Trial and Error

Hey folks, just a couple of notes before we start the show. When I meet listeners, they almost always tell me that they found the show through a recommendation. So I really appreciate it when you share the show with your friends. In fact, it turns out that having some listeners is also helpful when it comes to getting guests. So this stuff is all related. Okay, and then the other thing is that I want to thank everyone who has signed up for the Premium Substack. I really appreciate that you care enough to support the show, and it's also been really nice that some folks have sent notes of encouragement with their subscriptions. Anyway, that's all, and I hope you enjoy this episode. I remember thinking every time I was talking or texting aos, 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, there was going through a massive downswing. Even though we were very sharp stuff through it, we were trying to flip that way or count using the high limits, and we were just getting crushed down like 600,000. And we had a small bonus, a deposit bonus, like 10%, but 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 in my love, 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're going to 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 you did lost. So I wanted to see how far I could go with the act. And I remember when he called back again, I was like, "Fake crying." And talking about, "Oh, my girlfriend's going to leave me. My parents will be so upset if I can't get this money back." 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. You're listening to Risk of Ruin. I'm John Reader. This is episode 44. Trial and Error. I am 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. And something like 30 states, you can bet using apps like draft kings and fandals. And 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 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 Bet Online 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. 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-past-bar repeal. So obviously, no draft games or a fan duel. I was introduced to sports betting in college. My roommate came home one day and said he signed up for a website called Volvata. And he had put $20 on the Illinois game. And I did the same thing a few days later and I dressed as history. I probably found out quickly why my parents had hit betting from me because I was instantly hooked. I don't know. I hate using the word addiction because I asked such a negative connotation. But I was definitely addicted from day one. And I was either going to figure out how to win a sports betting or I was going to 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 and 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 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 you know, it's getting the degree in engineering and also degrees in math and statistics. And I also knew everything about sports, you know, every player's name, his stats, which teams were hot and cold. Yeah, I lived in breed 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 about gambling markets. I had no idea that when I logged into sports books Sunday morning to Ben NFL game, those lines were already shaped into place. By millions of dollars throughout the week from sharp groups all over the world. 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. 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 Fish and Mark and Hypothesis and the basic fundamentals of gambling markets. And that was the day that changed my life, I guess. Yes, I remember I was just like immediately threw away all the spreadsheets and algorithms I'd been working on and I only focused on CLV. 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 street 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. They 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 115. 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 the 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. We'll see LV can help with that at least in part. It is not an ironclad love 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 would be expected to lose the amount of sports books house 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 $10. 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, then the 50/50 closing price, you're going to win as long as it's enough to overcome the minus one 10 big. They always, most people I should say, had a very tough time understanding that. And it always perplexed me. 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. Once you're paying attention to the markets, then you need a tool that shows all lines for all games at all books. There are various services that do this, depending on how much you want to spend. Companies like Spot Ods and Unabated offer these Ods screens today. When Thomas got started, he was using Don Best, which had been the go-to for years. I bought an Ods screen and started steam chasing. I turned on notifications for injuries and were hammered lines that seemed to start players got ruled out. I mean, I learned quickly, 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. 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. I'd be sitting in my office and I'd had Don Best up on one of the screens. I mean, it eventually became a problem where I knew I wasn't given 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 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. 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. Yeah, I don't think my parents were overly concerned when I started in college. They definitely didn't like it. I don't think any parent wants their kid to be gambling because of course these statistics are stacked against you. 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 betters. 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. And 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, you know, 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 could, you know, they know me better than anyone. They could tell that it was all I was thinking about. It was really consuming my whole life. And 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, that's, I mean, they tried to, I think, be as supportive as they could, but they just cannot 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. 