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A daily podcast delving into the biggest stories of the day throughout the sports betting and igaming sector.
Charlie Horner (00:01.004)
Historical horse racing is back making headlines in the US as the Santa Anita racetrack takes the California Attorney General Rob Bonta and his office to court over its decision to seize 26 machines from its premises earlier this month. Santa Anita claims that their HHR machines are legal and constitutional, but the state says they go against their state laws. So what are HHR machines? Are they legal in California? Or...
are they just glorified slot machines masquerading as a horse racing product? And talking about products with legal ambiguity, we round up the latest in prediction markets as Massachusetts gets a win, Polymarket faces a challenge, and Fanjul Predictions goes live nationwide. So welcome back to iGaming Daily, supported by Optimove, the creator of positionless marketing and the number one player engagement solution for sports betting and iGaming operators.
I'm Charlie Horner and today I'm joined by SBC's managing editor, Jessica Wellman. Jess, thanks for joining me. How's things?
Jessica Welman (01:03.323)
nice and easy compared to you guys. I'll tuck it out from Barcelona, but yeah, just trying to stay warm here. The U.S. It seems like the entire U.S. is going to be covered in snow is how people are talking about it, so I'm preparing for a wintry weekend.
Charlie Horner (01:23.234)
just getting acclimatised for the welcoming of Greenland into the United States seemingly.
Jessica Welman (01:27.458)
Yeah, we know how to roll out the red carpet for the block of ice that is under debate right now.
Charlie Horner (01:36.6)
Brilliant, yeah, diplomatic events put to one side, we have enough to talk about today. Okay, this HHR disagreement between Santa Anita and California, what's the story here, what's the dispute?
Jessica Welman (01:53.557)
You know, I was listening to your questions in the intro going, I mean, can all of these be true technically? Yeah. Here's what happened. Santa Anita put in 26, what they call racing on demand machines that are based on historical horse races, not current simulcasting from another.
track or what's going on at Santa Anita utilizing what is called a three by three wager which is essentially somebody wagers on who's on basically three trifectas across three different races. Those display is like a little grid a three by three kind of like a slot machine and you can quick pick and just see are you gonna win are you are you not.
They made it all of 48 hours before more than 20 people from the Department of Justice of California and the Arcadia Police Department showed up and confiscated them. And in the lawsuit that followed suit or the complaint, however you want to phrase it, Santa Anita has filed action against Rob Bonta, who's the Attorney General of California, Ergo, the guy in charge of the California Department of Justice.
saying this was an illegal seizure, it was unconstitutional, you didn't have a warrant, and we believe that what we're offering is perfectly legal.
Charlie Horner (03:29.889)
Yep, listeners can go and check out Jess's story. We'll link it in into the show notes and you can actually see a screen grab of what the machines looked like from the court documents and well, I'll let you...
Jessica Welman (03:41.471)
I'll be honest, less slotty than others I've seen, but.
Charlie Horner (03:46.804)
Yeah, well, we'll let listeners be the judge on that one and make their own minds up of whether it does replicate what a slot machine might look like or not. delving into that story, though, why did Santa Anita think it would be okay to launch these machines prior, you know, because they did have meetings with state officials about this launch, didn't they?
Jessica Welman (04:10.643)
Yeah, so the horse regulator there, they had several meetings in November, in December, again in December, the first meeting included the chair of the organization in which they kept saying, we have these machines, we plan on using these machines, et cetera, et cetera. They had a legal opinion that was created for their team that concluded they believe these machines fall under the letter of the law.
That legal opinion is based on not the attorney general opinion, but what is called the Office of Legislative Council. They have these at kind of every level. We talked about the federal version a bit with the tax bill stuff last year. Essentially, the Office of Legislative Council helps lawmakers figure out if what they're writing is constitutional, legal within the letter of California law.
And in 2006, they said, listen, there's nothing in the definition of a horse race that clarifies it has to be a new horse race. So this is probably something that is already legal and you don't need to write something new about it. Now that opinion came out 20 years ago and they're only now doing something with it, but they sent their legal opinion that this is fine to Rob Bonta's office. They met with people from Governor Gavin Newsom's office at no point.
