Risk of Ruin
Audio documentaries about risk takers.
Risk of Ruin
Trial and Error
Thomas started as a losing bettor, and then learned to win. Eventually he won so much that a regulated sportsbooks stole several million dollars from him.
He talks about CLV, harvesting bonuses, faking the NBA overnight market, parlays, SGPs, round robins, and VIP rewards.
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SPEAKER_02:I remember thinking every time I was talking or texting a host, what would a problem gambler do? Because it worked. We always got what we wanted when we thought that way. I remember one day when we had an account that was going through a massive downswing, even though we had been very sharp stuff through it. We were trying to flip that whale account using the high limits and we were just getting crushed down like 600,000. And we had a small bonus to But, you know, in typical Thomas fashion, I was greedy and wondering if we could get more because the account was down so much. My host called me after a few days to see if I was going to deposit again. So I pretended to be down on my luck, disappointed in the rough results, and said I wasn't sure if I wanted to keep betting. And the host said, no, come on, man. You can't quit now. Those are just bad beats. You'll get them next time. Come on. You can do it. And I couldn't believe he was trying to get this account to keep gambling after how much it had lost. So I wanted to see how far, you know, I could go with the act. And I remember when he called back again, you know, I was like fake crying and, you know, talking about, oh, my girlfriend's going to leave me. My parents will be so upset, you know, if I can't get this money back. You know, and I said I would need a bigger bonus if I was going to play again, if I was ever going to bet again in the book. He said he'd check with his manager and quickly called me back offering a 50% deposit bonus.
SPEAKER_00:You're listening to Risk of Ruin. I'm John Reeder. This is episode 44, Trial and Error. I'm recording this episode during week one of the 2025 NFL season. And as of this writing, here's a not at all exhaustive list of ways that you can bet on sports in the US. You can go to a physical sports book in Las Vegas and bet over the counter with cash. In something like 30 states, you can bet using apps like DraftKings and FanDuel. In a number of other places, you can gamble on a sweepstakes site like Novig. Various brick and mortar casinos throughout the US have self-service casinos kiosks that will take bets sometimes 24-7. You can, of course, play daily fantasy sports for lots of money. Even if you are mildly enterprising, you can probably figure out a way to bet through an offshore book like BetOnline or Bovada. I'm not guaranteeing that these sites are legal, but you can bet on them. Or you might have a real-life bookie like an actual guy. Again, no comment on the legality. And then more recently, you can also gamble through so-called prediction markets. like Kalshi, including by using the funds in your Robinhood account. I'm sure I've left out a bunch of stuff, but my point is that a lot of energy has gone into turning over every possible stone to find the very last sports fan who might be capable of making a deposit. And I almost don't need to bother describing the kind of person that these companies see as the ideal opportunity, because if I just say typical sports better, you already have the idea in your mind. It's probably something like the guest for this episode. This is Thomas.
SPEAKER_02:I never gambled growing up. I mean, I grew up on a farm in central Illinois, a very traditional conservative upbringing. I didn't really even know you could gamble on sports. I guess my parents were trying to hide that from me. And this was, of course, pre-passbook repeal, so obviously no DraftKings or FanDuel. I was introduced to sports betting in college. My roommate came He came home one day and said he signed up for a website called Obata, and he had put$20 on the Illinois game. And I did the same thing a few days later, and the rest was history. I probably found out quickly why my parents had hid betting from me, because I was instantly hooked. I don't know, I hate using the word addiction, because it has such a negative connotation, but I was definitely addicted from day one. I was either gonna figure out how to win at sports betting, or I was gonna lose everything trying. Because I continued to gamble pretty much every day for the next several years. Any sport I could bet on, I would, And I went broke more times than I can count. I mean, I wasn't just gambling for fun. I was always trying to win, looking for an edge. I mean, I tried everything. Public money splits, trends, I bought picks from touts. I found out quickly none of those strategies worked. So I started building spreadsheets and algorithms to try to win. And they all failed miserably. I remember I'd take months off from betting and save everything I had. I had from my paychecks and put it towards a new bankroll. And then I'd come up with a new strategy, a new model, algorithm, whatever. And I'd start betting and then quickly lose everything. And I probably did this at least 10 times over the course of the next five years. And I just wasn't going to quit until I figured it out. But I was studying engineering at U of I and I think I thought I could build a winning sports model because I was always good at math. And I was getting the degree in engineering and also degrees in math and statistics. And I also knew everything about sports, every player's name, his stats, which teams were hot and cold. Yeah, I lived and breathed sports and was great at math. And so it was so frustrating that everything I tried wasn't working. But I was so naive and knew nothing nothing about gambling markets. I had no idea that when I logged into a sportsbook Sunday morning to bet an NFL game, those lines were already shaped into place by millions of dollars throughout the week from sharp groups all over the world.
SPEAKER_00:To this point, Thomas was like 99% of people who have ever placed a bet. He thought he could win at sports because that's the point. It is supposed to look beatable.
SPEAKER_02:I stumbled across gambling Twitter and heard people talking about CLV. And I started to research that and it led me down the path of the efficient market hypothesis and the basic fundamentals of gambling markets. And that was the day that changed my life, I guess. Yeah, so I remember I just like immediately threw away all the spreadsheets and algorithms I'd been working on and I only focused on CLV.