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. I definitely have an obsessive personality trait and addictive personality. And I mean, I love sports. I mean, I was probably addicted to sports. I mean, it's, you know, even before bedding, you know, it's all I thought about, you know, I'd be sitting in class, you know, and I, you know, I'm just day dreaming 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. And when I get my mind stuck on something and I, I will stick with it and I'm stubborn. I won't stop until I beat it or, you know, I don't like people getting the best of me, you know, 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 gambled in a casino. I have no desire to, you know, I've no desire to play blackjack or slots or anything, you know, 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, I never have any desire to go back and play. Although when it sports, I mean, I'm, I would definitely use the word addicted. I mean, I show if you, if you want to look up the definition of in addiction or, you know, a problem gambler or anything, I mean, I, I qualify under every single definition. The only difference between me and a problem gambler is I win and so then therefore it's, I guess, not a problem. Thomas is obviously 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 asked him if he ever thinks about that and is he ever worried that something bad could happen to him one day. I guess the only comfort I've taken 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, I would just quit all 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 haven't itch, I guess, but I, you know, I try to control myself. So I, I mean, I would like to think yes, I could stop if I never got or if I, if I lost my edge. The first time I met Thomas, I was in Vegas with a friend who was 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 sports book 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. Yeah, a lot of bonuses. I mean, those were fantastic when we first start 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, you know, we were just constantly churning new accounts that, you know, I say it was a jump start to the bankroll, but really it just continued throughout because we just kept getting new accounts for the bonuses. But yes, far as the actual betting, when I first started, yeah, it's mostly just steanchacing. 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 spinning 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. Everything we're hearing about happened a few years after the Supreme Court overturned Passbutt, 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 published the win loss for various games and sports is usually not worth writing home about. 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 one's to parlay something like a quarterback throwing three touchdowns with 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. 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 sports book software, we probably found it. And I mean, that led to correlated parlay's, lots of correlated parlay's over the years. Some simple stuff like big favorites and football combined with the total to more complex stuff like specific game states that were mispriced in same game parlors. And SGPs were just getting rolled out so we hit those 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 with the book one it opened the whole can of worms. I mean, we're betting parlays SGPs around Robins just to maximize our edge, but then the book started giving us VIP because they saw as betting these. I mean, it was the best of both worlds. There's an often repeated misconception, which is this idea that parlay's 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 amount. They really had no idea what they were doing. They had always been told parlay's 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 now, and it wasn't just us, there's 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 parlay's. They don't care about decreasing the variance or, you know, maximizing liability, you know, by, you know, spreading out the combos and everything. But yes, we found out that a lot of books, you know, all you had to do, you could place a parlay for a certain amount, say $1,000. And then you could change one of the legs. So just change like the spread to a money line. And then you'd bet it again for another thousand. And the book thought, 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 know, you'd do like $500 for each combo or for each, you know, leg of the combo. That's going to be like 30 different combinations. So 30 times 500, that's, you know, $15,000, you're betting all of a sudden in a bunch of parlay's. And 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 my ability on these plus EV bets. And the whole time, the book isn't thinking much of it because it's parlay's. So we just, we worked out of our living room 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 you know, really going about our daily business, you know, steam chasing or, you know, playing our normal bets. And then we would just stumble across stuff like, huh, why did this looks like a glitch? Why did this? The book just act up when I, when I click this. And then you just keep exploring it. And you're like, oh, wait a minute. I might be on to something. You know, every time I click this button, you know, the, you know, it's letting me do this or that, you know, it's like, okay, well, how can we take advantage of this? I think everything, every time we're flipping through the sports book, we'd always ask ourselves the question, how can we take advantage of this? I mean, how can we use this to make more money? 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. So that led us down the path of VIP where we really found out what damage could be done. It took 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 Sunday morning. And we'd place it all on the early NFL slate, you know, pick one game at random, didn't matter. We'd bet it 10 minutes for 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 nothing on the afternoon slate. If both those bets lost, so now you're down $50,000 and we loaded 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 him and hob out the offer and put an honor best act and pretend we didn't know anything about VIP programs. But eventually, except 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 we'd 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 longer lease. And I mean, it worked like a charm like clockwork every single time. I mean, I got to the point where we found ourselves wanting to lose those first few bets. We we'd be sitting there watching the game, rooting against our bets because we knew and make us more in the long run. The cornerstone of modern sports book 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 logistics. 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. We knew which accounts were limited and we knew which ones for VIP. And then we were right 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 someone so that we had just talked to. So we started using voice changers. 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 host and responding to them and always nicely turning down their tickets to Rocky's games and nuggets and concerts and everything because of course we didn't actually meet these people in real life. But we would just string them along and act like we were going to go and then always have an excuse at the last minute. If you're in an never ending 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. 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 the IP and we're wanting to make a large deposit but the sportsbook had asked for 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 or more. 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 improved 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 the P's, 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. And I guess if you were to define the exact definition of responsible gaming, I mean you'd find it's literally the exact opposite of a successful casino's business model. 