Did anybody tell them no?
Charlie Horner (05:45.298)
I'm led to believe that the United States is quite litigious and as a nation you do like going to court but I can't believe that they would sit through all these meetings thinking, yeah, that's fine. While simultaneously thinking, yeah, we can't wait to take these guys to court when they launch these machines. Surely they would have raised their concerns about it before Santorini to launch them.
Jessica Welman (06:11.091)
you would think. They approved the three by three as a concept as a wager for live horse racing in 2024, about 18 months ago. You would think. The other thing is like the DOJ showed up and according to court documents, they were like, okay, well, where's your warrant? And they're like, you know, we don't need one. These are illegal gambling machines. And they were like, again, this is a leg, big alleged around all of this, allegedly.
They were like, well, can you tell us what law it's breaking? And they're like, no, we're taking them. So here's the thing with these two is sometimes, I don't know if this is the case here. Sometimes you do this so that it goes to court.
Charlie Horner (07:03.447)
For what reason?
Jessica Welman (07:05.205)
So, I should clarify that kind of just left that trailing, didn't I? For the reason that the same way Cal she is kind of suing everybody, you get the legal clarity that you are seeking, which is you're gonna get a judge reading the letter of the law, which they believe is on their side and saying in a much more formal capacity than the office of legislative council. Yeah.
the law says it doesn't have to be a new race. So sometimes you do these things to get arrested, to get sued, to get to court because maybe you haven't made progress on the legislative front to get like a bill that stipulates specifically that HHR is okay and that they feel comfortable enough with the particular product that they're offering, which like I said,
Like when I live 10 minutes from an HHR facility and when you walk in it's, know, dragons and pigs and buffaloes and all of the things you see in casinos and coins flying through the air, they look like slot machines. Comparatively, this is, it's a three by three grid, you hit quick pick and it does kind of, it seems spin of sorts or create that vibe, but like it's very far removed from
the HHR machines you see here in Kentucky. That I think with this particular product, they're just comfortable enough that if this is gonna get seized, so be it. Like the other thing is, don't, you ever been to a casino with 26 slot machines in it? That's all they rolled out, you know? It's just one little bitty area. So it does feel like a bit of a test.
That being said, it is funny to me that 48 hours somebody showed up to shut these 26 machines down. Rob Bonta's office said in July that DFS is illegal in his eyes. And to date you can still play on every DFS site in California. So I do think like the parties that play here and it does seem like the California tribes are one of them, called a lot of phones and did a lot of yelling.
Jessica Welman (09:29.599)
to immediately get this, you know, taken down. Do I think that might've been the end game for Santa Anita all along? Maybe. I don't know.
Charlie Horner (09:39.437)
Yeah, seems like... It seems the state is picking its battles on that one, but... And for Senza and Ita's part, yeah, it is relying on a 2006 opinion from the Office of Legislative Council. And you said earlier, Jess, that the state didn't provide a specific law that it was invoking.
Jessica Welman (10:02.761)
They said it was illegal gambling machines and I'm sure there's something in the California Penal Code that they're probably, but like in the complaint, they said they were asking for the specific thing that they believed they were doing wrong and were not provided an answer. it's kind of, you know what? It's at least, it's kind of like sweeps, right? Where it was this vague law that you could interpret a couple different ways and.
Bonta's office taking a very strong stance that this isn't one of them.
Charlie Horner (10:37.388)
A quick legal lesson for listeners then. Presumably any opinion from the Office of Legislative Council isn't legal precedent, it doesn't have to count towards case law.
Jessica Welman (10:48.949)
It's just opinion. It holds a little weight in that it's a lawyer who's working for the state that came up with it and said, you know, lawmakers, we think that this is fine. But it's also the same way when we were talking about DFS, Rob Bonta's office issuing that DFS opinion doesn't make DFS illegal. It's just in his opinion it is and that they will
pursue legal action based on their reading of the law. It carries more weight than the Legislative Council's office in that they actually can show up and take your machines. But again, it is just an opinion.
Charlie Horner (11:33.58)
And then finally before we go to a break, it seems like the unions have come out in favour of Santa Anita. Maybe that's worth mentioning because they hold significance way.
