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Gaming Guru

Matt Youmans
 

Sports Betting: Guess Where Big Bettors Spend Their Money?

12 September 2005

Every Sunday night, starting late in the summer and stretching into the winter, the opening act in one of Las Vegas' most dramatic plays belongs to Stardust sports book director Bob Scucci, who must know his lines by heart.

For decades, the man in charge at the Stardust has posted the first lines on NFL and college football games, allowing the biggest bettors around to take their best shots. The man adjusted, and the rest of the sports betting world followed his lead.

There was no understating the importance of the role. The man at the Stardust had to be solid, and Scucci has to be solid, too.

"It's a great amount of responsibility and it's not something that we ever take lightly. All the other books in Nevada look to our opening numbers, and there's a lot of money that gets bet on those lines," Scucci said.

The importance of that role has not diminished in Nevada, but a convincing case can be made that the betting world no longer revolves around Las Vegas.

A 10-year boom in offshore sports books has turned Las Vegas into a smaller player in the game, second in line to computers in Antigua, Costa Rica and other remote international outposts. The biggest bettors, looking for a better deal, have been leaving Las Vegas for islands in the Caribbean.

"Offshore betting has gotten so big, so expansive, that it's hard to ignore their existence," Scucci said. "Their popularity has grown so much it's really incredible. I think they were a blip on the radar 15 years ago, and today they are a major, major source of big money."

It was 1996, Scucci said, "when I started getting a lot of feedback from some of our big, sophisticated bettors, that gave me an indication that a lot of play was being driven elsewhere."

The numbers are impossible to ignore. Offshore sports books combined for an estimated handle of $76.6 billion in 2004, compared to a handle of $2.08 billion in Nevada. At least five offshore books alone took in more money in sports wagers last year than the entire state.

Nevada's handle, which was $2.48 billion in 1996, dropped to $1.86 billion in 2003. Almost half of that money is bet on football.

"I think the offshores made a huge impact in the early years, the mid-90s, because when our handle was increasing and making tremendous leaps year to year, you could tell where it leveled off," Las Vegas Hilton sports book director Jay Kornegay said. "It slowed us down for a little bit.

"I'm sure if you were to close down every Caribbean book, our business would go up."

What happens in Las Vegas is always important, but what happens when the Stardust posts the first lines Sunday night is second in significance to the moves made at books in Third World countries such as Costa Rica.

Jimmy Vaccaro, a Las Vegas bookmaker for almost 30 years, got an up-close look at the other side when he left town two years ago to run the Atlantis casino sports book in the Bahamas. He recently returned to be public relations director for Leroy's sports books.

"The offshore books still want to know where the Stardust opens the lines. They still want to know what we're doing, even though we're second," Vaccaro said. "It's not as significant as it once was, because the Stardust was the barometer on Sunday nights going back 20 years. That has changed immensely.

"We pay more attention to them than they do us. They are first, but they still want to know what's going on here."

. . .

When he moved from Canada to San Jose, Costa Rica, in 1995, Calvin Ayre had modest goals for Bodog.com. He settled into a one-room apartment and launched a sports book that was federally licensed by the local government.

"We were small back then. I can remember sitting down here and watching the first bet come in for $15," said Ayre, 44.

"I thought, `This is a good idea. I'll get to live in the tropics and when the dust all settles, I'll have a couple million dollars.' That's not even a good month for me anymore. Bodog has killed my expectations, turning into more than I ever even contemplated."

The projected sports book handle for Bodog this year is $1.2 billion. That figure does not include the casino and poker rooms, which will help push the projected handle to $6 billion.

Ayre said the company's marketing budget is $50 million, and he said Bodog has grown from having about 1,000 accounts the first two years to more than 30,000 accounts.

Bodog is not even one of the sports books that caters to major players. It is known as a book that courts squares, or novice bettors, and expects at least a 5 percent hold. The company fact sheet states its average sports book wager is $68.

"Our target market is recreational bettors, but that doesn't mean we expel the wise guys," Ayre said. "A big bet for us is maybe $10,000."

Books such as CRIS, Hollywood, Millennium, Olympic and Pinnacle, which offer higher limits and are estimated to double or triple Bodog's sports handle, are bigger-volume businesses that expect a smaller win percentage of 1 to 2 percent.