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 sports book operators. However, if you go to have a game plan org here are some of the most prominent features you might notice. Casino and sports book logos, you know all of the big ones, draft kings, fandall, 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 new found money line betting knowledge and try your luck at pinnacle. All right, 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 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. I kind of felt bad, you know, when I when I really woke up and saw, you know, how the sausage is made, you know, the inner working 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, you know, problem gamblers, really, you know, to scale to the size of we were to get VIP, you know, for every, 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, as you know, not even a one-to-one ratio, probably a five-to-one ratio or something of actual losing bettors who are actually, you know, maybe rich people betting a lot, but also maybe normal people betting beyond their limits and losing big. And they, I mean, they probably have a problem and can't stop. Yeah, it, it ain't it be all the time. And yeah, I don't know. Yeah, I guess I guess money can, yeah, I don't money can heal a lot, I guess, and make you keep pushing forward. But I mean, I tried to always spend it in my head in a positive way. Like, oh, you know, I'm kind of like a Robin Hood, you know, of, you know, I'm going inside the beast and, you know, taking money from him. And, but I mean, at the end of the day, I'm just giving most of it back to myself. You know, I guess I pay, you know, the beards and pay other people for accounts and everything. But, no, I mean, the majority of it is just going to my bank accounts. 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, and never mind, why go to all that brain damage when you can just blanket band entire zip codes in rural Illinois. Because I remember getting texts from people back home, you know, 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, you know, yeah, did you bet anything? And he'd say, yeah, I know it's weird, but I was going to place a bet on, you know, Indiana or whatever. But I've all tried logging into the account and they said I was banned. And I thought, well, that's weird. Because you're not, I mean, we didn't use your accounts. You're not related to us at all. That's weird. And then I go and I'm talking to someone else the next day. And they say, hey, I just, 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, you know, 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, I go crap. They just went ahead and banned the entire zip code. They were, they just weren't going to take any chances. Probetters have an early endless ability to tolerate the frictions that cause most people to quit. So they're 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 back off is some smaller number. And then after the second back off, 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. Of course, PayPal was a big issue early on. I mean, I think every pro better I know has been banned from PayPal. So that's not unique. It is 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, new banks. And I really make sure you appreciate crypto. And yeah, I mean, don't get me wrong. The sportsbooks caused this trouble too. I mean, we had stacks of hundreds of burner phones. Each one neatly labeled with the corresponding identity and 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 geofence, our entire apartment complex. So we You know didn't really know how to respond to that when it 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 Park on the side of the road and bet You know we consider 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 phone 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 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 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 a dollar 50 on anything because what we would do with those accounts is We would use those accounts to bet these massive 12-lay ground robins Again, they're limited to about you know one dollar per bet But no matter what the bet was But when you do a 12-lay ground robin and you choose all the combinations of two like three like four-lay combos and so on That's going to be like a few thousand combinations of Parallels 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 Sometimes have to change one leg or maybe add another 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 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 injury news and similar But eventually he was well past the concepts that you're going to learn in intro to sports betting So yeah, so like of 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 the IP Kitting 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 By this time Thomas was also originating which meant that his knowledge of the market wasn't limited to being able to pick off small pricing errors 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 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 It was probably limited like a hundred dollars 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 a hundred thousand dollars down at minus six Instead of maybe ten thousand dollars 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 ten thousand dollars or so to move the market to point the opposite way hitting all the major sharp offshore books And then you're hoping you can still get your 100,000 or 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 you know pay the one hundred dollars to move the line from minus five to minus six So you can bet one hundred thousand at minus six Or you can pay ten thousand to bet Maybe a hundred thousand dollars 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 gonna probably get that one hundred thousand dollar 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 Move in the other way and he's probably going to move his line back down to minus five and a half for minus five Despite your bet even though it was a big bet the accounts marked a square and he's probably going to then move to minus five and a half So then you can bet another one hundred thousand at minus five and a half and you can probably do that several times You bet it again at minus five you know if they want to line up with the consensus You know great, you know you're bet again four and a half four you know at the end you know several days later later in the week if this is a football game That that's gonna close seven or above You know you have the nuts on this game 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 variance and the fact that our brains are not well designed to deal with small samples especially when losing is involved I just went through a massive downswing I was doing all the parliaments and round robbers and everything so just huge variance involved And I lost like a million dollars one day and then the next day I lost in 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 To go see my family and you know, and I did I didn't really even want to board the plane But I did and yeah, I went back to you know see my family and I was pretty good at blocking out the results You know again, I just always was reminding myself It's not even money. I just kind of saw it as like points or tokens or you know game points You know like oh yeah, 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 