The sports betting evolution in America began on May 14, 2018, when a landmark decision from the United States Supreme Court changed everything.
Four years later, Americans have bet more than $125 billion according to the Associated Press and legal sportsbooks now operate in 30 states and the District of Columbia. Betting advertising is everywhere, and some stadiums even have sportsbooks. Once-stingy bookmakers are handing out sign-up bonuses worth thousands of dollars, as they fight for a share of what's expected to mature into the largest sports wagering market in the world.
In the first quarter of 2022, a record $26.3 billion was bet with U.S. sportsbooks, generating $1.58 billion in revenue, according to the American Gaming Association. But there's an underlying concern about what the U.S. betting market has become. Bookmakers fear the massive, complex betting menus with modern offerings like same-game parlays leave them vulnerable to a potential doomsday.
"I think potentially there is a black swan event, where everything clicks," Karol Corcoran, general manager of FanDuel's online sportsbook, said, adding that such an event could be "existential" for smaller operators. "Yes, it could happen, and the chances of it happening are the same every day."
It nearly did on Jan. 9, 2022.
A wild night in American sports betting
The night of Jan. 9, 2022 will not only go down as one of the wildest in American gambling history, but also as a warning of what sports betting has evolved into -- a 24/7 high-stakes battle between cutthroat bettors and paranoid bookmakers who fear an unavoidable black swan event, like the one that almost occurred that memorable Sunday, will someday rattle the industry.
It was Week 18 of the NFL season. An epic upset Sunday afternoon had turned the final game of the day between the Chargers and Raiders into the biggest decision of the season for sportsbooks. Shortly after the NFL primetime game kicked off, though, bookmakers were forced to fend off another threat from bettors, who were reacting to late-breaking news in the NBA.
"EVERYONE PLAY DRAYMOND MAX UNDERS ON DRAFTKINGS NOW. GO."
That call to action was posted by an ex-radio DJ in Indianapolis at 8:35 p.m. on Jan. 9 in a private online sports betting community called Marcus & Beau VIP.
Bettors had just minutes to capitalize. Their quest: Bet as much as possible at the longest odds available on the under on Draymond Green's points, rebounds and assists before the Warriors and Cavaliers tipped off at 8:40 p.m.
At 8:31 p.m., the Warriors' PR team tweeted that Green would be on the court for the opening tip to honor the return of Klay Thompson, but would not participate in the remainder of the game due to left calf tightness. At 8:32, NBA insider Shams Charania amplified the news to his one million-plus Twitter followers. The news traveled quickly in the betting community on popular online forums like MoonshotHQ, Establish the Run and Marcus & Beau VIP. Sportsbooks all the way in Australia felt the effects.
"It speaks to just the speed of how quickly information travels," Corcoran said. "It's like lightning."
Most sportsbooks saw the initial tweets and quickly halted betting on all Green prop bets. DraftKings was slower to react, though, and it would cost the sportsbook more than a million dollars in a matter of minutes.
You see, bettors didn't just make basic bets to win a few bucks on the under on Green's stats. Instead, they went after the sportsbooks' throats. These days, you are allowed to pick practically any number you want to bet over or under on at varying odds. Knowing he would only play briefly, the savviest bettors adjusted the numbers on Green's points, rebounds and assists to as low as was offered, giving them the longest odds. As a result, they transformed what would have been a ho-hum three-leg parlay paying around 5-1 to an enhanced bet paying 20-1.
Dozens of same-game parlays on Green were placed at DraftKings, ranging upwards of $5,000 in stakes. Most were submitted in the final five minutes before tipoff, from 8:35-8:40 p.m. ET.
"Conservatively, there had to be $3 million out there [across all sportsbooks]," Beau Wagner, a 41-year-old real estate attorney and co-founder of the subscription-based Marcus & Beau VIP group, said.
Wagner's partner, Marcus Phelps, is the retired DJ from Indianapolis who ignited the flurry of action on Green with his post in their private group on Telegram. Members pay a $270 flat fee for access to the group from the start of football season until the end of the NBA season. Marcus & Beau had more than 1,000 members on Jan. 9, but estimate their tips are relayed to five times as many people.
Green was on the court for the tipoff to honor Thompson, who had not played since suffering an ACL injury in the 2019 NBA Finals. Green committed a quick foul and left the game after seven seconds. His stat line: 0 points, 0 rebounds, 0 assists. All the under bets were winners.
ESPN reviewed approximately 50 betting slips featuring Green unders. A $5,000 wager that paid $100,000 was the largest single bet. An Illinois bettor, who caught wind of the news on Marcus & Beau VIP, bet $20,000 on a series of parlays featuring Green unders and won $270,000 on DraftKings.