SPEAKER_00:Thomas mentioned closing line value or CLV. So let's just talk about that briefly in case there are listeners that aren't in the gambling Twitter streets every day. So first is that sports markets are subject to price shopping, just like pretty much anything you would buy. If you spent$400 on an Apple Watch, but everyone who has an Apple Watch also spent$400, then you paid market. It's like, who cares? But imagine if you paid$50 for your watch. Okay, now you got a deal. And conversely, if you paid 800, you got ripped off. Well, sports betting lines have some of the same properties. There are always better and worse deals in the market at any given time. So maybe some books are off by half a point or they're offering minus 120 on a money line when the rest of the market is at minus 140. All right, and then another thing is that markets move over time. So your equity in whatever bet you have, can also be estimated in relation to the then current price. This would be similar to a stock where you pay$100 a share, and then the market changes and says that share is worth$1.15. Your equity has increased. In sports, you might get your bet in at minus two, and then the whole market moves to minus three and a half. And now you have some equity in your bet. Even before the game has started, you can either just keep it on and see what happens in the game, or you can actually capture the profit by hedging out if you don't mind paying the hedging cost. This brings me to the last point, which is that you can also use CLV to evaluate the goodness of your bets, somewhat independent of outcomes. Everything we talk about on this show suffers from the same problem of small samples. We need to know if we have the right size when we might not have enough data for a long time. Well, CLV can help with that, at least in part. It is not an ironclad law of nature, but if your bets are usually better than the market closing price, then even if you are losing in the short term, over the long term, you are much more likely to win. And if your bets are pretty much just always at market, always at the closing number, then over the long term, you'd be expected to lose the amount of the sportsbooks house edge. And in fact, that's what the book wants you to do. They want to flip coins against you where you're paying$11 to win 10.
SPEAKER_02:I've definitely tried so many times explaining the steam chasing side of it to people because that's like, that was like the bulk of our operation probably when we first moved out there. And people just had a really tough time understanding that if you bet minus four and the game closed minus seven, you were going to win. They just had a tough time understanding that minus seven was the closing price, meaning it's efficient, 50-50 to happen. And if you have a better line than the 50-50 closing prize, you're going to win as long as it's enough to overcome the minus 110 big. They always, most people, I should say, had a very tough time understanding that and it it always perplexed me it's like the it's like the biggest thing in betting I think that has stumped me over the years is why some people can grasp that but other people some of my friends and relatives that are really smart people just cannot grasp that concept and they just do not understand how I win at sports
SPEAKER_00:once you're paying attention to the markets then you need a tool that shows all There are various services that do this, depending on how much you want to spend. Companies like Spot Odds and Unabated offer these odd screens today. When Thomas got started, he was using DonBest, which had been the go-to for years.
SPEAKER_02:I bought an odd screen and started steam chasing. I turned on notifications for injuries and would hammer lines as soon as star players got ruled out. I mean, I learned quickly a It wasn't really about what team you bet on, but what number you got. And I did this for a few months on the side of my day job. I was working as an engineer out of college. I did that for close to three years. It quickly got to the point where I was making more money at night betting than I was during the day. And I couldn't focus on anything at work. I remember sitting in meetings at work and the meetings were remote at the time. because of COVID. So I'd be sitting in my office and I'd have Don Best up on one of the screens. I mean, it eventually became a problem where I knew I wasn't giving 100% effort to the company. So I had to make a decision. So I remember it was the day of my 24th birthday. I went into the office and told my boss I quit. And everyone at the time thought I was crazy. I mean, obviously I was quitting my job to gamble full time. Most people are going to have that reaction. But also I I had just received a good promotion a few days before, but it kind of seemed like a now or never situation. I wasn't passionate about engineering the way I was passionate about sports. I knew if I took that promotion and kept putting off gambling, then I may never make the leap and could end up regretting it down the road. So I turned down the promotion and quit the company, and a few months later, I packed up everything I had and moved to Colorado.
SPEAKER_00:Going from losing better to quitting your job and moving to Colorado is a big jump. And that's really going to be a leap for parents who thought their son would be an engineer.
SPEAKER_02:Yeah, I don't think my parents were overly concerned when I started in college. They definitely didn't like it. You know, I don't think any parent, you know, wants their kid to be gambling because, of course, these statistics are stacked against you. You know, most likely you're going to lose. And my parents knew that most people are going to lose. Well, actually, they probably thought everyone loses. They probably had no concept of professional bettors. People could actually win. So of course, they didn't like it. But I didn't talk about it much when I was in college because I was just doing it very casually. I didn't really start taking it too serious until after I graduated. And I was working on it on the side. And they'd come and visit me in my little studio apartment. I had all of these monitors and computers and then these books about gambling and all kinds of papers and spreadsheets open and everything. And they started asking, what is all this stuff? And I started talking about it more and more. I think that's when they definitely got concerned because they know me better than anyone. They could tell that it was all I was thinking about. It was really consuming my whole life. Yeah, I think that definitely worried them. And then as far as when I actually took the leap to become a pro better, I would say they hated that decision. I mean, my parents have always been supportive of everything I've done. But yeah, they tried to, I think, be as supportive as they could, but they just could not understand why I was doing it. They couldn't understand why I had gone to a good university and got a degree. and then had a good job and why I would just throw it all away to gamble.
SPEAKER_00:It has been said before that there is a very thin line between problem gamblers and advantage players because the really high level APs are almost singularly focused on the thing they're doing. So if you're not really in control of your attention, then we can say that your relationship with the thing is not so much choice as it is compulsion.