game 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 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 Obviously the way these guys got big enough to be able to lose that much is that they had big winning days too It was just over a million about one and a half million because I remember we had a huge amount down on There was a specific WNBA play that day and for whatever reason we had the injury news or like it was a star player Was going to get ruled out so we just went all in on everything and you know if you give us like an hour 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 and then everything else went well that day too I mean that wasn't totally uncommon to have seven figure well seven figures swings probably was six figures swings weren't uncommon at all I mean that was almost every day you would have like a 100,000 200,000 or swing in one direction or the other and that that really messes with your psyche in a hurry Thomas the 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 So probably the culmination of all my scaling tactics uh came to fruition in early 2023 But at that point I had given up steam chasing and correlate parlay's and stuff like that uh I was originating pretty much every sport NBA college football college basketball We're the big ones, but still trying to bet early. Use all the same strategies of circumventing limits to get down on big on NBA overnight, 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 sports book, the largest sports book 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 in the wrong way. And then I'd do it again with more limited accounts. And again and again until the game and move two to three points the opposite way. And these accounts are limited to 1/100th, so a limit, max limit bet was like $50. All in all, we can move every NBA game on the board three points the opposite way for maybe $1,000. And at that point, I come in with several VIP accounts with huge boosted limits and bet the other side. I mean, same strategies as always, implementing parliés and round robins. We bet hundreds of thousands of dollars on these lines that have been gummed. And I mean, I had an edge anyways on these NBA games, right? They were already several points off my fairs 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 overnight that were getting five to 10 points for CLE 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. 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. - 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 light history, you can go back to early 2023 and see the lines at 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 betting. 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 their on 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. Turns out this sportsbook that I had been manipulating lines after 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 US Integrity. And US Integrity is-- they're a third party watchdog organization founded in 2018 around the time of PASPAS repeal. Their company's goal is to partner with the regulators in domestic sportsbooks in the US, help them sniff out any integrity issues with sports markets, match fixing, fraud, money laundering, any unethical, illegal betting activity. And somehow US Integrity is privy to all of the betting data at each sportsbook all across the US. 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 paypows and bank transfers to link accounts, geo locations, Wi-Fi logins, every bit of data that geo-comply had collected over the years. And that's a lot more data than the average user realizes. What geo-comply 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 US. Every sportsbook went through and perched 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. 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 betting, 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 mean, all those years of thinking, those that big losing VIP account that belong to the 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. 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. It was losing the money that hurt, because what that sports book 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, cashouts, parlays, et cetera. 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 were doing so many parlays around our office, 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 one 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 I lost several million in that whole ordeal, and it's done. [MUSIC PLAYING] 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. As far as consulting attorneys, there was two reasons. I mean, one, of course, they tried 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? You know, 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 betters. It pertains to bookies. It's illegal for bookies to book bets over state lines. Same thing with proxy betting, proxy betting, you know, if you read, especially that Colorado statute, I think they were accusing me of it, it pretty clearly points to bookies and not betters. And so everyone always said no, you have nothing to worry about there. That's just an empty threat. And which I thought so, because I mean, of course, if they actually thought I was guilty of that, you don't, you don't just nicely ask someone to quit breaking a law. For years, Thomas had made a living looking at the sports books rules and then being like, "Yeah, 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. 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. I no longer have the company or employees and I do everything alone. Yeah, after getting burned by Colorado gaming and US integrity and going through all the trouble, I went through, I was just totally burnt out, needed to take a break. It was really the first time in two and a half years of the crazy roller coaster experience of being a pro-better 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 models and start gambling again. Yeah, but again, I worked 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 forced myself to take time to travel, hang out with friends and family, focus on my mental and physical health and 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 gain to try to beat and I don't know if I allow myself I would probably get swallowed up and 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. There is a reading of this episode that is just young guy plays with matches and is 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 sports books and instead he turned into an absolute nightmare. 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 you know and that's the other part of it. I mean we worked our ass off you know when we were in Colorado I mean my partner who joined me you know when I moved out there and you know he did it with me for about a year I mean he he was a worker I mean he's maybe like I you know maybe the hardest worker I know I mean and he was so sharp too he caught on so quickly but you know between him and me you know we both worked at least 20 hours like 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 gonna stop until we uncovered every single error the book had made. 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 substack. As always you can follow the show on Twitter @halfkelly. [Music] [Music]