Several books, including FanDuel, Caesars, BetMGM and PointsBet, paid out quickly, but DraftKings, which seemingly took by far the largest hit, held off and instead launched an investigation into whether the news of Green's playing time being reported constituted a "known event." The sportsbook's terms of service prohibit wagering on an event in which the results are known.
Two days after the game, DraftKings gave in, paying out bets on the Green unders as winners and giving site credit to those who bet the overs. But for some of the winners, there would be a price to pay.
Many bettors who won big on Green unders say their betting limits were slashed significantly later the same week. When they reached out to DraftKings asking why, bettors were given reasons like, "Based on your history with us in the sportsbook, the team has altered the account's limits to correspond to ongoing risk exposure. This is common practice throughout the industry," according to screenshots of online chats provided to ESPN. One bettor who won $130,000 off parlays on Green unders was told, "Yeah, I'm sorry about that, but the 130K consolation prize doesn't suck so it's not all bad."
In a statement to ESPN, DraftKings said it conducted a review of regulations "due to the unique circumstances that surrounded the [Green] event" before moving forward with payouts. Citing company policy, DraftKings declined comment when asked if bettors who bet on Green props on Jan. 9 had their accounts subsequently restricted.
"I'm certain it was hundreds of people [that got limited]," Wagner said. "That was a crazy time."
Jan. 9 was very nearly even crazier.
'We would've felt it'
Entering the last week of the NFL regular season, a scenario existed where both the Chargers and Raiders would make the playoffs with a tie. The Jaguars, the biggest underdogs on the board, would need to upset the Colts, and the Steelers had to beat the favored Ravens on the road.
The potential for unusual liability correlated to a Chargers-Raiders tie was flagged early in the week during staff meetings at sportsbooks. It wasn't taken seriously at first. After all, 0.2% of regular-season games -- 27 of 11,292 -- have ended in a tie since the league implemented overtime in 1974. Plus, the Jaguars beating the Colts as 14-point underdogs seemed unlikely. Indianapolis could clinch a playoff berth with a win. The Jaguars could secure the No. 1 pick in the draft with a loss. Only one team in the Super Bowl era had ever lost as at least a 14-point favorite with a chance to clinch a playoff berth in their regular-season finale. But the betting public was sold and looked to bet the Jaguars to win and a Chargers-Raiders tie in any way possible, despite terrible odds being offered by sportsbooks.
In the NFL, typical money-line odds on a 14-point underdog winning straight up are around 6-1. At sportsbooks, odds on a game ending in a tie can be upwards of 150-1. Parlaying the two -- a 14-point underdog winning outright and a tie --normally would pay 1,000-1. On Jan. 9, a two-teamer on the Jaguars moneyline and a Chargers-Raiders tie was paying around 135-1 -- and it was the most popular bet on the board at PointsBet sportsbook.
"From a bookmaking perspective, it's an interesting thought exercise," Jay Croucher, head of trading for PointsBet, told ESPN. "Obviously, we want to protect ourselves liability-wise and bring in the price, where we can, but at the same time, we do want to entice bettors with big odds that should be even bigger. It became a balancing act."
The Jaguars would beat the Colts 26-11.
"Carson Wentz sh-- the bed, and that was the first domino to fall and set everything up," Croucher added.
Hours later, after the Steelers rallied past the Ravens in overtime to set the stage, it was the bookmakers who would become queasy. Sportsbooks faced a historic loss if the Chargers and Raiders ended in a tie.
The stress intensified as the Chargers used a 19-play drive, featuring multiple do-or-die fourth downs, to tie the score in the final seconds and force overtime. Corcoran was home in bed watching the game when he started to receive text messages from C-suite executives, asking about the ramifications of a tie.
"During the final quarter, it was in the 10s of the millions that we would've had to pay out Monday morning. It was early January, not a great way to start the month or indeed the year. The budget you just signed up for 2022 might be in jeopardy," Corcoran said with a laugh.
The sweat continued in overtime, as the Raiders faced the exact situation that made playing for a tie rather than a win a viable option. In the final minute of overtime, Las Vegas was at the Chargers' 39-yard line with the score tied at 32. The Raiders could have taken a knee and let the clock run out, assuring both teams get a spot in the playoffs. But Chargers head coach Brandon Staley elected to call timeout with 38 seconds left, leaving the Raiders with a decision. If they attempted a long field goal that was blocked and returned it for a score, Las Vegas would be out of the playoffs. On the other hand, the game ending in a tie would result in a playoff matchup against the Kansas City Chiefs for the Raiders, while a win would send them to Cincinnati.