SPEAKER_02:I definitely have an obsessive personality trait, an addictive personality. And I mean, I love sports. I mean, I was probably addicted to sports. I mean, Even before betting, it's all I thought about. I'd be sitting in class and I'm just daydreaming about today's baseball games or whatever. But of course, that's not harmful. It's just when you combine the financial aspect of actually gambling on it that it can become a downfall. And then suddenly the word addiction becomes extremely negative when there's a negative downfall to it. But yes, I definitely have an addictive personality Yeah, like I'm really OCD, obsessive. I get my mind stuck on something and I will stick with it. And I'm stubborn. I won't stop until I beat it or I don't like people getting the best of me. I'm competitive. I was definitely addicted to something. Now, whether that was the actual sports or maybe it was the gambling part of it, I want to say it wasn't so much the gambling part of it. Yeah, I've never been addicted to anything. I've never gambled in a casino. I have no desire to. I have no desire to play blackjack or slots or anything. Even the few times I've played, I just think, well, this is dumb and I just get up and I can get up easily and I can stop and I never have any desire to go back and play. Although when it's sports, I mean, I would definitely use the word addicted. I mean, I show, if you want to look up the definition of addiction Thomas is obviously
SPEAKER_00:aware of the parts of his personality that make him predisposed to this kind of thing. And he also knows that not every edge lasts forever. Actually, some pros eventually run out of advantages entirely. So I asks him if he ever thinks about that and is he ever worried that something bad could happen to him one day I
SPEAKER_02:guess the only comfort I take in that is I've definitely lost edges over time and maybe I don't quit them as soon as I should you know again because of the you know addictive trait but I do quit them eventually I mean I don't I mean I've never gone broke you know from continuing to bet those edges that don't exist so I would like to think if I ever lost every single edge, then yes, I would just quit all of those. I mean, there's, and there is some days where I just, there's not many sports going on. I don't have any edges on the board. I don't find anything. And I just, for whatever reason, don't have a bet that day. And I definitely have an itch, I guess. But I, you know, I try to control myself. So I, I mean, I would like to think, yes, I if I lost my edge.
SPEAKER_00:The first time I met Thomas, I was in Vegas with a friend who is a very high-level advantage player. My friend introduced me to Thomas and said, and I'm going to paraphrase here, but I think this is roughly it. He said, Thomas is even crazier than I am and has done everything I've done, but bigger. Then Thomas told me a story about a sportsbook stealing a couple of million dollars from him. Well, between Thomas leaves his engineering job and Thomas gets relieved of millions of dollars, lots of stuff must have happened.
SPEAKER_02:Yeah. A lot of bonuses. I mean, those were fantastic when we first moved out there. I mean, it was just an immediate jump to your bankroll. We ran through so many burner accounts. So we were just constantly churning new accounts that I say it was a jumpstart to the bankroll, but really it just continued throughout because we just kept getting new accounts for the bonuses. But yeah, as far as the actual betting, when I first started, yeah, it was mostly just steam chasing, trying to get CLV however I could. A lot of injuries. At the time books were horribly slow reacting to NBA injuries and that turned into us spending so much time looking through the books trying to find any weakness we could. I was able to price derivatives and game props using the market consensus as a fair. Teasers and pleasers for basketball and football were really great.
SPEAKER_00:Everything we're hearing about happened a few years after the Supreme Court overturned PASPA, which that was the thing that made it possible for states to legalize sports betting. Thomas actually moved to Colorado because he saw the most opportunity there. The state had a lot of books and some of them were offering stupid bonuses. Also, the operators were just figuring out what they were doing. For instance, the books know that sports betting on its own isn't really a great business. You can actually look this up online because lots of regulators publish the win-loss for various games and sports is usually known So the big books were thinking about ways to make it more profitable. This resulted in an innovation called the SGP or same game parlay. These bets are popular with casual gamblers because they have bigger payouts, but they also have thick house edges. So the operators love them too. Although they're complicated to deal and they require knowing the correlations of potentially thousands of relationships in a single game. If a better wants to parlay something like a quarterback throwing three touchdowns with a the defense getting three sacks, the book needs to know the correlations so they can adjust the payouts accordingly. They're not trying to just give away free money by letting someone get boosted payouts where the underlying probability is the same. Well, if you take a look at the betting menu, you'll see how many of these things they have to get right. So these SGPs were the only way out of the grind of being a low margin business, and they were new, and there were lots of ways to screw them up.
SPEAKER_02:I mean, we just spent so much time scrolling through every page of every app, trying everything. If there's any little glitch in your sportsbook software, we probably found it. And I mean, that led to correlated parlays, lots of correlated parlays over the years. Some simple stuff like big favorites in football combined with the total to more complex stuff like specific game states that were mispriced and same game parlays. And SGPs were just getting rolled out. So we hit those was hard. We found that not only was the stuff mispriced in the SGPs, but also the limits were much higher. The books were practically begging customers to bet their shiny new product. And once we saw how the betting limits would increase, if you were betting what the book wanted, it opened a whole can of worms. I mean, we were betting parlays, SGPs, round robins, just to maximize our edge. But then the book started giving us VIP because they saw us betting these. I mean, it was the best of both worlds
SPEAKER_00:there's an often repeated misconception which is this idea that parlays are inherently a bad bet i mean i guess because most gamblers have a negative edge it is true that most parlays are bad bets so fair but in reality they're just a levered bet and we would not say that leverage is default bad it depends what you're doing with it for instance sharps with an advantage are just levering up an edge and getting a bigger swing on a smaller risk of out.
SPEAKER_02:They really had no idea what they were doing. You know, they had always been told parlays were a sucker bet, a square bet. So no matter what type of parlay it was, it was just, it was a square bet. And that went with round robins. And so we abused round robins to the point where, you know, now, and it wasn't just us, it was a lot of other people, but I mean, we abused them to the point where now it's dead. It's completely dead. The books know if you're doing a round robin, there's a very good chance you're sharp. I mean, no square people do round robins. They do long shot lottery ticket parlays. They don't care about decreasing the variance or maximizing liability by spreading out the combos and everything. But yes, we found out that a lot of books, all you had to do, you could place a parlay for a certain amount, say$1,000, and then you could change one So just change the spread to a money line and then you'd bet it again for another$1,000. And the book thought, oh, this is a new bet. Here's your new$1,000 limit. And you could do that over and over again. You could do the same thing with round robins. You'd have six bets and you would do all the combos of the two legs, three legs, four legs. You'd do like$500 for each combo or for each leg of the combo. That's gonna be like 30 different combinations. So 30 times 500, that's$15,000 you're betting all of a sudden in a bunch of parlays. If you wanted to keep going, you always could. You just change one of the legs and then boom, you get a new$500, you know, so then that's another 15,000. You do it again, another 15,000, another 50. I mean, it was just, it was very easy to, you know, start racking up, you know, six figures in liability on these plus EV bets. And the whole time the book isn't thinking much of it, uh, because it's far lays. So we just, we worked out of our living room, uh, when we first started. And then I guess even when we moved to downtown Denver, we still worked out of my living room and then the other guys lived down the hall. So we were always close by. I mean, we basically had to do it that way with the hours we were working. I mean, it was just around the clock, 24-7. Yeah, we were sitting there, you know, next to each other all the time and just constantly looking for new edges and really going about our daily business. Steve game chasing or playing our normal bets, and then we would just stumble across stuff like, huh, why did, this looks like a glitch. Why did the book just act up when I clicked this? And then you just keep exploring it, and you're like, oh, wait a minute, I might be onto something. Every time I click this button, it's letting me do this or that. It's like, okay, well, how can we take advantage of this? I think everything, every time we were flipping through the sports book, we'd always ask ourselves the question, how can we take advantage of this? How can we use this to make more money?
