Michael LaPointe’s monthly column, Dice Roll, focuses on the art of the gamble, one famous gambler at a time.
Original Illustration © Ellis Rosen
In April 1995, traders on the floor of the Pacific Stock Exchange were in a frenzy. The jury in the O. J. Simpson trial had refused to come to court that morning. In The Washington Post, a law professor said that the probability of a hung jury had increased. And so at the Exchange, if traders had shares in guilty or not-guilty verdicts, they wanted to dump them; a hung-jury share was looking a lot sharper today. Everyone was looking for Steve.
This had nothing to do with the stocks on the ticker, and everything to do with an elaborate, parallel marketplace operated by Steve Schillinger, an independent broker, who sold futures on the side for countless things you couldn’t find at the Exchange: Who would win baseball’s MVP award? Who would make the Final Four? Would O. J. go to prison? Although Schillinger was a decent enough stock broker, his real talent was in figuring the odds for nebulous outcomes like the O. J. verdict, and revising them as events unfolded. His colleagues placed bets with him, and he’d pay out based on whatever the odds had been at the time of the wager. He was, in short, a bookie.
“People were leaving their stocks to come bet on the NCAA,” Schillinger said, explaining why he was quietly asked to leave the Exchange. But by then, he had a dream. In his covert marketplace, he’d glimpsed not just his own future, but the future of gambling. That vision would lead him to become the pioneer of a multi-billion-dollar industry, and then a fugitive from justice who would die in exile.
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Originally from Chicago, Schillinger came to San Francisco in 1979. He was preternaturally gifted at perceiving probabilities. Golf, backgammon, chess—he could set odds on anything, and place a savvy bet. I recently spoke to a former colleague of his, who said that the day Princess Diana died, Schillinger bet that Elton John would write a song about her. “That was a long shot,” the colleague told me, “but Steve won it at 20:1.”
In the mid-’90s, Schillinger and two friends from the Exchange, Jay Cohen and Haden Ware, decided to start an online sports book. On the surface, the start-up conformed to the logic of many early dot-com endeavors: take a well-established practice, and put it online. But in fact, what Schillinger, Cohen, and Ware were developing was far more radical. They wouldn’t just book conventional bets. In keeping with Schillinger’s O. J. experiment, in which the odds fluctuated as the trial progressed, the start-up would offer “sports futures.” You could buy stock in eventual outcomes—who would win the AFC Central Division in football or who would appear in the NBA Finals—and the value of those shares would rise or fall in real time, depending on the breaks of a season. Even the bets on individual games would follow a futures model, with probabilities fluctuating as the outcome came into focus. “The future of sports gambling is totally interactive wagering during the game,” Cohen declared.
This innovative futures market gave the start-up its name: the World Sports Exchange. They raised $600,000, and registered an alluring website: www.wsex.com.
It was time to book some bets—but where? Unless you were a Nevada casino, it was illegal to be a bookie in America. Of course that didn’t stop it from happening. In 1998, it was estimated that Americans illegally wagered about $100 billion. But WSEX was proposing to do its business proudly out in the open, not in the smoke of some dingy back-room bar.
And so they set out for Antigua. In the aftermath of devastating hurricanes, the island nation’s tourism industry was in decline, and it was pivoting to online gambling. With underwater fiberoptic cables connecting it to the U.S., Antigua was ideally positioned to capitalize on this burgeoning business. By 1999, the online gambling industry would be the island’s second-largest employer, and the nation of sixty-five thousand would account for over half of the world’s remote gambling market.
Above a camera shop in a St. John’s strip mall, Schillinger, Cohen and Ware set up an office and launched WSEX in November 1996. At first, they had about twenty customers. Then came the golf tournaments. With dozens of players competing over several days, golf was perfect for showcasing WSEX’s futures market. News of the start-up spread by word-of-mouth, and business started flourishing. In 1997, the client list grew to five-hundred. In 1998, it blossomed to two-thousand, and it was six-thousand the year after that. By 2000, as they were booking bets on the outcome of Bush v. Gore, or who would get booted off Big Brother, the annual income of WSEX was reportedly more than $300 million.
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As far as its founders were concerned, WSEX was doing nothing illegal. They were fully licensed by Antigua. Certainly they were doing nothing immoral—at least nothing worse than what they’d done at the Pacific Stock Exchange.
