He Invented Online Betting...Then Went To Prison For It - Jay Cohen
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What inspired Jay Cohen to create the World Sports Exchange?
Risk is the consequences if things don't go well. Everything in life has risk, especially in business, and with risk you have five options. You can avoid it, you can mitigate it, you can transfer it to someone else, you can hold it if the reward is high enough, or you can take on more. We take risk from people who have it and don't want it and sell it to people who want it and don't have it.
Welcome to Open Book. I am your host, Anthony Scaramucci. Joining us today is Jay Cohen. He's the co-founder and former president of World Sports Exchange. But he's got an amazing book out, and the title of the book is Odd Man Out, The Untold Story of How Professional Sports Crushed the Pioneers of Online Betting. Man, we got a lot of online betting now, Jay. It's great to have you here. But before we get into this story, you began on the Pacific Coast. You were an options trader on the Pacific Stock Exchange. I want you to take us there because like me, you're a better, okay? I just have long-term bets in the market, but you're a bit of a better, right? That's what our business is about, actually. Tell me a little bit about your background and what shaped your understanding of risk.
Well, first, thank you for having me and covering this book. I do not consider myself a better. I always go back to, well, when I was an options market maker on the floor, I was the house. And when I opened the World Sports Exchange, I was the house. And there's a line in a sports book management book by Roxy Roxborough that says, gambling is wagering at unfavorable odds. And when you're the house, you have favorable odds. So that's how I've always seen myself, not just a shot taker, but more as taking calculated risks where I have an edge, statistical arbitrage. I graduated from UC Berkeley in 89 with a degree in nuclear engineering. and I took a base-level job on the floor of the exchange because I wanted to work in the markets.
So I started as a quote operator, and you're in the middle of the action, you meet people, and I worked my way up to a firm and eventually became a market maker, options market maker.
All right, so I stand corrected. I think that that's a fair characterization. I guess I always tease people on Wall Street that we're taking risks. I do think sometimes we do have an edge on people. I think it's a fair characterization. But you came up with this idea of a world sports exchange. Somehow OJ Simpson is involved with this as well. I want to get into that a little bit. And it came in the very early days of the internet, long before online betting became mainstream. So you had a vision, Jay. Tell us about that. What made you believe that this wasn't just a niche idea, but it was like something that was going to be part of our future?
Well, my founding partner, Steve Schillinger, he was kind of the floating bookie around the floor. He was an amazing trader, but he could price anything. He was a brilliant odds maker. And he used to take bets on Academy Awards, sports, whatever you, anything obscure, he was involved. And when the OJ trial went down, he set up a market for it. And he had three products, guilty, not guilty, and other, which was hung jury or something else. And he made markets in these three products, whichever one covered would be worth 100 and the other two would go to zero. And it was so busy. And it could have been the busiest trading floor in the pit. People came in every day wanting to know where the market was, especially during the trial, a guy ran around from the Morgan Stanley desk and said, hey, Henry on the desk in New York wants a quote on a three-way, you know, things like that.
And so it was very active and very busy. So after that trial ended, Steve was still kind of doing the same thing with season-long bets on sports. And we said, hey, let's put this on the internet. We should find out how we can put this on the internet. I barely knew what the internet was at the time. I didn't even have a computer at home. But I knew it was something that was going to allow people access globally.
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Chapters
4 chapters
1
What inspired Jay Cohen to create the World Sports Exchange?
0:00–5:23
2
How did Jay Cohen's background in options trading influence his approach to online betting?
5:23–12:16
3
What challenges did Jay Cohen face when launching the World Sports Exchange?
12:16–23:21
4
How did the legal landscape for online betting change over the years?
23:21–24:14
Speakers
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