"We're doubling in size every year," Ayre said. "On the growth curve we are at right now, we will by ourselves be bigger than the state of Nevada in sports betting."

Nevada sports books are more strictly regulated than the offshore industry, where anything goes and every type of wager is offered. Bodog can post proposition bets on United States presidential races, reality TV shows and celebrity trials, for example.

"I actually think regulation is bad. An unregulated market creates competition at its highest levels, which means innovation, which is a good thing for the players," Ayre said.

"I don't think the Las Vegas books are really significant to us anymore. I know we don't look at them, but I suspect they pay a lot of attention to us."

There was more of a risk betting offshore in the mid-to-late 1990s, as several books disappeared and left people empty handed. Ayre said the "rip-off joints" have been snuffed out by the most powerful companies.

"People know they're going to get paid," he said, "and they don't give that a second thought anymore."

. . .

By most accounts, offshore sports books started surfacing in the early 1990s. The earlier operations in the late 1980s used phone lines, and bettors in the states called 800 numbers to places like the Dominican Republic, where wise guys in the United States who ran underground books set up shop to avoid law enforcement.

There were a number of ways to circumvent the laws three decades ago, and one was for a bettor in California or New York to set up a phone line in Las Vegas and forward calls to casinos.

"The guys who operated here for years and years, they got tired of getting pinched and went over there," Vaccaro said.

The Internet changed everything, and there remains a gray area in the legality of online gambling. It is technically illegal in the United States under the federal Wire Act, a 1961 law regulating gambling over telephone wires.

Still, many do it. An estimated 2 million people gamble over the Internet every day, and at least 70 percent live in the United States.

According to Christiansen Capital Advisors, a U.S.-based gambling industry consulting and research firm, offshore sports book revenue was estimated at $3.44 billion in 2004. Total online gambling revenue, including casino games and poker, pushes that number over $10 billion.

"That's revenue, not handle, and that's what's scary," MGM Mirage sports book director Robert Walker said. "It's hard to believe, when you see those figures, they would let that money go out of the U.S.

"Those numbers are staggering, and I can't believe the U.S. government can see those kind of figures. Why make criminals out of honest people?"

Why not regulate and tax online gambling? That question is being asked, but when could it become reality and what effect would it have on offshore business?

"It would be disastrous for the international online industry. It would be the worst thing that could happen," said Ayre, who predicts he will be retired and relaxing on a beach when that happens. "I think it's 20 years out."

Vaccaro said the "offshore is here to stay" because those books can offer credit, unlike Nevada, and legalized online gambling would only slow down offshore growth.

"I think the Caribbean would be gone tomorrow," Walker said. "I still think people would rather bet with the MGM Mirage than offshore. Would I like to book to everyone in the U.S.? The answer would be a resounding yes."

Scucci said he would like to see politicians use sports betting in a positive way instead of attempting to suffocate its growth.

"I think we have an unfair stigma attached to sports betting among certain lawmakers around the country," Scucci said. "It would be no different than opening up an e-trade account online.

"The fact that online betting is there and is so pervasive is an indication of how popular it is, and I would love to see it legalized and regulated in a way that Nevada does such a great job regulating over-the-counter sports betting. It may be a case of wishful thinking."

. . .

Las Vegas sports book directors are afraid to take a big bet. At least that is the criticism most often heard from the wise guys. In the old days, they say, the best bookmakers would gamble with anyone.

"The days of true oddsmakers are gone. There aren't many guys in town like that anymore," said Glen Walker, a consultant to Intertops.com, a major sports book on the Caribbean island of Antigua.

"Offshore is where the big bets are made now. From the bettors' point of view, offshore books are the best thing that could have ever happened. It's a great alternative to illegal bookmakers."

Walker is a well-known character from Las Vegas' past. He was a member of the Computer Group -- a collection of sports bettors that included Michael Kent, Dr. Ivan Mindlin and Bill Walters, among others -- who beat the books out of several millions of dollars from 1983 to 1985.

Kent was a mathematician who developed a computer program that predicted outcomes of college games and, according to Walker, "was laying golden eggs."