Drawing comparison to the stock market was the WSEX company line. “You can’t tell me that when someone buys a stock on Monday and sells it on Tuesday that that’s investing,” Jay Cohen told Sports Illustrated. “That’s gambling, just like our [sports] futures market. Internet gambling is the same as my last career, except the folks I work with now are less sleazy.” Haden Ware added, “If you go on our site and change Boston Red Sox to Boston Market, we’re Ameritrade just like that.”
They weren’t wrong to draw such parallels. As David G. Schwartz writes in Roll the Bones, his history of gambling, the eight-century pioneers of finance capitalism saw speculation as a kind of gambling. A coffeehouse near the royal exchange in London was described as “being full of gamesters, with the same sharp intent looks”; but as Schwartz writes, “these gamesters had turned in their cards and dice for stock.” The stock exchange inherently attracted gamblers. In The General Theory of Employment, Interest, and Money (1936), John Maynard Keynes states that “the game of professional investment is intolerably boring and overexacting to anyone who is entirely exempt from the gambling instinct.”
But the law wasn’t amused by these comparisons. As WSEX flourished, Schillinger and his colleagues made powerful enemies. Back in the U.S., Senator Rod Kyl of Arizona was crusading against online gambling. Likening it to crack cocaine, Kyl said that sites like WSEX were “where little Johnny can basically bet away mom’s entire credit card before she gets home from work.” In time, the senator refined this message into a kind of fear-mongering jingle: “Click the mouse and bet the house.” He introduced the Gambling Prohibition Act of 1997, under which an online bookie would face a four-year prison term. Kyl tried out another, less melodious slogan: “Use e-mail and go to jail.”
WSEX tried to make light of the opposition. They even set odds on whether the Kyl bill would pass. It did not, but in March 1998, Schillinger, Cohen, and Ware were nevertheless charged in federal court with violating the Wire Act.
Introduced in 1961, the Wire Act was intended to cut off the lifeline of bookies, making it illegal to use telephone wires for booking bets. WSEX argued that the act didn’t apply to them. Not only was it obsolete, having been written decades before the internet, but it also just wasn’t how they did business. WSEX customers wired money, sure, but that wasn’t a bet. The money remained banked until they made a wager, and those wagers didn’t occur over phone lines; they occurred in the internet server housed in Antigua, where everything was legal.
I recently spoke with Haden Ware, and he described the mood of cautious optimism the three men felt when Jay Cohen returned to the U.S. to fight the charges. “We felt that it was a bluff,” Ware told me, “and that if we called it, they’d go away fairly quickly.” Cohen urged his colleagues to keep WSEX plugged in, estimating he’d be back in six months.
It would be eight years. On July 24, 2000, Cohen was found guilty. He served eighteen months at Nellis Federal Prison Camp, north of Las Vegas, and was sentenced to a lengthy parole that kept him away from Antigua.
WSEX continued its operations, but for Schillinger and Ware, the writing was on the wall: returning home would mean prosecution and imprisonment. They were exiles.
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When Morley Safer disembarked on Antigua to interview Schillinger and Ware for 60 Minutes, he was turned back by customs. The island wasn’t sure what kind of slant he’d give the story, and they didn’t want any bad publicity. The WSEX team went to meet him on the nearby island of St. Martin. The story, which aired in January 2001, showed the men happily golfing. Safer enviously observed that Schillinger never wore a tie to work—or “We’re real happy down here,” Schillinger said. “If you’re going to be trapped somewhere, it’s not a bad place to be trapped.”
The reality of exile was slightly different. Schillinger had brought his wife and children with him when he first moved to Antigua. He’d thought it would be a temporary adventure before WSEX became legitimate and they returned home. But by 2000, the family was back in California. “[Antigua’s] not a great place to raise young ones,” he said. “There’s nothing here for them to do.” The family tried meeting on various Caribbean islands about once a month. Then his wife filed for divorce.
Around the same time, Schillinger called to wish his father a happy seventy-sixth birthday, and his mother informed him that he’d died five days before. She’d refrained from telling him, in case he impulsively risked arrest by coming home for the funeral. “I knew something like that would happen one day,” Schillinger told the New York Daily News. “It was horrible.”
But he vowed to keep going. “There’s really no slowing us down,” he said. “There’s no stopping us.” By 2003, WSEX was planning to strike back.
