Quote:
Originally Posted by thaskalos
When you thought up the Betfair concept...how involved did you get with the idea before you were threatened with imprisonment?
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I was mainly involved with trying to raise money at the time. I had never tried to do a technology startup, but I learned a lot about how to do one.
There was always talk about how online gambling was illegal, but the first time I can remember realizing how real the threat of jail was, was when a politician from West Virginia said I would go to jail if I tried to start up a "bookmaking website" as he called it. Mountaineer was my home track at the time and I approached them with the idea. I thought if they would start an exchange they could be on the forefront of a betting revolution. They weren't really sure how to run with it so they put me in touch with a congressman. He was also not sure what to think of it except that it probably involved jail time for me.
I knew England would be the most likely place to start up an exchange because bookmaking is legal there and respected. But I didn't know the lay of the land and I knew there would be huge pushback from legal bookmakers, even though I also knew they would eventually be customers because they could reduce their liability by laying off bets.
Overcoming the stigma of promoting bookmaking in the U.S. was a big hurdle. It was outlawed in the 1920s or 30s in NY. I recall reading that the owners of the NY Giants -- the Mara family -- made a fortune as horse racing bookmakers. They were smart to get into football.
The Rooney family in Pittsburgh, owners of the Pittsburgh Steelers, also made a lot of money running illegal slot machines around Pittsburgh. They owned Yonkers Raceway for a long time and now they own the Yonkers casino. Funny how that works. I guess it's like Joe Kennedy making a fortune running illegal booze during Prohibition and then getting his son elected president of the U.S.
There really isn't anything wrong with gambling. Mainly, the owners of established gambling operations don't want competition. It's better for them if I go to jail than it is for them to face competition. Even today racetracks don't want competition. Why can't the seasons of KY Downs, Keeneland, and CD overlap? It might have something to do with competition.
I knew the betting exchange was a great idea because it allowed the smallest of players to book bets. Typically, a bookmaker requires a fair amount of capital to get started. With the internet and person-to-person connections anyone could book bets for literally almost nothing. If you have 3 cents you could book a bet at 3-1 odds for a penny. Which is why it cracks me up that tracks still collect breakage from online wagers.
Additionally. I had more than one person tell me the mafia would probably come after me for taking business away from them. That seemed nonsensical. If anything I knew it would help illegal bookmakers by allowing them to lay off their wagers on an exchange in order to reduce their exposure.
Back in late 90s online betting was way more taboo than it is today.
I remember reading about a young car salesman who was making money betting sports online with an offshore bookmaker. He got arrested and did jail time. He was used to set an example. Kind of like the kid whose parents had to pay a giant fine because the kid downloaded music from Napster.
I was also told that for several years the founders of betfair were not allowed to travel to the U.S. because they would be arrested for accepting money from U.S. customers. I had an account with Befair and a few other exchanges for awhile until they all shut down my U.S. account. They had to if they ever wanted to become legit in the U.S. Then they bought TVG and are slowly getting a foothold in the U.S. But it has been a 20 year process for them.
The attorney general of Connecticut forced Xpressbet and Philly PhoneBet to close my accounts. I didn't even have money in PhoneBet. I just had an account so I could scrape their toteboard -- which they didn't mind me doing as long as I didn't hit it more than once or twice per minute. That's how much CT OTB was trying to protect their turf -- even though serious bettors would never consider betting a dime with them. CT OTB is a state-granted monopoly. How do you compete with that without going to jail? Nevermind, that the largest casino in the northern hemisphere is located in CT, but it's also on an Indian reservation. That helps. Of course, Mashentucket Pequot tribe had to agree to pay the state $100,000,000 per year royalty on their slot machines before the state allowed them to install them.
Check out this article from 2009 about a U.S. guy who went to jail for running a betting site in the Caribbean and you'll see why I decided not to pursue an exchange:
https://www.miaminewtimes.com/news/s...o-jail-6366563
