From Alleyways to Penthouse Suites

History of Sportsbetting Industry. Where it comes from and where it goes...

From Alleyways to Penthouse Suites

History of Bookmaking.

Wenesday, October 1st 1919 – Game Day (The 1919 World Series at Crosley Fields. Cinncinati Reds and Chicago Whitesox)

“It’s 9:38 am….It is gonna be a hell of a day”, I think to myself as a baggage car rumbles past the cobblestone street. “I got all my runners working the streets from Canal St. all the way up to Harlem. Joey “the snake” and his people are working the Brooklyn Area over by the bay, doesn’t have many players but most of em are wise guys anyways and they are all in on the fix. Lil’ Charlie ‘butters’ is working the other side of the river from Hoboken to Union City. Those are the one who are gonna make our pay day. All of em are ‘taking the price’. Even the “buttons” over at the “clubhouse” are in on it. This is the one day in my life that I have seen the “coppers” letting us go on with our own business and not shaking us down. This whole game is gonna be a chisel…its gonna be a hell of day!”

As I hang up on my last player, putting in a play for the weekends Seattle and Washignton Football game, I think back on that time, where a bookies best friend was a pencil, a note pad, a racing sheet for the day, and the friendly police officer that had been paid off the week before to allow them to continue doing business. And I think to myself how this whole business has grown from the back alleys of New York and Boston, where the masterminds of the bookmaking business where usually part of the Mafia and where constantly being hasseled and thrown in jail for writing bets, where the players would do their business in the back of a pub or local bar or on the street corner, to the huge Corporate Enterprises, where the player has accses to the technology and place their bets over the net, call in their bets over toll free numbers to Sportsbooks located offshore that are legal and bonded in the country they operate and the bookies calling themselves now a day “entrepreneur”.

I can’t help but laugh at the irony of it and question how all this began.

And in the beginning...

Betting has been around since the begining of time…ever since ther was something a man could place odds on …there where the bettors ready to throw some cash on it. They used to bet on the outcome of events that where held in the Coliseum when there where Gladiators and Lion wrestling.

There has always been a demand for betting and the bookies came to be, to fill that demand. In the old days, it began with people betting on makeshift horse races, cockfights and bare-knuckle brawls. Colonists from England had gambling in their blood since their ancestors had been doing it for generations - not only in hopes of a profit but also as a form on leisure and entertainment. If there was a sport to be played, there was somebody somewhere who was willing to bet on it, and a bookie to write it.

Now a days the betting industry has grown to huge proportions. Last year, Nevada took in almost $2 billion in betting handle via more than 150 sports books in the state. That is just a small percentage, however, of the money bet worldwide. In a ESPN Magazine article published in 2003 estimated that the online sports betting industry takes in $63 billion a year. It has also been estimated that one in every four Americans bets on a sporting event at least once a year and that 15 percent of the U.S. population bets on sports regularly.

But I jump ahead of myself…

Horses. That’s where the money was for the bookie back in the days. It’s popularity grew throughout the 19th Century and into the early 20th Century. From the get go, racing was a sport that was enjoyed and wagered on by mostly the upper class. But after the Civil War horse tracks began to dot the eastern landscape and bettors from all economic sectors flocked to the tracks in truck loads.

Many audacious bookies would start 'auction pools' in the early days of horse racing which involved auctioning off bets for each horse in a race. But this style did not last too long because bettors were out of luck if the horse that they wanted to wager on was already taken. The bookies - always considered an innovative and creative bunch when contrasted with professionals from any other industry -- soon realized that setting odds on individual horses would increase betting handle and, in turn, the bookie's hold. When there was overwhelming money on one horse, the bookmaker would simply lower the odds to increase the attractiveness of other horses in the race. This format is still in use today. But horse betting has steadily decreased in popularity since the 1930s.

By the 1920’s Horse racing was at its prime. There where over 350 tracks, hundreds of ‘pool halls’ which where connected to the tracks via telegraph wire. At these ‘pool halls’ locals could bet on any given track at a multitude or races in the country.

But going back in time, in the late 1800’s, Baseball started gaining some well earned popularity, hence people started betting it as well. Baseball 'pool cards' where created in urban areas in the East. These cards, similar to present-day parlay cards, offered bettors a bundle of baseball betting options that they could wager on for amounts as little as 10 cents. But there was a catch with these pool cards: the odds were badly fixed to the houses' favor. There was no way for a bettor, no matter how sharp they might have been, to make a profit over an extended period of time. No one seemed to care, however, as the cards continued to increase in popularity while the bookies' pockets continued to get fatter.

All was well in good for the bookies at that time. But all good things must come to an end.