SPEAKER_00:The crazy thing is that when you hear Thomas talk, his knowledge of what would work and what wouldn't work is so in-depth that it kind of sounds like they must have found a copy of an employee manual, but they didn't. They had to reverse engineer everything. And just coincidentally, or maybe not coincidentally, the thing that worked was to look like a gambler with zero self-control.
SPEAKER_02:So that led us down the path of VIP, where we really found out what damage could be done. It took a a lot of trial and error, but we quickly figured out how to get VIP at every book. I mean, we knew exactly what to bet at each book to trigger the VIP program. For example, at one book, which I won't name, but it's one of the big two, so you can take a guess, but we all knew, we knew all it took was three bets. And what we do is take a fresh account and load it with$25,000 on a Sunday morning, and we'd place it all on the early end NFL slate, pick one game at random, didn't matter. We'd bet it 10 minutes before kickoff. If it won, okay, great. You won$25,000. But if it lost, then we're down 25 and we'd quickly reload the account with another$25,000 and go double or nothing on the afternoon slate. If both those bets lost, so now you're down$50,000 and we'd load it up with another$50,000 before the Sunday night game and try to get it all back on the late game. If all three bets lost, the account is down$100,000, but we knew we were guaranteed to have a text from a VIP host when we woke up Monday morning, and that host would welcome us to the VIP program and offer us a 25% deposit bonus. We'd hem and haw about the offer and put on our best act and pretend we didn't know anything about VIP programs, but eventually accept, and then we'd ask if there was a limit to the bonus, and there never was. At the time, the books were so greedy for customers and deposit money. They would take anything they could get. So we'd hire, we would wire half a million dollars to the book and get a 25% deposit bonus for a total of 125,000 in bonus money. So now we got back our 100K in losses from the NFL Sunday. We made 25,000 and the best part was our account now had big limits and a lot of And I mean, it worked like a charm, like clockwork every single time. I mean, it got to the point where we found ourselves wanting to lose those first few bets. We'd be sitting there watching the game, rooting against our bets because we knew it'd make us more in the long run.
SPEAKER_00:The cornerstone of modern sportsbook risk management is to just kick out the winners. Well, the obvious consequence of winners getting the boot is that sharps just find lots of new accounts. Their aunt or brother-in-law or dog walker. I mean, these people don't need to know anything about sports. They need a name and a pulse. And maybe sometimes they have to help with the minor logistical stuff. Although Thomas was using new names to get VIP accounts. And the thing about VIP is that there is a host whose entire job is to cultivate that customer. It's a people business in a world that is otherwise digital.
SPEAKER_02:We knew which accounts were limited and we knew which ones were VIP. And then we would write down who the VIP host was. We had to keep that straight. We had to keep our stories straight between each host because we would often get assigned the same host and we couldn't repeat the stories. We had to blend in. I remember if we had got a host at the same book that we had recently used, we had to disguise our voice. We couldn't just get on the phone and I would think eventually they would catch on like you sound familiar to so and so that we had just talked to. So we started using voice changers and maybe I'm a little embarrassed to say but we got pretty good at using a woman's voice over the phone. But yeah, that was like a full-time job in itself just trying to keep all the accounts straight the accounting behind all the beards and the VIP, you know, host and, you know, responding to them and always nicely turning down their tickets to Rockies games and Nuggets and concerts and everything because we, you know, of course we didn't want to actually meet these people in real life, but we would just string them along and, you know, act like we were going to go and then always have an excuse at the last minute.
SPEAKER_00:If you're in a a branding search for accounts, you can't really be picky about the beards you end up with. I mean, it would be great if you had a limitless pool of rich people who would not only let you gamble in their name, but also look the part. Except Thomas eventually learned that look the part was just optional, which is just bonkers.
SPEAKER_02:But it was also very eye-opening as to how predatory the gambling industry is. I remember freaking out one of the first times we got VIP And we're wanting to make a large deposit. But the sports book had asked for a source of income to prove we were gambling within our means. And of course, this was a beard account of one of my buddies back home. And I think if I'm remembering the guy right, I think he was an electrician. If I got the right guy, he made like mid five figures, maybe$50,000. So obviously he could not afford to be gambling$100,000 in one day up to sometimes a million in a week The math didn't add up. So we didn't know what to do, but we eventually just submitted a paycheck showing his income and it got approved instantly and the deposit got accepted. I probably should have been happy at the time because we got approved and got the deposit in the account. But I remember I was just disgusted. I mean, they didn't care about responsible gaming. It was just something they did to appease the regulators. It was all part of an act. It was really the first time I took a step back and thought about a casino's business model from their point of view. I guess if you were to define the exact definition of responsible gaming, you'd find it's literally the exact opposite of a successful casino's business model.
