This Wall Street Legend Failed to Conquer Vegas Sports Betting

  • Cantor Fitzgerald chief is shopping around CG Technology
  • ‘They had great ideas, but they fell short,’ says consultant

March Madness, the ultimate in U.S. college basketball, hits Las Vegas like a tomahawk jam.

Each year, hundreds of millions of dollars course through the Vegas sports betting parlors, far exceeding wagers placed on the one-day Super Bowl event.

Howard Lutnick

Photographer: Michael Nagle/Bloomberg

Howard Lutnick, the man who rebuilt Cantor Fitzgerald LP, and then some, after the catastrophe of 9/11, has spent the past decade looking for a piece of the action by building a sports gambling powerhouse. But Vegas can be a tough town -- even a player like him has run into one obstacle after another.

Now, Lutnick may be folding his hand. He’s shopping the business around in what is described as an informal process to gauge interest, according to a person familiar with the sale. Cantor’s internal merger and acquisitions team is handling the possible transaction, circulating a short description of the business, said the person, who was not authorized to speak because the discussions are private. While the company is losing money, the person said, it may fetch $50 million.

What went wrong? Plenty. Lutnick, 55, wanted to inject a bit of Wall Street into Vegas. But revenue at his young betting firm, CG Technology, has stalled. Long gone are plans to take the company public, filings show. Its chief executive officer, a long-time Lutnick confidante, left last year in a regulatory settlement. He hasn’t been replaced.

On top of all that, a former CG executive pleaded guilty to scheming with illegal bookies. In October, the firm agreed to pay $16.5 million to avoid prosecution in the case.

“They had some great ideas -- for a while they had the best sportbooks in town,’’ said Jim Murphy, an odds consultant with “But as far as what they set out to do, they fell far short.”

Eight Locations

Lutnick declined to comment through a spokeswoman, Karen Laureano-Rikardsen.

It’s a far cry from the vision Lutnick was selling in 2008 when he bought odds-making firm Las Vegas Sports Consultants and put at least $150 million into the business, according to a Bloomberg Markets Magazine story in 2012. It opened its first sports betting parlor -- called a sports book in Vegas lingo -- in 2009 and now has operations in eight Nevada locations, including some of the city’s highest-end places such as the Venetian and the Cosmopolitan, owned by the Blackstone Group.

Mobile Technology

The firm sought to distinguish itself with sophisticated software and devices that allowed gamblers to bet anywhere in the casino or hotel. Its computer servers were driven by the type of software that fuels derivatives trading, spewing out odds on events at the fastest rate ever in Las Vegas, it said. That allows gamblers to place bets during contests on dozens of situations.

The moves worked, and competitors followed with similar mobile technology.

But another strategy adopted by Cantor -- offering higher betting limits than competitors -- led to its most serious stumble, according to federal prosecutors. Michael Colbert, the company’s head of risk management and a direct report to then-CEO Lee Amaitis, oversaw an operation that took in millions of illegal bets, including wagers from an East Coast betting outfit that operated from 2009 to 2012, known as the “Jersey Boys,” according to Nevada regulators and the Justice Department.

Some of the outside bets were needed to offset large ones CG was taking, prosecutors said last year.

Big Fine

Nevada gaming regulators hit CG with their biggest fine ever -- $5.5 million -- in 2014, and last October CG settled with U.S. authorities for $22.5 million more after being accused of illegal gambling and money laundering. The firm admitted wrongdoing on the federal charges and some of the state allegations.

Colbert, who is no longer with the company, pleaded guilty to a single charge of conspiracy in 2013. Murray Richman, an attorney for Colbert, declined to comment.

Cantor Gaming, as the firm used to be known, announced it was changing its name to CG Technology the same day Nevada regulators charged it with violations related to the “Jersey Boys” case. Lutnick and a family trust own almost all of the company, according to Nevada gaming records.

CG’s problems didn’t end there. Last May, the Nevada Gaming Control Board accused it of underpaying customers on more than 20,000 bets between 2011 and 2015. Regulators, who could have revoked CG’s gambling license, agreed to a settlement in which Amaitis left the company and CG was fined $1.5 million.

Amaitis didn’t return messages left on his Las Vegas answering machine.

While denying that it intended to profit from the errors, CG said then that it had provided refunds to most of the affected gamblers.

Legal Betting

CG remains a small and not particularly fast-growing business. It was projected to generate revenue of $33 million in 2016, according to documents filed in January in a suit against CG by a patent holder. That was up from $30.7 million three years earlier, the documents show. It hasn’t announced on its website the opening of any new sports-books in over two years, and that casino, in the Bahamas, has yet to open. The Tropicana downsized its CG-managed sports betting operation from a full room to a kiosk last year.

CG had hoped growth would come from legal sports betting spreading across the country. But efforts to legalize it beyond the four states permitted by federal law -- Nevada, Delaware, Montana and Oregon -- have been blocked by professional and collegiate sports leagues that fear gambling may lead to game-fixing.

Lucrative Rents

The potential is huge, though. In Nevada, sports gamblers bet $4.5 billion in 2016, according to the Nevada Gaming Control Board. That’s a fraction of the $149 billion that Americans wagered illegally on sports in 2015, the American Gaming Association, a casino-industry group, estimates. U.K.-based William Hill Plc is CG’s biggest rival, running sports parlors in 108 locations in Nevada, according to its website.

CG’s existing casino customers remain committed so far. One reason is the lucrative rents CG pays for space, according to a person familiar with the financial terms. Red Rock Resorts Inc. has long operated its own sports betting business, but kept CG as the provider for the Palms Casino after acquiring it last year.

There is one other downside for CG’s operations. Because it operates the sportsbooks and not bars for its casino clients, the company rarely offers free drinks to customers, a big draw at other properties.

“I’m a little old-school,” said Tommy Lorenzo, editor of, a web site devoted to the business. “If I’m going to bet $50 to a $100 on a game I’m at least going to want a beer for it.’’

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