When A Wall Street Firm Took A Stab At Casino Capitalism

It's illegal for casinos in Nevada to take bets from out of state. But that didn't stop one subsidiary of a Wall Street firm from trying.

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When people want to get in a jab at Wall Street, they sometimes call what bankers do casino capitalism. Today, Keith Romer from our Planet Money podcast has a story of what happened when one Wall Street firm actually tried to get into the casino business.

KEITH ROMER, BYLINE: The idea was simple. The Wall Street firm Cantor Fitzgerald was going to create a new company, Cantor Gaming. And Cantor Gaming was going to revolutionize the sports betting industry in Las Vegas.

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UNIDENTIFIED MAN: What happens when Wall Street technology hits Las Vegas?

ROMER: Here's an ad from 2010.

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UNIDENTIFIED MAN: You get instant sports betting throughout the game, freedom, a huge breakthrough in Cantor technology.

ROMER: It's like a beer commercial from 1985. There are all these women in skimpy bathing suits power walking around holding smartphones and tablets - tablets that let them place bets on Cantor's new system. In addition to the technological bells and whistles, Cantor Gaming offered gamblers one additional perk.

GERARD MCNALLY: Cantor was accepting wagers larger than any other casino was accepting.

ROMER: That's retired NYPD detective Gerard McNally. He says while most casinos would only take $5,000 or $10,000 on a football game, Cantor would take $50,000 and sometimes a lot more than that. Though he didn't know it at the time, McNally was already turning up evidence of the way these higher betting limits were bringing together Las Vegas, Wall Street and illegal betting, evidence in the form of bags filled with cash.

MCNALLY: We tracked the guy from Jersey all the way to New York. And we have our guys watch him, and they're saying, you're not going to believe this; this guy's walking down the middle of Manhattan, and you can see the bag - you could see the money on top of the bag.

ROMER: Like his bag was so full it was overflowing with money.

MCNALLY: Yeah, you could see the money.

ROMER: It turned out these guys were moving around a lot of these bags of money. Eventually McNally traced them to a quiet office park in New Jersey and a gambling ring the police came to call the Jersey Boys.

The Jersey Boys - they were sports bettors. And because it's illegal to place sports bets in New Jersey, they had runners placing bets for them in Nevada with Cantor Gaming.

MCNALLY: They knew who the Jersey Boys were because they needed their help.

ROMER: Remember. Cantor was willing to take much bigger bets on games than other casinos, and that meant that sometimes they took way more money on one side of a game than they could handle. So when that happened, they would call up the Jersey Boys to see if maybe they would bet $50,000 on the other side - clever idea, also illegal. Nevada casinos are not allowed to take bets from out of state.

Second problem - casinos are required to file reports on any big payouts. For the Jersey Boys, Cantor Gaming failed to file a lot of reports. After a two-year investigation, police seized millions of dollars in cash and arrested 25 people, including the head bookmaker at Cantor Gaming. In August, the CEO resigned.

Last fall, Cantor Gaming, now rebranded as CG Technology, agreed to settle with federal prosecutors. There would be no criminal case brought against the company, but it would have to pay fines totaling more than $22 million. Detective McNally is happy with the way the case turned out, but he's not convinced it will really make a difference.

MCNALLY: Did we change anything about it? I don't know. I don't know. Money does weird things I guess.

ROMER: Wall Street lost its bet to remake sports betting in its own image - or maybe just its first bet. Gamblers don't always know when to quit. For NPR News, I'm Keith Romer.

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