SPEAKER_00:The American Gaming Association is the lobbying arm of the casino industry, and they have a responsible gaming campaign slash slogan called Have a Game Plan, which is supported by the major sportsbook operators. However, if you go to haveagameplan.org, here are some of the most prominent features you might notice. Casino and sportsbook logos, you know, all of the big ones, DraftKings, FanDuel, BetMGM, they're all there. Of course, there's also a map that shows whether sports betting is legal in your state. And there's a page that explains helpful, responsible gambling concepts like the difference between a spread and money line bet. Oh, also, and this part is very important, the website is clear that you should always bet through a legal, regulated book. I guess they don't want you to take your newfound money line betting knowledge and try your luck at Pinnacle. Alright, so I don't know if the operators put their best people on the responsible gaming campaign, but to be fair, I don't know if it's realistic to to really expect books to take problem gaming seriously at all. As Thomas says, it is directly in conflict with their business model. The other thing that's worth mentioning and is an unavoidable reality is that the Sharps also rely on the existence of problem gamblers.
SPEAKER_02:I kind of felt bad, you know, when I really woke up and saw, you know, how the sausage is made, you know, the inner workings of these sports books, you know, through the VIP programs. I mean, yeah, I felt bad participating in such an evil system. I mean, I think it's evil, I mean, what they're doing, you know. And yeah, like you said, I, you know, professional bettors need losing bettors in order to make money. In fact, they need, they need big-time problem gamblers, really, to scale to the size that we were, to get VIP. For every VIP like myself, where we're just pretending to be square, and then we eventually flip the account and start playing the sharp stuff, there has to be not even a one-to-one ratio, probably a five-to-one ratio or something of actual losing bettors who are actually maybe rich people betting a lot, but also maybe normal people betting beyond their limits and losing big. And I mean, they probably have a problem and can't stop. Yeah, it ate at me all the time. And yeah, I don't know. Yeah, I guess money can heal a lot, I guess, and make you keep pushing forward. But I mean, I tried to always spin it in my head in a positive way. Like, oh, I'm kind of like a Robin Hood of, I'm going inside the beast and taking money from him. But at the end of the day, I'm just giving most of it back to myself. I guess I pay the beards and pay other people for accounts and everything, but the majority of it is just going to my bank accounts.
SPEAKER_00:In my imagination, if you work in the analytics department at a major sports book, you would be really stoked about putting their staggering amount of information to use. Think about all of the data points you'd have to profile customers and decide which bets are good and which bets are bad. And you'd come up with sophisticated machine learning models to predict what a certain kind of bet from a certain kind of customer means. Or, eh, never mind. Why go to all that brain damage when you can just blanket ban entire zip codes in rural and Illinois?
SPEAKER_02:Because I remember getting texts from people back home when one of the books decided to do it. And I was just texting with some guys like, oh, yeah, who you like for the games today? Yeah, did you bet anything? And he'd say, yeah, I know it's weird, but I was going to place a bet on Indiana or whatever, but I tried logging into the account and they said I was banned. And I thought, well, that's weird because you're I mean, we didn't use your accounts. You're not related to us at all. It's weird. And then I go and I'm talking to someone else the next day and they say, hey, I thought I'd ask you since I know you know a lot about betting. Do you have any idea why this book emailed me saying that I'm restricted and I can't log in and they're going to send me a check with my funds? And that's when I thought to myself, oh crap, they just went ahead and banned the entire zip code. They just weren't going to take any chances.
SPEAKER_00:Pro bettors have a nearly endless ability to tolerate the frictions that cause most people to quit. So there are actually probably a decent number of people who could win enough to get backed off. But then the number with the resilience to keep going after the first backoff is some smaller number. And then after the second backoff, more people drop out and so on. Well, the people who can scale these operations have a superpower, which is they're not discouraged by setbacks.
SPEAKER_02:Music Of course, PayPal was a big issue early on. I mean, I think every ProBetter I know has been banned from PayPal, so that's not unique. It sucked for us when we first got started in Colorado that over 50% of our bankroll got locked up for six months, and that really slowed us down. So then we moved to only using banks and debit and credit cards to deposit and wiring money to send to and from accounts. But then each beard got banned from banks one by one. They tie us all together and launch investigations and do a purge of all the accounts at the same bank at the same time. And then we'd have to start all over again with the new people at new banks. And it really makes you appreciate crypto. And yeah, I mean, don't get me wrong, the sportsbooks caused us trouble too. I mean, we had stacks of hundreds of burner phones, each one neatly labeled with the corresponding identity a four-letter passcode that could unlock the betting accounts. And each phone had to have certain cell plans so we could ping off different cell towers. They each had burner emails and burner laptops assigned to each. And then, of course, that only lasted so long. And within a few months of being in Colorado, they connected all the phones and geofenced our entire apartment complex. So we, you know, didn't really know how to respond to that one at first. We would just get in the car and drive around with our laptops and phones and you know one guy drives one guy works and we park on the side of the road and bet and We considered renting an RV to work out of or just moving into a new apartment every month. I remember after we moved to downtown Denver, I would be walking around the streets of Lodo at 3 a.m. in the middle of the winter with 10 burner phones stuffed in my coat. It was freezing cold, so I'd go into the subway bus terminal at Union Station to warm up and take a break. Just me, several police officers, and hundreds of homeless people, they were trying to shoe away before the sun rose and the buses started running again.
SPEAKER_00:Not only did the guys plow ahead in the face of constant daily annoyances, but sometimes they figured out how to turn lemons into lemonade.