Jessica Welman (11:43.529)
Yes, so we are in a situation in every state, lawmakers need to be very careful about unions. This is, I feel like I'm just doing a highlight reel of other things, other pods we've done, Charlie. Like if you recall us talking about online casinos in Maryland, it was the unions that showed up and basically defeated that. And that has been a playbook that they've rolled out in other states of existing land-based casinos like
Cordish Casinos, Churchill Downs, a horse racing first kind of company have shown up and said, like, the unions don't want you to do this. And that carries a lot of sway for politicians, because unions have very influential abilities when it comes to donations, voting blocks, et cetera. The fact that the Teamsters and a lot of other unions have come out in support of San Anita and said, like, listen, horse racing is...
in most parts of the United States and particularly in California, a dying industry. It also employs 26,000 people in the state of California. Many of them are good union jobs. For those who don't know, like in America, a union job has like guaranteed benefits and wages and that kind of thing. So they're generally considered, you know, a good thing to have.
To put lawmakers potentially in between the rock and the hard place of you're either gonna piss off the tribes or you're gonna piss off the unions, that's a spot I don't particularly want to be in and don't envy them. If you're Gavin Newsom and you're thinking about running for president, pissing off the national Teamsters Union or every tribe in the country,
Not a position you want to be in. So this is getting very interesting because with sweeps you saw like the sweeps The pro sweeps people just didn't have a lot of ammo to fight back With DFS they were able to pull a certain amount of strings and I think they were trying to get a union related kind of bill through the legislature before the opinion came down and it just didn't happen but
Jessica Welman (14:08.344)
These guys have pulled in a very formidable foe. I'm curious. Again, I think the courts are where this is going to get settled. But if you're Bonta, if you're Newsome, this may impact how hard you want to go after this.
Charlie Horner (14:25.963)
I know Gavin Newsom has been in Davos this week for the World Economic Forum and I love the idea that they they would be grilled by the the world press. Hey, Governor, what do you think about those 26 machines in in the middle of your state? Any comment? But yeah, let's let's follow this one very closely because it could be it could have big ramifications in California. But for now, Jess will take a short break and then we'll
Jessica Welman (14:51.379)
Yes.
Charlie Horner (14:55.595)
Have a little look and a bit of a roundup of what's happening in prediction markets. Join us again very soon.
Jessica Welman (14:56.839)
more prediction markets.
Charlie Horner (15:05.585)
Welcome back to iGaming Daily. It's that time again we're talking about prediction markets. One voice in all of this that we've missed for a long time is that of the CFTC. We've finally heard something. The new chair has written in the Washington Post. Rather than any official CFTC release or anything or press conference, it's taken to a newspaper but...
Jessica Welman (15:34.601)
love that this bothers you so much.
Charlie Horner (15:34.675)
each to their own. But what did Salig say in his op-ed and what does it tell us about the commission's plans?
Jessica Welman (15:44.499)
Yeah, so the new chair Mike Selig did an op-ed and I think the reason he did an op-ed versus an official communique is because it's like we're gonna roll out this new initiative versus policy. You know what I mean? Like he's saying our approach to the CFTC is going to change and it's more, know, a press release would have made sense too but the op-ed is not as weird as you think it is when it's the fact that
He hasn't materially changed anything yet. But what he has said is basically, want, I believe the phrasing was the minimum dosage of regulation necessary. So a very hands off approach, which is very different from how the Biden CFTC was run. And that we are going to comprehensively look at all of our regs and like scrap any that we feel are unnecessary, which...
for prediction market critics who are like, this is chronically under regulated is not the news you want to hear as all of these, know, insider trading collusion stories run their course. He's talking a lot more on the crypto side of things. He's a crypto guy and that's what the focus of the op-ed was. In fact, he only mentioned prediction markets once and it was just kind of in passing. hey, they're a booming thing.
I did appreciate the phrasing was that are used as like legitimate financial hedging devices or people who just want to test their ability to predict the truth. And I'm like, yeah, that's exactly why like Joe Schmo in California has 17 contracts on the AFC championship this weekend.