The Raiders ran one more play, a 10-yard run by Josh Jacobs, called a timeout and sent out kicker Daniel Carlson to attempt a 47-yard field goal. Carlson made the game-winning field goal as time expired, allowing sportsbooks to avoid what would've been the most expensive tie in NFL history.
"It would've been one of our biggest payouts for sure," Corcoran said. "We would've felt it, and I think it would've hurt, but I think it would've hurt some of our competitors even more. It would've been an industry blow."
It would've been expensive, but the sportsbooks would've survived Jan. 9, even if the Chargers and Raiders had tied. However, they might not be as lucky in a future that, to some industry stakeholders, looks a lot like a powder keg.
The danger and dark art of same-game parlays
Pat McAfee, the charismatic ex-NFL punter who now works for FanDuel, regularly gives out betting picks, including on the increasingly popular same-game parlays or SGPs. FanDuel says it has received upwards of 100,000 bets on SGP's touted by McAfee. If one ever hits -- especially at long odds -- it would be costly.
Same-game parlays are multi-leg bets on events from a single contest. They have a comfy margin in favor of the sportsbooks built into the payout odds but still can be dangerous for bookmakers.
Industry experts believe SGPs could be the gasoline and influencers like McAfee the match that could one day blow up on the sportsbook industry. Scott Ferguson, a veteran of the betting industry based in the United Kingdom, compares SGPs to "the dark arts."
"Nobody really knows the true price and the sharps can't directly bet the other way to hammer out a true price," Ferguson told ESPN in an email. "It's all about the quality of the algorithm and how accurate it can be hidden behind a lot of juice (vigorish) If there's a hole in it somewhere, a book could be seriously exposed -- and U.S. regulators tend to side with the player rather than the book on errors. But is there a scenario where hundreds/thousands of players all follow with the same bet? Maybe some influencer flukes some random bet he posts and his/her huge following gets on the bandwagon?"
The latest generation of bettors congregate online, thousands of them, using platforms like Discord and Telegram to share information and tips before firing an instantaneous firestorm of bets on the books. The most vicious of the new breed is known as glitch hunters, bettors who obsessively scour sportsbooks hunting for gratuitous odds mistakes to exploit. When they all get on the same page and the breaks fall their way, they have the ability to do catastrophic damage.
Corcoran acknowledges that celebrity influencers like McAfee can lead to some concentration of bets on specific markets, but says the betting groups that focus on finding gratuitous errors in odds and promotions in sportsbook menus -- often referred to as glitch hunters -- are more dangerous.
"That's going to happen and there's nothing we can do about it," Corcoran said. "That's more of a risk than more authentic communities trying to talk about sports and the bets they've made."
For cunning bettors, same-game parlays have become a weapon of choice when trying to capitalize on errors and correlated events like the Chargers-Raiders tie. Some bettors got creative, building multi-leg parlays that included the final score ending in an even number, along with the Chargers +3 and Raiders -3. Others bought into an absurd conspiracy theory that both teams would exchange kneel-downs through the game and constructed parlays around a 0-0 tie.
With the variety of bets being fired on the tie, it was difficult in real-time for books to determine just how much they were on the hook for on the Chargers-Raiders tie. The lack of visibility adds to the danger of SGPs. By the time a game begins, it may be too late to mitigate the risk.
"Those same-game parlays are hard to calculate until the game goes" Johnny Avello, a veteran Las Vegas bookmaker, now with DraftKings, told ESPN on Jan. 9. "You're not really sure where you're at it. It's something to keep an eye on, but I wouldn't stop people from betting them."
A future doomsday
Looking back at the Jan. 9 sweat five months later, bookmakers say they wouldn't and couldn't have done anything differently in regards to managing the liability correlated to the Chargers-Raiders tie. They moved the odds on a tie significantly -- it got down to as short as 11-1 at The Borgata in Atlantic City -- but it didn't slow down the betting public's appetite.
Online sportsbook WynnBET did not escape unscathed. The sportsbook took a $1,000 bet at 100-1 on the Chargers and Raiders being tied at the end of regulation from a customer in New Jersey. The bet paid $100,000. It would've been much worse if the game ended in a tie after overtime, WynnBET senior trader Motoi Pearson said.
"It was a ridiculous number," Pearson said of the liability accrued on a Chargers-Raiders tie. "We knew if it got there that it would be a pretty damaging Sunday, no doubt."
It feels inevitable that the betting public will latch onto another black swan event with long odds in the future. Bettors simply love to get involved in long-shot storylines where they only have to risk a little to win a lot.
"I can't tell the future about how the market could destroy a sportsbook," Pearson said, "but I'm assuming there's going to be a parlay, maybe not here, but somewhere, that's going to rattle the sports betting industry."