SPEAKER_02:So we'd reach out to people and see if they had limited accounts. Like when I'm talking limited, I mean like they can't bet more than like$1.50 on anything. Because what we would do with those accounts is we would use those accounts to bet these massive 12-leg round robins. Again, they're limited to about$1 per bet but no matter what the bet was but when you do a 12 leg round robin and you choose all the combinations of two leg three leg four leg combos and so on that's going to be like a few thousand combinations of parlays and so many books used to let you do the one dollar bet on each round robin combo so with a single click of a button you'd get thousands down you know one dollar per combo there's a thousand combos and then you you'd sometimes have to change one leg or maybe add another their leg and then you do it over and over again betting thousands at a time you do that like you know 30 times and next thing you know you have you have six figures you know over hundreds of thousands of dollars down on FCS college football games that and it's all in an account that the book thought they limited a long time ago
SPEAKER_00:I'm going to call the next part of the episode beyond steam chasing because when Thomas started winning he was using gambling Twitter's basic strategy picking off in So yeah, so like, of
SPEAKER_02:course, we would fake the market a ton. And I mean, I love that part of the game. The strategy around that was fascinating to me. And then my favorite ways to fake the market was always the more unconventional ones. Because normally, when someone is faking a game, they're doing it to decrease the price and try to get the best number possible. But we always found ourselves looking to take the worst price in the market, especially if you had a VIP account and wanted to keep it VIP. Hitting all the big offshore books the other way, but hoping my book would stay at the same price and not follow them. I mean, for us, the market manipulation wasn't so much to get a better price. It was more about the volume.
SPEAKER_00:By this time, Thomas was also originating, which meant that his knowledge of the that might show up in an odd screen. He knew that by game time, the market was probably going to land closer to the number in his model. And so all of the distance between the current market and the number he expected eventually represented opportunity.
SPEAKER_02:So, I mean, a lot of times what I do is I would take a marked account and intentionally move a book from, let's say, minus five to minus six when the rest of the market is sitting minus five. And I'm trying to bet that favorite but I intentionally moved it to a worse number, minus five to minus six. So I take then a VIP account at that same book and ask for a huge bet at minus six, well above the posted limit. That original bet with the marked account was probably limited to like$100, but I knew I could easily move the line of point. And now that I'm taking the worst price in the market, that VIP account is now going to be able to get maybe$100,000. down at minus six instead of maybe$10,000 at minus five. So you can always do the more traditional way of faking the market the opposite way, but you would need to pay at least$10,000 or so to move the market a point the opposite way, hitting all the major sharp offshore books. And then you're hoping you can still get your$100,000 bet at minus five. Because again, I'm hoping my book doesn't even move with the rest of the market. I'm wanting to take, I don't even want that minus four. I'm not going to be able to get much at minus four because every other book is at that same price. I want to take a bad number and I want that trader on the other end to think I'm taking a bad number. So you just have to do the math for each situation and ask yourself, is it better to pay the$100 to move the line from minus five to minus six so you can bet$100,000 at minus six or you can pay$10,000 to bet maybe$100,000 at minus five. And sometimes the best answer was to combine the two. So imagine if you're betting all the major offshore books down to minus four right after you moved the line to minus six at that book where you have a VIP account. In that case, you're going to probably get that$100,000 click at minus six. And then the trader on the other end is going to be very confused. He's going to take a look at the screen and see the steam moving the other way. And he's probably going to move his line back down to minus five and a half or minus five, despite your bet. Even though it was a big bet, the accounts mark as square, and he's probably going to then move to minus five and a half. So then you can bet another 100,000 at minus five and a half. And you can probably do that several times. You can bet it again at minus five. If they want to line up with the consensus, great, your bet again, four and a half, four, you know, at the end, you know, you know, several days later, later in the week, if this is a football game that that's going to close seven or above, you know, you have the nuts on this game.
SPEAKER_00:I never know if I should point out obvious stuff like just because someone is winning doesn't mean they're winning every bet. Even sharps still have to deal with variants and the fact that our brains are not well designed to deal with small samples, especially when losing is involved.
SPEAKER_02:I just went through a massive downswing. I was doing all the parlays and round robins and everything. So just huge variance involved. And I lost like a million dollars one day. And then the next day I lost another million. And then I think the final day of the three-day stretch, I lost a million and a half. So I lost like three and a half million dollars. And I specifically remember it was the Monday, Tuesday, and Wednesday of Thanksgiving week. And I was set to fly home Wednesday night at to go see my family. And I did. I didn't really even want to board the plane, but I did. And I went back to see my family. And I was pretty good at blocking out the results. Again, I just always was reminding myself, it's not even money. I just kind of saw it as points or tokens or game points. I didn't lose half a million dollars today. I lost half a million game points But I would tell myself I had$50,000 in expected, you know, gain points today. You know, you really had to play tricks with your mind to just try to keep your sanity. But I remember going home, you know, that Wednesday night or maybe it was early Thursday morning, a red-eye flight or something. And I just sit in there at Thanksgiving, surrounded by my family. And all I could think about, I was just like devastated. And I think my parents and my family could probably tell something was up.
SPEAKER_00:Obviously, the way these guys got big enough to be able to lose that much is that they had big winning days too.
SPEAKER_02:It was just over a million, about one and a half million, because I remember we had a huge amount down on, it was a specific WNBA play that day. And for whatever reason, we had the injury news early. It was a star player who was going to get ruled out. So we just went all in on everything. And, you know, if you give us like an hour of before the news is announced to bet. You know, we can bet a lot. So we had at least a million or so on that game. And then everything else went well that day too. I mean, that wasn't totally uncommon to have seven figure, well, seven figure swings probably was. Six figure swings weren't uncommon at all. I mean, that was almost every day. You would have like a 100,000, 200,000 hour swing in one direction or the other. And that really messed up Thomas'
SPEAKER_00:story is amazing. In just a few years, he had gone from pretty much just betting in his free time to gambling millions of dollars a day and running a professional operation. He was able to do that because he was never confined to looking at these problems the way everyone else does.