Charlie Horner (17:27.528)
Ooh.
Jessica Welman (17:37.811)
He just wants to see how good he is. He doesn't care that it makes money and that sports betting's not legal in California. He just wants to see how good he is at measuring truth or to hedge against his Apple stock.
Charlie Horner (17:52.524)
Yeah, I'm sure there's plenty of free-to-play prediction games that Joe Schmo could get involved in, but there you go.
Jessica Welman (17:56.853)
Or just like write them down seal them in an envelope and prove to your friends that you got it, right? I don't know why you need to do this on cal she but okay
Charlie Horner (18:02.475)
You
Charlie Horner (18:06.165)
But this approach, this laissez-faire approach, is what we would have anticipated, what we would have expected from this administration. We can see it in plenty of other parts of politics in the United States. But still, the states are remaining hands-on with prediction markets, and the polymarket has been hit with a legal notice in Nevada. What's the story here?
Jessica Welman (18:32.021)
So what's interesting about the Nevada case is there are two other cases, right? We've talked about them ad nauseam. One is crypto.com, one is Cal-She. In both of those, Cal-She and crypto.com are the plaintiffs. They filed suit and they did so in federal court. Now those cases are all going Nevada's way at the moment because Judge Andrew Gordon initially ruled against them.
Then the crypto.com case came through and he's like, no, actually you guys need to get out while we litigate this case. gotta get out of Dodge and reverse on Cal-She which is now up for appeal. What's interesting about this is that Nevada didn't just send a cease and desist since they get out. They actively sued Polymarket in state court. Again, for those of you that don't know,
Federal court is for like the Constitution and the laws that are passed by Congress. State court is about laws passed in the state. So to now take charge in state court, you're gonna find potentially even more rulings in favor of why they need to get out of Nevada. So it is interesting that they are now taking this new tact with this new player of going on the offensive.
be perhaps because I'm gonna give you your segue, they saw how well it worked in Massachusetts.
Charlie Horner (20:03.965)
Exactly, yeah, we sort of hinted at it at the top of the show. Massachusetts has landed a big blow on on Cal-Sheer. It's won its suit against a prediction market in state court, or it's at least it's
Jessica Welman (20:15.797)
It hasn't won its suit, it's won its injunction.
Charlie Horner (20:18.973)
Yes, yes, so that's an important clarification to make. So, Calchi has to temporarily shut down in Massachusetts. This is big and this could shape how all of these bits of litigation go right across the country, right?
Jessica Welman (20:37.065)
Yeah, so yes and no. I did a pass on all of the cases yesterday and I did see that basically every case was like submitting documents saying, by the way, here's what Massachusetts said. Now again, this is in state court, not federal court. So this isn't a ruling that like say they win the whole case. That doesn't apply to the rest of the country. It just applies to Massachusetts.
Now Massachusetts was the first state to go on the offensive like this and they sued Kalchi in state court. Kalchi tried to get it kicked up to federal court. Federal court was like, no, this is one the states need to figure out, sent it back down. And then they lost their preliminary injunction. Now we have seen Kalchi is fighting tooth and nail to not leave anywhere and so far they have.
They have been told in Maryland, in Nevada, and now in Massachusetts, get out, and they are appealing the two. I have yet to see an appeal filed in the Massachusetts case. I would wager quite, would hedge my 401k by investing quite heavily in the contract that they will in their argument to Massachusetts.
They claim that like if you make us do this, you might collapse the whole ecosystem. But they also are claiming and the judge did not buy it at all that, you know, this is gonna impact every contract, not just sports contracts. They're like, no, it's just sports contracts. you know, you talk about it with injunctions, if there's an undue amount of harm that will be done to a site or a party if you're telling them.
get out, stop doing something. And he very clearly said, like, it's pretty obvious that you run the risk of being told to get out that you brought this on yourself.
Jessica Welman (22:45.044)
Charlie Horner (22:45.362)
Yeah, and this is something that's gonna be a very, very fast moving situation. It has been for the last 12 months. While simultaneously being a really slow process and we have to wait at least two years to find out what's gonna happen on the federal level, but...
