we're always going to be on the forefront of adopting whatever the kind of newest iteration of what's the right kind of menu of product to offer. So we'll always be kind of working hand in hand with the leagues to adopt, you know, whatever the kind of consensus view of the right thing to do is. I think the thing that is always part of that conversation, though, is it is important to understand, you know, there's a concept of channelization, right? if you look at international markets where whether tax or regulatory reasons, it's, you know, how do you build a legal market that has the appropriate regulations in it, but is still competitive enough against the illegal market that kind of the consumer wants to use the legal product versus the illegal product.

18:01And so, you know, the way we've always talked about the conversation is we want to be, you know, have the right amount of common sense regulation, but also make sure that the product is competitive against illegal products out there. Because if you lose your competitive advantage relative to the illegal products in terms of what you can offer, then you'll see a lot of consumers just go back in the illegal market and you undermine a lot of the transparency benefits. And so that's really the kind of the push and the pull around what's the right suite of things to offer. Because you want to make sure that, the product that you're offering is both the right thing to do from a long-term industry perspective, but is also competitive with the illegal market.

18:45What percentage of bets are prop bets? In terms of volume, it's not the majority, but it's a significant minority of the bets. But keep in mind that a vast majority of those are on the overs, not the unders. And so I think a lot of times people are focused on the under of the bet is potentially the more manipulable side. Well, that's like my grand plan on this is not to accept under bets on that because that would be so easy to manipulate. I come up with an injury or I'm not going to go after that rebound or something along those lines. Is that something that's viable? So I think that's part of what gets you into the question, the competition with the illegal market question, right?

19:37It is about four or 5 % of bets are on the under. And if you lose those in their entirety, then you're in a world where you do have a significant gap to the illegal market and you will push more people into the illegal market. And I think that the thing that's important in this conversation for people to appreciate is when I say the illegal market, it's no longer finding a bookie in the back of an Italian restaurant. which like has it and that that has like a there's a there's a challenge to that for the average person the reality is in the world that we live in today if i have a vpn on my computer i can go find a website that will take my money feels very legitimate we'll probably have a line at the top that says sports betting now legal in all 50 states but the reality is like they're based in Curacao or somewhere like that representing that, you know, they're legal in the U.S.

20:36when they're really not. And so there's a lot of kind of the access to the illegal market is very, very easy and the product is very sophisticated. And so it is a important kind of factor when you think about how easy it is somebody for somebody to move from the legal market to the illegal market. The other thing I would say about the unders is the average bet on an under is probably 20 or 30 bucks. Like it's these aren't large bets. And so part of the reason why surveillance works so well is anybody who's trying to manipulate a market is going to be trying to get orders of magnitude more money down on the underside of a bet than you would typically see.

21:20And so it literally is a flashing red light of like, hey, something weird is happening here. And so that's where I would argue that most unders, you're completely fine. I think there is a group of things like missed free throws or things like that that are markets that I think we have to look at and say, should those exist or not? and so I do I do think there is a class there will continue to be classifications of bets where they truly don't matter to the outcome of the game and they aren't really a core part of the offering that I think we will collectively want to scrutinize but the reality is I don't think that's it's as simple as saying don't take the bets on the unders because I think that would create two big one it doesn't address the real issue and two, I think it would create too big of a delta between the legal market and the illegal market.

22:22So that's kind of how I think about it. I do want to ask you about that. When the big flashing red light goes off, what would it be? Like I put$1 ,000 on Jonte Porter getting under four rebounds? I mean, in that case, yes. It could be trying to get$10 ,000 down,$20 ,000. And, you know, it's like people are trying to get real money down. How do you find that? And then once that comes in, do you call the NBA? Do you call authority? Like, take me through that process. The first thing, it kind of all starts with, you know, effectively kind of a predicted versus actual view of what handle is, right?

23:03So if you think about a game, you know, a side of a game, a side of a bet, like based on the fact that we offer thousands of games and your thousands of bets in a game and millions of games a year, we kind of have a good sense of like what you would expect. And so really the flashing red light comes from like, is this, you know, this particular player, this particular match, this particular side of the bet is the volume we're seeing significantly in excess of what we would have expected on that. Um, and, and that could be for any number of reasons, a lot of them legitimate, right? So, you know, um, you know, a good example where we might see more action on the unders, um, than you might expect is if we see it and then you go on social media and it turns out some media personality, um, tweeted that, you know, this guy's garbage and like, they're terrible.