October 1st 1919. World Series. Game day at Crosley Fields. Chicago White Sox and Cinncinati Reds. Anyone who is anyone in the basbeall loop can tell you what happened on that day. That was the day that eight members of the White Sox were charged with conspiring to throw the Series. ... The eight became known as the "Black Sox" and were banned from organized baseball for life by Commissioner Kennesaw Mountain Landis. This was dubbed as the ‘Black Sox Scandal’ by the media and exposed the risk of proffesional baseball games to be comprimised by gamblers. (Chicago lost the series to Cincinnati, 5-3). The Chicago White Sox were found to have fixed games at the request of gamblers. This brought the public to have negative thoughts on sports gamblers, who at that time, with the help of the friendly media, where made out to look like criminals who where trying to ruin the goodness of the game for their own monatary enhancment. And even though gambling was illegal sports betting was seen as some victimless crime… until that day.

The sport of Baseball continued however. And Despite the media coverage given to the gambling world, the bettors did not waver in their betting parlors and in their ‘pool halls’. You could still fin the bookie on the same street corner or at the same pub writing out his bets for the regualars, with far more caution than before,however. If anything was lost over that one demoralizing day for the betting community, one could not have figured it out. Both the bettors and the bookies where more cautious in their active roles and the betting handle continued to grow progressivly

As time went by more and more people became interested in sports betting during the 'Golden Era' of sports in the 1920s. College football and college basketball were gaining huge popularity within the gambling circuit. Boxing was a big part in the picture. And Baseball remained steady. Pool cards where still in the game which at this point in time where also used for Football wagers and were the favorite option of many due to their promise of riches during the tough economic times of the Great Depression.And just like in the past, the odds for football cards were heavily in the bookie's favor.

And so, “In the beginning the Bookie created betting pools , Odds and Pool cards. And the earth was formless and empty without these. And the bookie said, “let there be Bettors” and bettors came to be. And the bookie saw that this was good.”

Let there be point spreads…

So we are now at the point where any bettor that wanted to place a wager on anything would be taking the odds that the bookies would give him. On everything from Horses to boxing matches to Football games to Baseball. Anyone wanting to take the favorite would have to lay down hard cash and bets on the underdog would bring back a hefty payoff. If the bookie was taking heavy action on any one partucular event he would refrain from dealing it to minimize his risk. It was all about playing the odds. The odds used back then are very similar to the Moneyline system used now on mayor sporting events.

Then in the 1940’s came the solution to the bookies problem: Point Spreads and the 10% Vigorish (commision taken by the bookmaker on all bets). Many argue in who was the einstien who actually came up with this idea, but most believe it came from professional bettor and bookmaker Charles McNeil from Connecticut. But whether it was him or some hobo from 36th ave, it most certainly was McNeil who streamlined the idea and first put it into use. McNeil undoubtedly borrowed some concepts for what he called the 'wholesale odds system' from other professional bettors - including fellow sports betting luminaries Billy Hecht and Ed Curd. Regardless of who is credited with inventing this new system of bookmaking, it changed the face of sports betting forever.

This new point spread system created a windfall for bookies because they could now even out the betting handle on each side of a game by making a point spread that reflected the difference in points between two teams in a game. This virtually guaranteed a profit for the bookies in addition to giving them the option of offering many more games to their customers.

Before all this most bookmakers would book games that were fairly evenly matched in order to decrease the risk of huge losses. But with the point spread they could offer any game they wanted because the line reflected the differences between the strengths and weaknesses of the two teams and helped them attract business on both sides of a game. If a particular game saw heavy action on a particular team, the bookie simply had to move the line to make the opposing team more attractive.

Offering a point spread and 11/10 vigorish not only ensured that the bookies would earn a profit over the long run, but it increased the interest in sports betting across the country as bookmakers in different markets began to implement the new system. Over time, the 11/10 vig would earn the bookie a 4.4 percent profit on the bets they booked (in a perfect scenario where action was balanced for all offerings). The 11/10 system also gave professional bettors something to shoot for: 52.38 percent. When factoring in the vigorish, a winning bettor must hit at that ratio just to break even and they must best that percentage in order to achieve profit.

The new idea of the point spread, along with the widespread mania of television in the 1950s, can be referenced as two factors that perpetuated the massive growth of sports betting during this era. More games were offered by bookies and people could actually watch the contests they bet on at home or their local tavern.