Jessica Welman (22:56.245)
Yeah, I mean, the the state court worked a lot faster, right? You know, we have a decision pretty quickly. It was filed in November, I think, or maybe September. In the fall, it already got it got in and out of federal court in like a week. And then, you know, the reply, the briefs and things have came through, have come through very quickly.
The reason I think a lot of these other cases are taking their time is they're waiting to see, you've got the Ninth Circuit with the Nevada case on appeal. You've got the Third Circuit with the New Jersey case on appeal. And you've got the Fourth Circuit. The circuit courts are the appeals court at the federal level looking at it. And I think all of the other judges in these other cases are kind of saying, I don't really wanna weigh in next if...
the circuit courts are gonna weigh in and tell us I'm wrong. So I think they're kind of biding their time a little bit on this. And we'll see which circuit court comes back first and says something about it.
Charlie Horner (24:11.422)
Listeners can't say that we don't give them a good lesson in the US legal system.
Jessica Welman (24:16.627)
I mean, go take the AP government exam, guys, at the end of this, because we've taught you a lot about the system.
Charlie Horner (24:26.78)
Indeed. finally, let's take a look at what's happening at FanDuel because FanDuel predicts has now gone nationwide from what was just a handful of states. And yeah, tell us about what it is, you can wager on, hedge your bets on sports, hedge your predictions on sports and where you can't.
Jessica Welman (24:51.381)
Test your truth, testing your truth from coast to coast. Now it varies, any state that has sports betting, Fandool is only offering like culture and business kind of markets. So you can do things, which like actually opens the door for a lot of like, we have the Super Bowl coming up soon, a lot of like halftime show related things that you won't be able to offer elsewhere. And I'm sure for that.
group, fan dual predict, et cetera, et cetera, that that'll be a point where you really start pushing this product. We haven't seen it advertised or anything like that. They're not, again, I think I kind of said this as much. They're getting in because they have to. I don't think that this is the plastering ads wall to wall on sports broadcasts.
thing that they did with sports betting. They're being very low key about it because they actually are being like they wanna make sure that these contracts are not being manipulated. They wanna make sure that they're doing similar diligence that they do with their sports books. So I'll be honest, I've looked at the DraftKings product. I haven't looked at the FanDuel product. Looking at the DraftKings product, it presents just like a sports book.
Moneyline, Total, those sorts of things, they're all there. And I assume the interface is similar for FanDuel. I might dabble in the culture ones and see what happens, because, you know, Oscars noms came out yesterday, or this past week, I forget we're rolling this out on a Monday. So you know me, I love my Oscars stuff, and I may not have to go out of the 20 minute drive to Indiana this time.
Charlie Horner (26:41.706)
Yeah, nice. And, you know, the likes of DraftKings and Fanjul have said that if they were going to get into this game, they could do it better than Kalshi and the rest of them because, you know, they've got the products, they've got their technology lends itself to this kind of product more so than the others, particularly in the sports realm. Sure.
Jessica Welman (27:02.953)
Yeah, I think they mean specifically sports. know, I think these other things are fun ancillary markets. This again, it's not a moneymaker, right? I think that somebody on Twitter was saying that like the next most popular contract on Kelshe that wasn't sports was who the new chair of the Fed was gonna be.
and was like 31 million in trading total on it, whereas sports, there's about a billion in trading a week.
Charlie Horner (27:35.176)
There you go, that's the moneymaker and that's where we'll see this...
Jessica Welman (27:38.653)
Yeah, so it's like, yeah, I think these culture ones, again, you're just place holding. It'll be interesting because you wanna be there in case the You Can Bet On Everything app gets approved. I mean, test your truth on everything. Can the title of this podcast be, you know, testing the truth with Cal Sheet?
Charlie Horner (27:54.044)
Yeah, yeah, exactly, yeah.
Charlie Horner (27:59.85)
Fantastic. Well, Jess, as always, we've run way over, but we've had fun on the way, that's the real quiz. Thanks a lot for joining me on this one, Jess. Really appreciate it. And thanks to the listeners for tuning into today's episode of iGaming Daily, and join us tomorrow to keep up to date with all the latest global gambling news.
Jessica Welman (28:25.749)
Bye.