Vaccaro was sports book director at the Barbary Coast when the Computer Group hit Las Vegas.

"I was there for the first crush of the computer wave," Vaccaro said. "We found out that smart people can beat you on a regular basis. I believe it made Vegas smarter quicker, because if you were dumber slower, you were out of business. These people knew exactly what they were doing.

"It changed the face of sports betting, without a doubt. It changed it to make people smarter, but it also encouraged more people to bet. It brought sports betting to a more visible level."

Walters is still one of the biggest and most feared sports bettors in Las Vegas. He declined to speak on the record but offered an unflattering review of how casinos operate sports books today.

He did compliment Vaccaro, who ran The Mirage sports book in the 1990s and said he always welcomed Walters' action.

"Billy was a customer at every casino where I worked. All Billy asked for was to be treated like everybody else. If we give him a limit, he'll bet the limit. He won't try to sneak in on you until you double-cross him. I've always had a good relationship with him and all the big players," Vaccaro said.

"We had sort of like a uniform code -- these are the rules and if you play by the rules, you're welcome to play here. I as a bookmaker wanted him to play with me.

"I would rather have the big players in front of me as opposed to behind me. The unwritten law we had, they would never screw with me and I would never screw with them."

. . .

Before posting his lines, Scucci crunches numbers with two of his assistants and relies on three outside sources, including Las Vegas Sports Consultants oddsmaker Ken White. Sometimes the Stardust lines go up first, and sometimes offshore books are already open for business.

"It's scary when you first put them up because you don't know where you're going to get hit," Scucci said. "You might do a great job and put up solid lines on 98 games, but get pounded on two games."

The Stardust limits are $10,000 for NFL sides and up to $5,000 on college sides. The Mirage offers $50,000 on the NFL.

Betting limits vary at Las Vegas books and, in reality, they are only guidelines. Limits are extended for some bettors, especially casino players at Strip hotels.

Some bettors complain if they can't get free drinks, but the big players are more concerned with betting limits.

"I think that's the most unfair criticism that the books have here," Scucci said. "First of all, if you ask 97 percent of the betting public if they've been able to get down what they want, I guarantee you they would all say, `Yes, no problem.'

"If they want to come in and bet $50,000, they're going to have a hard time doing it, and we end up getting the bad rap because of that. But that's more of the exception than the norm. If you look at Caesars or Mirage, a lot of big places, six-figure bets are no problem at all."

Nevada sports books reported total revenues of $112.5 million in 2004, which was just 1.1 percent of the state's total casino win, according to the Gaming Control Board.

Sports books are minor but necessary amenities in the hotels, and that's part of the reason casino executives don't blink if the big-money sports bettors are going offshore.

"The sports books in Las Vegas are part of the entire resort destination. It's a small part of the overall operation and we want people to come to town and enjoy the entire gambling experience," Scucci said. "We're not targeting just that sophisticated bettor who's trying to make a living betting sports.

"These guys are the sharpest in the world and typically they're going to hit over the 54 percent required to have a winning year. So if they're shifting all that money somewhere else, that's not going to really hurt us.

"It's self-serving for them because they're looking to make their living at it. Anything that hinders them from doing that, they're going to be very critical, and they've been an outspoken minority in the industry."

Vaccaro said more Las Vegas books should welcome big players and use strategies such as minus-105 vigorish -- the standard is minus-110 -- to encourage more business.

"The closest thing to an offshore book right now in Nevada is Coast resorts," Vaccaro said. "They get the volume ... and it works."

According to Sportsbook Review, there are more than 400 online books, and the dynamic growth offshore, Kornegay said, forced Las Vegas to "not rest on our laurels and think that we're invincible."

But he said Las Vegas must compete in ways other than setting sky-high betting limits for wise guys.

"We've been around for many, many years and we've learned to limit our plays and not say, `Hey, welcome everybody.' When we had to scale down limits in Nevada, the offshores were basically taking everything.

"I said this five years ago, they will learn that you can't take everybody, because there are some really smart, organized players out there who in the long run will beat you," Kornegay said.

"They are going to soon become more corporate just like we have been over the last two decades. We all know the offshores took some business away, but we're on the rise again."