SPEAKER_02:So probably the culmination of all my scaling tactics came to fruition in early 2023. At that point, I had given up steam chasing and correlate parlays and stuff like that. I was originating pretty much every sport. NBA, college football, college basketball were the big ones, but still trying to bet early. Use all the same strategies of circumventing limits to get down on big on NBA overnights, openers. I mean, I would say the amount we were betting on these extremely soft opening lines, but I mean, most of the audience wouldn't even believe the numbers. But around January to March of 2023, it was right in the middle of the NBA season, we figured out a way to move the market at a certain domestic sportsbook, the largest sportsbook in the US, so you can figure it out. But we figured out that if we took our accounts that were already limited to 1,100th of the normal limit and had them all bet the same game within a certain period of time, it would trigger an auto mover. So I'd take a bunch of my limited accounts and line them up and at the same time hit a game and it automatically moved the game half a point the wrong way. And then I'd do it again with more limited accounts and again and again until the game had moved two to three points the opposite way. And these accounts are limited to 1,100th, so a max limit bet would was like$50. All in all, we could move every NBA game on the board three points the opposite way for maybe$1,000. And at that point, I'd come in with several VIP accounts with huge boosted limits and bet the other side. I mean, same strategies as always, implementing parlays and round robins. We'd bet hundreds of thousands of dollars on these lines that have been dummied. And I mean, I had an edge anyways on these NBA games, right? They were already several points off my fares for me to be betting them to begin with. But then I was also buying myself a few extra points. We essentially were getting millions of dollars down each day on NBA overnights that were getting five to 10 points of CLV the next day. It was such an insane strategy that I never expected it to last. I had tried plenty of this type of stuff before and been burned before trying similar stuff that I never thought it'd last more than a day or two
SPEAKER_00:thomas thought of his relationship with the book as being a cat and mouse game he would find some weakness attack it then the book would adjust and countermeasure him and then that cycle just repeated but eventually one of the books did not see this as a game at all and their response was serious so
SPEAKER_02:But the craziest part was it lasted for months. And for nearly two months straight, I'd stay up all night each night doing this strategy. And if you have an odd screen to display line history, you can go back to early 2023 and see the lines of this book just going crazy every morning around 3 to 4 a.m. And I definitely didn't expect it to last forever. I knew every edge came to an end eventually. And I was ready any day for this one to end. I just never expected it to end the way it did. One day, I woke up from my midday nap. Reminder, I was staying up all night bedding, so I would take quick two-hour power naps midday as my only sleep. And I woke up and I checked every phone email and each one had an email from this sportsbook saying its account had been locked. Probably 20 to 30 accounts. Both the ones that were already limited, betting the wrong side, and the VIP ones. I think one of the accounts had just recently registered for an account, but had not even placed a single bet yet at that sportsbook. Yet it also got the email saying its account was locked pending investigation. Then I started getting emails from all the other sportsbooks saying my accounts were locked there too. And I wasn't even doing any funny business at those books at the time, so... That was peculiar. And that's when I knew I was in trouble. It turns out this sports book that I had been manipulating lines at for the past two months had become aware of my actions a while back. And they had been watching my accounts and marking my accounts and they had reported it to Colorado Gaming and a bunch of other state regulators that we were betting in at the time. And Colorado Gaming in turn told U.S. Integrity. And U.S. Integrity, they're a third-party watchdog organization founded in 2018 team around the time of PASPA's repeal. Their company's goal is to partner with the regulators and domestic sportsbooks in the U.S., help them sniff out any integrity issues with sports markets, match fixing, fraud, money laundering, any unethical, illegal betting activity. And somehow U.S. integrity is privy to all of the betting data at each sportsbook all across the U.S. So when the sportsbooks in Colorado Gaming brought my case to their attention, they were able to look up the types of bets at one book and link them to bets at other accounts at other sportsbooks. They used our PayPals and bank transfers to link accounts, geolocations, Wi-Fi logins, every bit of data that GeoComply had collected over the years. And that's a lot more data than the average user realizes what GeoComply has access to. And over the course of several months, they compiled a list of all my beards I had used for the past two years, linking them back to my partner and I who were running the show, and they sent that list to each state regulator and each sportsbook in the U.S. Every sportsbook went through and purged those accounts from their app, and most states put myself and each beard on the self-exclusion list, a list that is supposed to be reserved for problem gamblers who want to responsibly self-exclude from gambling to limit their gameplay. Well, Now the list was being used to forcefully exclude winning bettors.
SPEAKER_00:It's always tempting to try to be the most cynical person in the room and to claim that you're not surprised that a sportsbook or the regulators would use the self-exclusion list to retaliate against sharps. But this is a stunning response because if you were suspicious of their pronouncements about responsible gaming before, this leaves no doubt as to the complete lack of sincerity. I mean, every state, when they legalize bet, goes through a performative display where the regulators and operators join hands to say how seriously they take the issue. All right. And if you're sitting there screaming that, of course, no one cares about problem gambling, I think that's fair enough. But keep in mind that it is, for whatever reason, very important for the operators and regulators to claim that they care. I
SPEAKER_02:mean, all those years of thinking that big losing VIP account that belonged to the 20th 21-year-old kid down half a million dollars with no reasonable proof of income to support the losses. I thought that account was an ideal candidate for the self-exclusion program. Turns out I finally found my way into that program years later in a totally different way.
SPEAKER_00:The books always have a trump card in these things, which is that after the bets are decided, they can usually figure out a way to void the winners and let the losers stand.
SPEAKER_02:It was losing the money that hurt because what that sportsbook had decided to do was go through each VIP account that had won at and make me forfeit the winnings in those accounts, citing violation of house rules, manipulating lines, multi-accounting, syndicate betting, circumventing limits, taking advantage of software glitches, cash outs, parlays, etc. I mean, I really had no case for keeping those winnings. I had explicitly broken so many house rules. But the real kicker was they only did this with the accounts that had won. The accounts that were down money, they ignored. So let's say I was using 10 accounts at this book. Seven of them might be up and three might be down. Even when you have big edges, variance is still an issue, especially when we're doing so many parlays, round robins. The swings in each account were massive. So they took the winnings from the seven accounts that were up and made me swallow the losses in the losing accounts. I filed a complaint to Colorado Gaming. Unbeknownst to me, they were the ones spearheading the investigation. They had already given the book approval to do this. They replied with a not-so-nice email to me saying that I had broken several Colorado statutes and also violated federal laws, all pertaining to the Wire Act and proxy betting. The regulators, who I thought were supposed to be a liaison between the sportsbooks and the consumer, were fully in the corner of the casinos. I tried to plead my case and they threatened me with jail time if I didn't seize my operations and leave the state. So, yeah, so I lost several million in that whole ordeal and it stung.
