A $3 million parlay bet … a frozen DraftKings account … the breaking of federal and state laws … ongoing investigations … the list goes on.
Really, the only thing missing in this story is a femme fatale and rumpled detective, and for all we know, they’re just waiting for their cue.
It’s been one of the biggest stories in the gambling industry since Sports Handle first broke the news earlier this month: A Florida bettor’s DraftKings account was frozen weeks after he placed a $3 million dollar parlay bet. The reason for the freeze? Sources told Sports Handle it was because the bettor placed the bet on his DraftKings mobile account through a proxy in New Jersey.
Known as “messenger betting” — where a second person places a bet in a legal jurisdiction under someone else’s account — it is illegal under both federal and New Jersey law.
As of this writing, DraftKings has confirmed to Sports Handle that the matter is under outside investigation, though, as is its wont, the New Jersey Division of Gaming Enforcement (DGE), a subsection of the New Jersey Office of the Attorney General, has not commented on whether an investigation is indeed underway.
But one longtime watcher of the sports betting space — and the man who did the legislative heavy lifting to help bring sports wagering to the Garden State — thinks the DGE is obviously involved.
“Seems to me the DGE should have an opinion on this,” former state Sen. Ray Lesniak told NJ Online Gambling. “I’m sure the DGE is all over this, one way or another.”
Lesniak, who filed the first lawsuit in 2009 seeking to overturn the Professional and Amateur Sports Protection Act (PASPA), thinks the DGE will eventually levy some sort of fine on DraftKings, but thinks whatever happened falls far short of the sportsbook losing its license to operate in New Jersey.
“It depends on how serious the offense is, as it’s looked upon by the DGE,” Lesniak said. “If they see it as a serious offense, and someone else is complicit, and it wasn’t an honest error or mistake? Then it’s a serious fine. But that’s a lot of speculation. But a heavy duty fine, even if it was an honest mistake, is big and would send a message. Taking a license out of state? I would think it would have to be more than this.”
Bill Pascrell III, a lobbyist with the Princeton Public Affairs Group and one of the state’s leading experts in the online gambling space, echoes Lesniak’s opinion.
“At the end of the day, I think the DGE will handle this the proper way, and I have confidence that they will, but my opinion? I really think there’s no harm, no foul here,” Pascrell said. “The guy placed a bet, DraftKings took it, and then a couple of weeks later they voided it, maybe their internal compliance committee caught up with it. I think it’s clear as a bell that the DGE has to support the way DraftKings handled it, although they may be disappointed DraftKings took the bet initially and there could be a fine or some type of penalty related to that. That’s possible, because by taking the bet DraftKings violated the law, and presumably that was an error, a mistake, not done knowingly, and they will probably be required to beef up their internal controls.”
The bet itself
The $3 million bet — which featured the Green Bay Packers to win the NFC North, Georgia to win the SEC East, and Alabama to win the SEC West — would’ve paid out a $5.5 million profit if it hit. It was placed on Oct. 6, and it wasn’t until Oct. 23 that DraftKings froze the account.
“I’ve been horribly wronged by them,” the bettor told Sports Handle.
The bettor claims to have had a verbal agreement with Johnny Avello, DraftKings’ director of sportsbook operations, to allow him to place bets via a proxy in New Jersey.
Avello told Sports Handle he had no idea the bet was placed through a proxy, and a spokesperson for DraftKings said any claims the bettor has concerning a verbal agreement to place bets through a proxy are completely false.
Messenger betting could be a front
Messenger betting is illegal for a variety of reasons, Lesniak pointed out.
“One of my arguments for legalizing sports betting was to be able to spot unusual betting patterns,” he said. “Messenger betting could be used as a way to disguise this and make it more difficult to spot. It also could be used as a way to launder money, spreading it out all over the place through proxies.”
But despite the potential for abuse, Lesniak believes there should be some wriggle room in the law.
“I do think there should be an allowance for messenger betting,” he said. “The question is I don’t know where you draw the line. Could be as simple as what your intent is. It’s what we call mens rea in the criminal ranks. Really, I don’t have a problem with messenger betting as long as there’s no criminal intent behind it. I’d like to get the DGE’s opinion, to have them say why you can’t place bet for someone else at Monmouth racetrack.”
“I think that as long as there’s no criminal intent, no issue of money laundering — AML is very important — I don’t think at the end of the day it’s an extraordinarily big deal,” he said.
But — and as “buts” go, it’s a big one — the action the bettor took, and the acceptance of the bet by DraftKings, were clearly and firmly outside the law.
“I think the bet as outlined in the article is blatantly, patently illegal,” Pascrell said. “There’s no question about that. I think DraftKings was wise to default the bet in advance of the outcome. It’s not like they did it after the outcome, which would’ve been a problem and I think there could have been significant civil litigation.”
Pascrell believes the DGE, while probably planning to turn the screws a bit when it comes to DraftKings, won’t treat this as nuclear war.
“I don’t think the DGE is going to knee-jerk this,” he said. “They’re going to investigate it and I’m pretty confident they’re going to come back and say this was handled erroneously up front, but ultimately DraftKings did the right thing, but they may slap further controls on them so the rest of the industry knows you can’t do this. I don’t wish ill will on DraftKings, I think they’re a super company, but they have to self-monitor and self-regulate a little better. They should fall on the sword and adopt further strict internal controls.”
And as for the bettor?
“I feel terrible for the guy who placed the bet, who presumably did it without knowledge of the law, but that doesn’t matter,” Pascrell said. “He can pursue all the civil litigation against DraftKings he wants, but I think a court will throw that out easily.”