23:58And yeah, they're definitely going to have the under tonight. You'll see a lot of people bet the more people than you might expect to bet the under just because they saw something online about it. And that type of stuff is expected. You might see, and we actually, the industry saw this at one point, there was some meme on Instagram at one point about the Simpsons that accurately predicted the score of the Super Bowl in the episode they run for a number of years in a row. And so like you suddenly started to see a lot of volume on an exact score market in the Super Bowl, right? And it's like, it's random stuff like that that you see a lot.

24:36But then to answer your question, like once you see those red flags, you know, there's kind of blinking red lights of like, hey, there's something to look at here. If you can't find a totally explainable reason why it is, then you really get in. We first get into the question of who's making the bets? Where are they making the bets from? What's their historic pattern to try to understand what we think, right? So, again, you might have like there are cases where we might see more volume than we expect on the underdog of a game and then you go find and it's a and it's a long shot underdog in a college game and you go look up the player the user that made the bets and you say oh he actually went to that school and it bets that school all the time you know like so there's things like that where it's a lot of legitimate customer behavior.

25:28But there are other times where you will see, you know, we've investigated issues and you've been in a place where we look at where the bets are being placed from. And what you realize is there's four or five devices of users all sitting in the same apartment, all trying to make the same bet. And by the way, these are also people that have tried to do fraudulent things on our platform before that we've had to stop or do things that like, you know, are a little bit suspicious. And so like suddenly you're like, okay, this is weird. Let's really dig in here. And so ultimately, like if we see activity that we think is suspicious, we will typically report it up to, and there's most sports have an integrity monitoring kind of organization or function, right?

26:15So, um, U S integrity is a big one. I think they were bought recently, and there's a couple others out there, that when it's basically when a sport gets regulated by the state, they have to show the state regulator, here are our integrity monitoring policies. And a lot of times, and frankly, in all the cases I know of, there is some function of a clearinghouse that can effectively look across operators where we can report suspicious activity on our site and then other operators will report. So like tennis is a sport that has struggled, not struggled, but has did historically have struggles with integrity before, particularly in lower grade tennis matches.

26:57They spent a lot of time and effort to really make sure that those were largely eliminated, which they have been successful in. And so like, but you still see people attempting that in low grade tennis. And in those cases, is the system works really well and really smoothly work. We'll see a match. We might see suspicious activity. And then we hear from the integrity monitor, two or three other operators have seen the same. That kicks off a full investigation, which typically results in identifying if there wasn't an issue. And if there was an issue, the appropriate legal action is taken. And so that's really how it works.

27:34It's kind of automated monitoring our side, kind of manual follow-up and investigation. If we see something that we think is suspicious, reporting that to the industry body then kind of collaborates across operators to get a kind of a full game view across the major operators. And then if there is deemed to be an issue there, then it's reported up to the authorities. So with the Jontae Porter or the Terry roger examples did fanatics see as a spike in those uh those bets we're relatively new so on the terry roger we just weren't in business we were like just starting our business so we didn't see real activity there um that was really you know on some of the more established sports books do you have like a real world example you can share where this actually did work uh in terms of like a match or something like that yeah there's some it was something where you you saw suspicious What's your activity you went through and sort of rooted it out?

28:33We do see it in tennis. Like we had an issue earlier this year where it was, again, a low-grade tennis match and the underdog won. And we saw in our data that there was significantly more activity on that underdog. And when I say low-grade tennis, I'm talking about kind of third or fourth-tier tennis. And we saw issues. We reported up to the integrity monitoring, um, body, a couple other operators had seen issues and then, you know, the investigation still ongoing. Um, you know, but it's clear like that I think there was an issue in that case. And yeah, I think that the appropriate actions will be taken.

29:16So, um, the short answer is it's not a, um, it's not a regular occurrence by any means, but it is something we have seen before. I think what you're seeing, though, is the time, like, I don't necessarily, because we've only really been in business for about two years, you know, the time of the investigations takes a while. So, yeah, we haven't necessarily seen some of the reports that we've made come to full fruition. Final question on this is you mentioned low-grade tennis. I always talk about like, you know, Division III football, the ability to bet on some of these really lower tier sports.