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While serving his sentence, Jay Cohen received fan mail. People had seen the WSEX founders on 60 Minutes, and were impressed by how they’d stood up to figures like Senator Kyl. One such letter contained two ideas. The first was for a betting service that would track pregnancy due dates. Cohen discounted that one. But the second idea was intriguing. What if Antigua sued the U.S. government for violating trade rules?
After all, the letter writer argued, the U.S. allowed some long-distance wagering, such as off-track horse-race betting. By outlawing WSEX, but still allowing off-track betting, the government was giving preferential treatment to U.S. companies. That violated World Trade Organization rules.
In 2003, the WSEX lawyer filed a complaint with the WTO on behalf of the Antiguan government. The U.S. responded by claiming their laws were designed to protect public morals. But in a repudiation of Senator Kyl’s rhetoric, the WTO ruled that the U.S. had failed to demonstrate a moral basis for their laws. Instead, targeting the Antiguan gaming industry was clearly an attempt to protect economic interests. The U.S. was ordered to pay damages.
“The U.S. doesn’t control Antigua and it doesn’t control the Internet,” Schillinger declared. But above the camera shop in St. John’s, things were starting to unravel.
By then, Ware told me, “We were a law firm fronting as a sports book.” Much of the company’s revenue had gone into fighting the Cohen and WTO cases, and whatever remained went back into the site. Meanwhile other, fiercely competitive sports books had emerged online, and the comparatively low-tech WSEX struggled to keep pace. What’s worse, after licking its wounds from the WTO, the U.S. government circled back on Antigua.
On October 13, 2006, President George W. Bush signed the Unlawful Internet Gambling Enforcement Act. Full of typos, and tacked onto an unrelated Homeland Security bill, the act prohibited banks, credit card companies, and eWallet services from transferring funds between U.S. residents and off-shore gambling businesses. It was spearheaded by none other than Senator Kyl.
Now WSEX had its money seized by banks, and credit cards wouldn’t process payments. Soon complaints started circulating that WSEX wasn’t paying its customers on time. In 2010, the sports book had its Antiguan gaming license revoked. In 2013, the site went dark.
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“Steve was a very analytical person,” Ware told me. “He looked at things from a probability standpoint, not a human standpoint. And he looked at his life and death that way.”
Around five o’clock on April 20, 2013, neighbors at the Darkwood Beach apartment complex went around to invite Steve Schillinger to a gathering. They found his door ajar. Inside, they discovered Schillinger’s body, a .38 revolver, and a suicide note. He was sixty years old.
In the company’s final days, Schillinger had been saying that he was too old to start over. He hadn’t saved anything from the WSEX heyday; he didn’t even have a bank account. Where would he go? What would he do? The consummate oddsmaker saw a high probability of becoming a burden on others, and that was intolerable: worse than exile, worse than death. “For him, there was no emotional attachment to the decision,” Ware said. “It was all very cold and calculated.”
After Schillinger’s suicide, Ware spent a few more years as a fugitive, then returned home in 2016. The FBI handcuffed him at the airport terminal. He pleaded guilty to a felony, and was sentenced to time served, plus probation.
When his legal troubles were finally over, the Supreme Court was hearing a case that would allow states to legalize sports betting. The mood had changed in the intervening years: a majority of Americans now favored regulating the betting industry. In 2018, the decision came down: states were free to legalize it. Schillinger, Cohen, and Ware always felt they’d be vindicated one day. “Maybe even 10 years [from now], they’re going to look back at my case and say, ‘We sent a man to prison for that?’ ” Cohen told NPR in 2005. (Cohen’s current whereabouts are unknown. He has renounced his American citizenship, and declined to comment for this story.)
If Steve Schillinger had come home, faced the music, and waited until the Supreme Court decision, perhaps there would’ve been a future for him, one he couldn’t quite perceive in the black months of 2013. That’s what Ware wagered on. With a fairly thin and suspect resumé after decades at large, he applied to one of the newly legal sports books in New Jersey. After all, he’d helped start up one of the first online sports-betting enterprises, a multi-million-dollar business that had juggled probabilities in real time, fielding hundreds of thousands of bets a month. But his application was denied; he was a felon.
Michael LaPointe is a writer in Toronto. His debut novel, The Creep, will be published by Random House Canada in 2021
from The Paris Review https://ift.tt/2IeqwSR
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