Albert Chen - Billion Dollar Fantasy: The High-Stakes Game Between FanDuel and DraftKings That Upended Sports in America

Copyright 2019 by Albert Chen

All rights reserved

For information about permission to reproduce selections from this book, write to or to Permissions, Houghton Mifflin Harcourt Publishing Company, 3 Park Avenue, 19th Floor, New York, New York 10016.

hmhbooks.com

Library of Congress Cataloging-in-Publication Data is available.

ISBN 978-0-544-91114-7

Cover design by Richard Ljoenes

Author photograph Taylor Ballantyne

Insert: top Courtesy of the author, middle Robert Beck / Getty Images, bottom left Photo used with permission, bottom right Darren McCollester / Getty Images for DraftKings

; Erik Jacobs / The New York Times / Redux; Erick W. Rasco / Sports Illustrated / Getty Images

eISBN 978-0-544-91118-5
v1.0819

To Andrea and Leo

DraftStreet

Brian Schwartz / CEO

Mark Nerenberg / Chief Product Officer

FanDuel

Nigel Eccles / CEO

Lesley Eccles / Chief Marketing Officer

Tom Griffiths / Chief Product Officer

Christian Genetski / Chief Legal Officer

Justine Sacco / Communications Director

DraftKings

Jason Robins / CEO

Matt Kalish / Chief Revenue Officer

Paul Liberman / Chief Operating Officer

The Industry

Cory Albertson / Rayofhope

Jeremy Kudon / Partner, Orrick, Herrington & Sutcliffe

Mike LaSalle / Partner, Shamrock Capital

Vic Salerno / President, US Bookmaking

Peter Schoenke / Cofounder, RotoWire

October 1992: Professional and Amateur Sports Protection Act (PASPA), prohibiting betting outside Nevada, is signed into law

October 2006: Unlawful Internet Gambling Enforcement Act (UIGEA), legalizing fantasy sports, is enacted

Summer 2009: FanDuel launches

Spring 2012: DraftKings launches

July 2014: DraftKings acquires DraftStreet

July 2015: DraftKings and FanDuel announce funding rounds that total $575 million

Summer 2015: DraftKings and FanDuel are each valued at over $1 billion

September 2015: DraftKings and FanDuel become largest advertisers in America

October 2015: The FBI and the Department of Justice open probes into daily fantasy sports companies

Winter 2015Spring 2016: DraftKings and FanDuel are shut down in half a dozen states

August 2016: New York State passes bill legalizing daily fantasy games

June 2017: The Federal Trade Commission blocks proposed merger between DraftKings and FanDuel

May 2018: US Supreme Court strikes down Professional and Amateur Sports Protection Act of 1992

We will, soon enough, get to the unicorns and the sharks, the billion-dollar game of Prisoners Dilemma and the carpet-bombing that unleashed the mayhem, the FBI investigations, the conspiracy theories, and the nerds and impostors who waged a battle that forever rearranged the landscape of sports in America. First, though, we must begin with the three prophets in the desert, the men who saw a war coming and sought to win it long before it started.

It was 1991, and the three men had a plan. They would travel across the country, coast to coast, pitching their idea to anyone willing to listen. Inside casinos and horse-racing tracks, they would install establishments where people could wager on the outcome of sporting events and in turn win, or lose, money. These outfitssports books, they were calledwould be linked through a computer line, a line connected to a hub in central Nevada, a hub the three of them owned and controlled. They only had a vague idea of what this network could be worth one day, but they knew that the line would give them an edge in a clash they were certain was about to erupt.

If anyone understood what was at stake, it was these three men from that neon-lit oasis in the desert, gamblings birthplace in AmericaLas Vegas. Art Manteris lorded over the sports book inside the opulent Las Vegas Hilton, then the largest hotel in the world, a modern-day Versailles that illuminated the entire Strip like a great lantern. Roxy Roxborough was the most influential oddsmaker in townevery morning in his office in a downtown strip mall he sat at his desk in a resplendent suit and set the opening line for the entire world, from Vegas to Monte Carlo to Macau. Vic Salerno ran Leroys Horse & Sports Place, Vegass largest independent sports book, a dark, smoke-filled, gin-stinking parlor where the towns biggest sharps and wiseguys gathered to place their bets and watch their fortunes rise and fall.

This concept of linked sports books had worked for them before, beautifully, on a smaller scale. With the help of a computer whiz kid from Pakistan, Vic built the first electronic system that took bets, which meant that he no longer had to lug home trash bags from Leroys, cursing as the bags burst with pencil-scribbled tickets that he would sift through late into the night at his kitchen table, sorting the winning tickets from the losers. In 1989, when Art opened up a sports book down the road from the Hilton, at the Flamingo, he used Vics computerized system to connect his operations. It was so easyeasier than anyone imagined it would be, says Art. The result was the first linked sports book in America.

Years earlier, Art had arrived in Vegas, in this world, in a roundabout way. The son of Greek immigrants, he was twenty-one when he dropped out of community college, left home in Pittsburgh, and headed west to become an actor. On his way to LA, he made a stop in Nevada to make money for rent, working as a cashier for his uncles business: the sports book in the Barbary Coast, a little shop with golden chandeliers and faux stained glass that sat on a prime corner of the Strip, the nexus of what was, in the early 1980s, a fledgling industry in America. Sports bettingthen legal in Nevada and, on a much smaller scale, in Oregon, Montana, and Delawarewas always the odd, slightly uncouth child of the gambling family. Its stature began to grow after an obscure tax cut in 1974: when Congress slashed the sports betting tax rate from 10 percent to 2, it was worthwhile for someone like Vic Salerno to walk away from his career as a dentist and go into business as a full-time bookie. In 1983, just as Art arrived in Vegas, the tax was slashed again, from 2 percent to just 0.25 percent, and that peculiar profession became a potentially profitable one. The Nevada handlethe total amount placed in betshad ballooned by 450 percent after the first tax cut and rose to $894 million after the second in 1983, and with all the money that was gushing into this world, Arts aspiration to become Hollywoods next leading man was put on hold.

Art had a handsome face and, even in his twenties, a dignified presence; he floated above the wiseguys and fleas around him, but without an air of condescension. Within a few years, by 1987, he was running the sports book at Caesars, at twenty-six years old the youngest director in town. A few years later, he was cutting the ribbon at the entrance of the glittery, $17 million, state-of-the-art SuperBook at the Hiltona magical realm in which men sat in leather chairs sipping on Stolichnayas at 11 a.m., all of them gazing up at one of the fifty-three flashing, cinema-scale TV screens with live sporting events beamed in from around the world. The SuperBook was the first of its kinda case study for every casino in town on how to create the ultimate man cave for any out-of-towner.