In many American cities - especially in the east -- betting on sports was becoming an integral part of daily life. Some of the men who helped mold the Las Vegas sports betting scene remember being exposed to the enterprise at a very young age. Current Las Vegas professional bettor Lem Banker, who has been prominent in the Southern Nevada sports betting scene for more than four decades, learned the craft as a youngster under the tutelage of his father who ran a bookmaking operation out of his candy store in Union City, N.J. Vaccaro remembers betting at bookmaking operations that were located in the back of cigar stores in Pittsburgh and driving to neighboring communities to 'shop' for better numbers at competing books. Frank 'Lefty' Rosenthal recalls his days as a young man betting in the bleachers at Wrigley Field and Comiskey Park in Chicago where he says, "gambling was more popular than hot dogs."

Handicapping America

Long before Las Vegas became the epicenter of the sports betting world, a man named Leo Hirschfield started a company, Athletic Publications, Inc., that would become the oddsmaking standard for the sports betting world for three decades. Established in the mid 1930s, the company set the lines in all sports and distributed them to bookies across the country via telephone and telegraph. This is much like the Don Best Line Service that reputable sportsbooks use now a days. Hirschfield also published and distributed several publications that provided sports information intended to help bookies make a better line and for bettors to be able to spot weak numbers. The most popular of these publications was called The Green Sheet.

While most of his thousands of customers were illegal bookmakers, Hirschfield's business was purely legitimate. He had a team of four handicappers that would analyze each game for the following week and set a line during Monday morning roundtable discussions. The late Mort Olshan, who eventually became the founder of ‘The Gold Sheet’ tout publication -- which is still immensely popular with bettors to this day -- was a young handicapper on Hirschfield's staff in the late 1940s to the early 1950s. His son, Gary Olshan, remembers hearing stories of how the 'Minneapolis Line' was set.

"[My father] read the sports sections each day from 40 papers from around the country to learn as much as he could about the teams so he could come up with a good line on games," says Gary Olshan. And setting good lines was especially important for Hirschfield and his staff since their reputation and livelihood were at stake. Clients paid approximately $25 a week in order to subscribe to the line service.

According to Howard Schwartz, owner of the Gambler's Book Shop in Las Vegas, Hirschfield used to pay airplane pilots and cleanup crews for the collection of newspapers from all around the country that his staff could use in the formulation of point spreads. Until the company disbanded in the early 1960s as a result of new laws that made it illegal to discuss gambling on the telephone across state lines, just about every point spread used anywhere in America originated from the Minneapolis office.

Viva Las Vegas

Gambling was legalized in Nevada in 1931, but it wasn't until years later that sports betting would become commonplace across the state. Before gambling, Nevada was in big economic trouble. The state's main industry had been mining, but that trade had diminished by the late 1800s and Nevada was in a dire financial situation. Most of the state's cities, which had boomed during the mining apex, were virtual ghost towns. Reno was the state's biggest city with approximately 15,000 residents and Las Vegas had nearly 5,000 citizens. But legalized gambling, boxing, effortless divorce and prostitution made Nevada an attractive tourist destination. The economic condition changed dramatically -- almost overnight -- once gambling was added to the state's coffers.

While casino-style gambling was deemed legal, sports betting was still illegal until a regulation was passed by Congress in 1951 imposing a 10 percent tax on all sports bets. Of course, in an atmosphere that revolved around gambling, it was probably not difficult for visitors or residents to find someone to take a bet before the new law was passed. But the new regulations allowed the bookmakers to come out from the shadows and work their trade openly in the public eye.

The first legal sports books in Nevada were stand-alone shops which were independent from any of the large casinos. They were called 'turf clubs' and had names like the Del Mar, Churchill Downs and the Rose Bowl. These small operations were sometimes referred to as 'sawdust rooms' because of the wood chips that were spread across the floor to soak up spilled beer and to remove some of the foul odors. Betting options were posted on chalkboards and cigar smoke was heavy in the air.

After the office in Minneapolis shut down, these turf clubs filled the oddsmaking void left by Hirschfield's departure from the industry and the first 'Las Vegas Line' was established. It was during this time that a man named Jimmy 'The Greek' Snyder became the world's most visible linesmaker. Snyder, who formulated his numbers out of the Saratoga Club, was known by most industry experts as more of a public relations whiz than an astute oddsmaker. He is, however, often credited as the being the individual that brought sports betting into the public eye like no other before him. Snyder, who ran his own PR firm, wrote a syndicated newspaper column that was published across the county and even landed a lucrative gig on the CBS-TV football pre-game show, where he would make his game selections live on the air every Sunday.

"One thing that [Snyder] was able to do that no one has been able to do before and no one has been able to do after him is get gambling on national TV on a regular basis," says Michael 'Roxy' Roxborough, who would later become the most prominent linesmaker in the world in the 1980s. "He was such a celebrity that he did a TV commercial where he would give people 5-2 odds that you could get a closer shave with some shaving cream and he was rolling dice in the commercial. That could never happen today."

