Crypto Crackdown
The DOJ is spending more time and resources on cryptocurrency crimes. The DOJ's Crypto Unit is doubling in size amid a rash of crypto-related transgressions.
The Bulletin Board
NEWS: The DOJ is ramping up its Crypto unit, doubling its size and increasing the amount of funding spent on cryptocurrency crimes.
NEWS: Fanatics is making inroads in US sports betting markets.
BEYOND the HEADLINE: Fanatics online casino plans.
NEWS: The fight between fantasy sports operators is getting real.
VIEWS: A recent column offers a primer on California’s recent history with gambling and explains why it’s so frustrating to online gambling advocates.
AROUND the WATERCOOLER: Latest on MGM hack and a possible second hack of BetMGM accounts.
STRAY THOUGHTS: Some thoughts on fair fights.
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DOJ Puts Crypto in the Crosshairs
As reported by Compliance+More on Monday, the Department of Justice is doubling the size of its Crypto division to counteract the many cryptocurrency-related crimes, from the collapse of FTX to a litany of failed coins.
The list, from a December 2022 NPR column, is expansive and ever-growing:
A string of failures started in May: a pair of cryptocurrencies called Terra and Luna, the trading platform Voyager, a crypto hedge fund called Three Arrows Capital, BlockFi, Celsius.
“I think over the last couple years what the DOJ has realized is that we’ve moved to a digital battlefield, where wars are fought on blockchains,” C+M quotes Ari Redbord, a former federal prosecutor and current global policy lead at blockchain analytics firm TRM Labs.“The reality is if this is in fact the future, every prosecutor, every investigator, is going to need to understand these cases.”
And then there are the hacks, most recently the $41 million stolen from the crypto casino Stake by Korean hackers.
Not surprisingly, the federal government is considering regulating the sector.
Per Reuters, A bill passed by the “House Financial Services Committee would define when a cryptocurrency is a security or a commodity and expand the Commodity Futures Trading Commission's (CFTC) oversight of the crypto industry, while clarifying the Securities and Exchange Commission's jurisdiction.”
The industry has been seeking regularity clarity, which might provide more mainstream acceptance, but government regulation is never as simple as it sounds.
Fanatics Making an Early Splash
Fanatics ranked third in app downloads during Week 1 of the NFL season and held that spot in Week 2. Couple that with Fanatics’ August results in Massachusetts (following a beta-testing period that ended on August 15) and the latest entry into the US sports betting market is looking like a legit contender.
The company was officially live for just half of August and posted a respectable $4.4 million in handle and just under $550,000 in revenue. Fanatics reported $2.5 million in July while it was still in beta testing. Fanatics’ handle tally in August was about half of WynnBet.
That pales in comparison to DraftKings, which led the Massachusetts market with $162 million in handle but was far ahead of another new entrant, Betr, which tallied just $150,000 in handle.
Of course, Fanatics is running a major promotion where any new registrant placing a $50 wager receives a $150 voucher for a Fanatics jersey in the four states it’s active: Massachusetts, Maryland, Ohio, and Tennessee.
The big question is, can Fanatics continue to gain momentum, which requires the company to bring in new customers and lure customers away from competitors, and most importantly, retain those customers?
Beyond the Headline: Fanatics Eyes Online Casino by 2024
In related news, Fanatics has also signaled its interest in online casino. In a recent episode of the Gamble On podcast, Fanatics Betting & Gaming Chief Business Officer Ari Borod.
“I think we should have our iCasino product live by the end of the year. But if we don’t feel it’s perfect yet, then it will be live at the beginning of next year,” Borod said. “We have the same commitment to improving the product on the casino side as we do in sports.”
That will hinge on PointsBet market access - Fanatics acquired PointsBet’s US assets earlier this year. Through PointsBet, Fanatics could launch online casino games in New Jersey, Pennsylvania, Michigan, and West Virginia, pending regulatory approval.
Fanatics will likely wait until it can rebrand the sportsbooks and online casinos in those states, as the company is currently using a placeholder, PointsBet, a Fanatics Experience, until it receives full regulatory approval in Colorado, Iowa, Kansas, Maryland, New Jersey, Pennsylvania, Virginia, and West Virginia.
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Battle Lines Being Drawn Over DFS
I’ve covered the unfolding rift in the DFS community, which has now veered off in two separate directions as a debate rages over what constitutes fantasy sports and, simultaneously, what DraftKings and FanDuel’s end goals are.
One thread has companies like Underdog Fantasy (a sponsor of this blog) accusing DraftKings and FanDuel of regulatory capture and trying to eliminate the competition through political muscle. All the while hedging their bet and registering their own Pick ‘Em style games, CashPicks, which Twitter user @MikeDzikowski first noticed. DraftKings said it doesn’t have any specific plans for the CashPicks trademark.
Underdog founder Jeremy Levine spoke with Sports Handle about the CashPicks trademark and also took to Twitter/X.
And then there are the legal arguments, first broached by Underdog’s general counsel, Nicholas Green. Green’s white paper caught the eye of Dustin Gouker, who wrote about the legal case for DFS in his The Closing Line substack.
Gouker rightly points out that UIGEA is a payment processing law that didn’t make any type of online gambling legal or illegal. Gouker and Green later had a back-and-forth on Twitter/X.
The one component I would add is that the language in UIGEA may not have made DFS legal, but it’s been copied, mostly word-for-word, in many of the DFS laws passed by states. So, while UIGEA doesn’t allow you to offer fantasy sports, the language has been copied and used to do just that. Gouker clarified that he was speaking about offering fantasy sports in states without laws in his conversation with Green.
For more of my thoughts on this, you can read my feature column from Friday.
Making Sense of Nonsensical California
Tuesday, I reported on California sports betting, noting that California is a prickly locale capable of frustrating the most patient among us.
“California was one of the first states to explore online poker legalization, with efforts dating back to the aughts. The only lasting effect of a decade of debate was an increasingly fractured relationship between tribes and cardrooms and new animosity towards online gambling operators like PokerStars.”
Wednesday saw an article in Capitol Weekly that elucidates that point quite nicely: The story of Bob Lytle, the most infamous figure in California gaming you’ve never heard of.
Full disclosure: I do know who Bob Lytle is, and I fully understand his importance. A letter penned by Lytle shortly before he went to work for cardrooms resulted in more than 15 years of disagreements between California tribes and commercial cardrooms, further fraying an already frayed relationship.
Lytle’s story is one for the record books, but it’s also the perfect example of the intertwined nature of gambling and politics in California and highlights the state’s confusing web of antagonistic stakeholders and its bifurcated regulatory system.
I highly recommend reading the Capitol Weekly article if you don’t understand how California sports betting was resoundingly defeated at the ballot box.
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Around the Watercooler
Social media conversations, rumors, and gossip
The latest on the MGM hack has the company slowly bringing more and more systems back online - Is it wrong that I envision Han and Chewy’s self-repairs of the Millenium Falcon? And there could be some secondary fallout. Per Todd Witteles:
Another point of interest was Betr’s decision to reimburse No House Advantage customers.
These honoring balances from defunct competitors occasionally occurred in the online poker world back in the day.
Stray Thoughts
There is a lot of chatter about entrenched interests squashing competition (not just in DFS, but throughout the industry), which makes me think of one of my favorite quotes, attributed to John Steinbeck, but who knows where it comes from, “If you find yourself in a fair fight, your tactics suck.”
Keep in mind that this only applies to good actors. But the landscape is what it is. Fair or not, it’s the battlefield you find yourself on. I think most in that position understand that, but many onlookers become overly preoccupied with evening the playing field or, worse, picking winners and losers and digging in their heels.