SPEAKER_00:Thomas did talk to some attorneys and they did at least put him at ease about the potential criminal case. Although that also meant that the state's gaming regulator had been making threats with no basis in the law.
SPEAKER_02:As far as like consulting attorneys, there's two reasons. I mean, one, of course, to try to get the money back. And then also, yeah, I mean, I can't say I wasn't a little scared of their threats of you're violating this and that. I mean, they were saying whatever law I was breaking in Colorado, It held a sentence of three to five years, and I was possibly guilty of 50 counts of that or something, so whatever the math is there, that's, you know, I was pretty young at the time, 25 years old, but that's still life in prison. So I can't say I wasn't, you know, a little scared of that. So, yeah, when I approached the attorneys, I'd ask them both, you know, well, one, can they do this? Can I get my money back, or are they right. Do I need to actually get a defense attorney and be scared of prosecution? Every attorney immediately said no, that you're not violating these laws. The Wire Act, everyone has always said the Wire Act does not pertain to bettors. It pertains to bookies. It's illegal for bookies to book bets over state lines. Same thing with proxy betting. Proxy betting, if you read, especially that Colorado statute, I think they were accusing me of it pretty clearly points to bookies and not bettors. And so everyone always said, no, you have nothing to worry about there. That's just an empty threat, which I thought so. Because, I mean, of course, if they actually thought I was guilty of that, you don't just nicely ask someone to quit breaking a law.
SPEAKER_00:For years, Thomas had made a living looking at the sportsbook's rules and then being like, nah. If they put an obstacle in front of him, he would go over it or around it or through it. He was relentless. So it must have taken a lot for him to slow down after this ordeal.
SPEAKER_02:Yeah. So when I moved out of Colorado in 2023 and I moved back to Illinois, I mean, I took a big step back from gambling. I mean, nowadays I maybe work one fifth of the hours I did in Colorado and I'm betting like one tenth of the volume. You know, I no longer have the company or employees and I do everything alone. Yeah. After getting burned by Colorado Gaming and U.S. Integrity and going through all the trouble I went through, I was just totally burned. out, needed to take a break. It was really the first time in two and a half years of the crazy rollercoaster experience of being a pro bettor that I took time to appreciate everything that we accomplished. I went several months that summer without placing a bet and yeah, I thought maybe I'd never bet again and I was probably okay with that until football season came rolling around in the fall and I just couldn't help but dust off the mod and start gambling again. But again, I work so much less now. I hate the word retirement, so I'm never going to use that. I always have to be doing something. I have to stay busy. But I'm just really focusing nowadays on the work-life balance. I bet when I have downtime, but I also force myself to take time to travel, hang out with friends and family, focus on my mental and physical health. Yeah, I mean, don't get me wrong. I still love sports and betting on them. All the little intricacies surrounding sweepstakes, prediction markets, exchanges. I mean, it's fascinating. It presents a whole new game to try to beat. And if I allow myself, I would probably get swallowed up in it all over again and spend all day researching and finding new angles. But I also know the pitfalls that come with all that. And so I have to always actively, Restrain myself.
SPEAKER_00:There is a reading of this episode that is just, young guy plays with matches, ends up getting burned. I mean, one of the great sharp betting podcasts is titled The Business We've Chosen as a nod to the Hyman Roth line from The Godfather. I think the point of that reference and the point of the line from the movie is, once you've decided to get involved in a very dirty business, then your room to complain about the way the world works has been severely diminished. But there's another reading of this episode, which is, the way the books operate and the way they've captured the very regulators that are meant to oversee them is emblematic of a larger trend one where cynicism has infected everything and we should never expect a casino to deal a fair game and we should never expect them to be sincere when they say they care about problem gaming and they have just undertaken the same search for marks to bleed that everyone else has and if you want to measure their value to society you should start with their stock prices first I think those are both fine interpretations of what we've heard, but I opt for what I guess I will call the small satisfaction in poetic justice version, which is Thomas could have been a dream customer for these sportsbooks, and instead, he turned into an absolute nightmare.🎵
SPEAKER_02:And you just never knew it was just trial and error. I mean, we would try that exact same strategy at a different book and they would just kick us immediately and just have none of it. Like those traders, for whatever reason, could catch on to it. Yeah, it's just a constant cat and mouse game. And yeah, I just encourage people to just try everything. I mean, just keep trying something until it clicks. I mean, because that's basically what we did. We were lucky too. We just had like an infinite amount of accounts at the time. So And that's the other part of it. I mean, we worked our ass off when we were in Colorado. I mean, my partner who joined me when I moved out there and he did it with me for about a year. I mean, he was a worker. I mean, he's maybe the only guy, maybe the hardest worker I know. I mean, and he was so sharp too. He caught on so quickly. But between him and me, we both worked at least 20 hours each day. We just never slept. And most of that time was either trying to figure out new ways like this, just trying everything, but then we'd lose the account. So we have to get new accounts. We spent so much time gaining new accounts and doing all the accounting and bookkeeping that, you know, comes with that. It was just a lot of work, but I mean, we were 24, 25 year old kids who were hungry and, you know, just neither one of us had, you know, girlfriend, wife, family. I mean, we, were just all in on, you know, we were able to dedicate, you know, about every second of the day to, you know, sports betting. And, you know, we just found everything. I mean, we just weren't going to stop until we uncovered every single error the book had made.
SPEAKER_00:Risk of Ruin is written and produced by me. Special thanks to Thomas for doing this episode. Thomas says that he's never tweeted, but he wants to become active on Twitter after this episode. So I'll put a link in the show notes so you can follow him there. I'll also put links in the show notes so you can email me or check out the premium sub stack. As always, you can follow the show on Twitter at Half Kelly.