Even though sports betting was becoming widely accepted, the turf clubs faced some problems from the outset. Because of the 10 percent tax, it was impossible for these betting shops to make a profit while offering 11/10 vigorish. Many of the books passed the tax on to their customers -- who were willing to lay the action no matter how steep the price -- in the form of 12/10 vig. Some say that enterprising book operators found other illegal ways around the tax. Despite the tax, the turf clubs evidently did quite well during the 1960s and early 1970s.

"They were all well organized," says Rosenthal of the turf clubs. "They used to bail their money [like hay]. It just kept rolling in. They were the only game in town and it was legit."

The turf club operators had an agreement with the larger casinos, according to Vaccaro. As long as the hotels would stay out of the sports betting business, the turf clubs promised not to add casino games into their operations. The two entities ran separately and in harmony until 1974.

It was during that year that legislation was passed that would change sports betting in the state forever. The 10 percent federal tax imposed on sports bets was deemed unconstitutional and Congress agreed to lower the tax to just two percent. This created a sports betting boom because operators could now legally make a profit while offering their customers 11/10 juice. It was a move that would also signal the beginning of the end for the turf clubs.

The casinos had decided to stay out of the sports betting game because it didn't offer the high profit margin of other casino games like blackjack, roulette, craps and slot machines. But after the tax was lowered (it would be dropped even further, to .025 percent in 1983), some casino executives began to see the potential advantages of opening a book in their outfit.

One of these men of vision was Rosenthal, the real life figure who was portrayed by Robert DeNiro in the movie "Casino." In 1975 Rosenthal, who was running the Stardust, appeared in front of committees of the state legislator in favor of new laws that would allow sports books to be located in casinos. "In this one situation it seemed like I had a crystal ball," remembers Rosenthal. "My premise [was] that it would create thousands of jobs and bring in millions of tourists and [the sports book] would just be another arm of the casino. [The commission] acted within two weeks and passed the ordinance."

This new law paved the way for what would become the standard for Nevada casinos. In 2004, nearly every large property in the state has a sports book. Back in the mid 1970s, after the new law was passed, the casino operators wasted no time in getting into the sports betting business. Jackie Gaughan opened a book at the Union Plaza Hotel and Casino in downtown Las Vegas in 1975 and Rosenthal opened his book at the Stardust the following year. Books subsequently "sprang up like cactus" in the casinos, according to Rosenthal.

"[Gaughan and Rosenthal], they are the pioneers of what you would call the new race and sports book," says Vaccaro. "They moved forward and took the backroom stigma out of race and sports by placing it in a high visibility property. Those two people had more to do with the way things are now than anybody."

The sports book at the Stardust became the prototype for what every designer after it would aspire for their book to be. Rosenthal created a plush environment for his customers with plenty of seating space and multiple television sets where patrons could keep tabs on their action. He replaced the old chalkboards with electronic boards to display up-to-the-minute on a multitude of sports.

Rosenthal's vision for the potential success of the sports book for the overall bottom line of the casino was correct. Customers herded into his book and the casino started to see increases in revenue across the board. "We knocked their socks off," he says. "It really wasn't rocket science. If you build an operation that contains horses and sports and do it properly and make it comfortable and luxurious, people will be coming in from various parts of the country."

Consequently, sports books began to show up in other casinos at a rapid pace. The turf clubs were not able to compete and they all eventually shut down. With the exception of Little Caesars, which was operated by the late Gene Mayday and stayed in operation until the early 1990s, the casinos rendered the turf clubs nearly obsolete by the mid 1980s.

"They held out for as long as they could," comments Vaccaro. "Those old guys who ran those joints, they were what you would consider just purist bookmakers. But they couldn't change with the times because they couldn't buy hotels. The hotels could buy them."

One of the holdovers from the turf club era was the late Bob Martin, who ran the Churchill Downs book and was eventually hired on by Gaughan to run the book at the Union Plaza. Martin had established a reputation as a shrewd oddsmaker. According to Vaccaro, Martin was the "greatest bookmaker that ever wrote down a point spread." In fact, he was so well respected that most of the lines used throughout the country originated from his office. After Snyder's reputation had diminished, Martin's numbers became the Las Vegas Line.

"At Monday around noon, the sports book at the Union Plaza would have hundreds of people there and then once the line went up, the sports book - one or two minutes later - would have about six people in there," remembers Martin's son-in-law, Eric St. Clair, who is currently a Las Vegas bookmaker. "It was people all running to the phone to call their people and saying 'here's what the line is' so they could put it up all across the country."

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