Open Book with Anthony Scaramucci - He Invented Online Betting...Then Went To Prison For It - Jay Cohen

Episode Date: July 7, 2026

He built a betting exchange three decades ahead of its time, got prosecuted for it while John Roberts almost took his case, and served time for something states are now making legal one by one. This week on Open Book, Jay Cohen, the man the pro sports leagues crushed, tells me what really happened and why the house always wins in the end. Jay Cohen is the co-Founder and former President of World Sports Exchange, the first fully online betting site. Prior to World Sports Exchange, Cohen worked as an options market-maker for Group One Trading on the floor of the Pacific Stock Exchange. Cohen and World Sports Exchange have been featured in The New York Times, San Francisco Chronicle, Wall Street Journal, Washington Post, and on CNBC, HBO Real Sports, 60 Minutes, and ESPN. Get his wonderful new book (out today), Odds Man Out: The Untold Story of How Professional Sports Crushed the Pioneers of Online Anthony Scaramucci is the founder and managing partner of SkyBridge, a global alternative investment firm, and founder and chairman of SALT, a global thought leadership forum and venture studio. Pre-order my next book, All the Wrong Moves: How Three Catastrophic Decisions Led to the Rise of Trump, out on the 17th of September in the UK and the 22nd of September in the US: ⁠https://www.scaramucci.net/allthewrongmoves Learn more about your ad choices. Visit podcastchoices.com/adchoices

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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 obstinate trader on the Pacific Stock Exchange. I want you to take us there because like me, you're a better. I just have long-term bets in the market, but you're a bit of a better, right? That's what'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 sportsbook 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 Moore is taking calculated risks where I have an edge, statistical arbitrage. I graduated from UC Berkeley in 89 with the 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 risk. I do think sometimes we do have an edge on people. I think it's a fairer 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 main. stream. 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. And so we set about, figure out how to do it, how to build it, how to do it legally, where we had to go. And we basically built it. built a futures exchange from the ground up. And that's what we built a functioning futures exchange of our own to trade these sports futures. Plus, we also built a platform that could take ordinary traditional bets and exotic

wagers and anything else you can think of. And you're, you're three decades ahead of the market, basically, right? Almost. Yes, I'd say so. So. But it's not legal anywhere, right? I mean, this is when, you know, the NBA is moving to Vegas. We've got a hockey team in Vegas.

We've got a football team. You and I are old enough to remember when the commissioners of those sports were like NFW. We're never going to have a team in those areas. But we now can bet on balls and strikes during a baseball game. Right. So you got there ahead of everybody, but you ended up in Antigua. Tell us about why you went to Antigua and tell us what happened there. Okay.

Well, you're right. Back then, the NFL wouldn't even. take a tourism ad from Las Vegas for the Super Bowl. They won't even take a hotel ad back then, anything related to Vegas. We went to Antigua because it was licensed and regulated there. And we consulted with lawyers and consultants and everything else you can think of. And at the time, the United States was, a spokesman for the Department of Justice was widely quoted as saying, It's out of our jurisdiction.

And the understanding was if we went down there, if we lived there, if we ran the entire business from there, we didn't take credit. We weren't like a street bookie. We didn't have people betting on credit. They had to put the money up first and what we call a post-up account. That the bet took place down there. And not only were we legal, because the government of Antigua license regulated us, The government of Antigua had consulted with the U.S. about how to set up their licensing. But not only did we feel we were illegal, but we believe the U.S. didn't care.

You know, that was our position at the time. And so that's how we ended up in Antigua. We moved down there. We lived there, and that's how it started. And you mentioned bets on balls and strikes. We did all that back then as well. We were taking bets on who's going to score next, what's the next that bat, and we pioneered live betting. We had people betting.

We kept the market open from the beginning of the game to the last second. No one was doing that then, and they still don't do it properly today. It's such an incredible story, but you're in Antigua, did you see it as a safe haven or a safe harbor? And you mentioned that the Americans don't have legal jurisdiction, but yet you end up getting prosecuted and you make a decision sort of return to the United States. So tell us a little bit about that. What happened and why did that happen? And then why did you make a decision to leave and come back to the U.S.? Well, like I said, the U.S. had been quoted as saying it's out of our jurisdiction. Right. And then we were in a, we weren't hiding what we were doing. We were

actually in a very favorable article in the Wall Street Journal in April of 97. Rebecca Quick, now known as Becky Quick, wrote the article. And so we clearly weren't hiding. After that article came out, I get a letter FedEx from a law firm called Deboevoise and Plimpton saying we represent the NFL, the NBA, baseball and hockey. You're running an illegal business, blah, blah, blah. you're using our team names, you're using our trademarks,

and you're linking to our site. I send my lawyer, and they said, I should cease doing business with U.S. residents. I sent my lawyer to go talk to them, and we agree to take down their team names. So instead of

Pittsburgh Steelers versus San Francisco 49ers, the games then said Pittsburgh versus San Francisco. We took down links to their sites, but as far as stopped doing business, with U.S. residents, we said you're a private firm representing private interest. We're a licensed and regulated to do what we do. It was at that point that the lawyers for Debovoise and Plinton representing the sports leagues

went to their former colleagues at the U.S. Attorney's Office in the Southern District and said, go get this guy. And they built the case. They brought, said Cohen's doing this, Cohen's doing that. and the original AUSA at the Southern District of New York used to work for that law firm. The point person at the law firm used to work for the Southern District. There's a major revolving door relationship

between that firm and the U.S. Attorney's Office in the Southern District. We found out 25 attorneys have gone back and forth. We found out that if you work at that law firm and you go work for the Southern District for two years, you come back, you still get credit towards seniority when you come back. So they went and said, go after Cohen, and the Southern District did.

That's how the case started. But you came back, though. You said, why'd you come back, sir? Well, my initial reaction was no judge was going to let this stand. This is ridiculous. I said, I'm going back. I'm going to fight this. And I was a little jaded because I had a family member 20 years later have a case that was thrown out on a

to dismiss. So I thought that's just how things worked. And so I went back and and so began the, you know, six or eight year legal odyssey of fighting it and losing and losing and serving time and finally coming out. So that's, that's, those were literally my words. No judge will let this stand. And when I, when I first came back, they let me self-surrender. So I flew back in the evening and then next morning I surrendered to the FBI in Manhattan and I got processed and everything. And we had just been in another article at the time, a cover story in Sports Illustrated. I'm sitting in the Manhattan MDC and the cop says to me, what are you here for? I said, internet gambling.

He said, I thought that was legal. I just read about that in Sports Illustrated. I said, yeah, that was me. So did I. So that was where we were kind of at. So when I got out that afternoon, I went to my lawyer, Ben Brothman's office. And I told Ben, I told him, I said, Ben, I did nothing wrong. I don't care if they kick it down to littering.

You will not hear the words guilty roll off my tongue. I strongly believe that. Now, I will say this, unlike a lot of people who I met in the system, you know, I was single. I didn't have, it was easy to be a real renegade like that. I don't know if I could do that if I had a wife and child at the time. But I didn't, so that's where I was at. And I said, I'm going to fight this. And I'm not going to plead to anything.

And let's fight it all the way. Thank you for tuning in an open book. And if you haven't already, please hit the subscribe button below so that you're the first to know when our new episodes drop each week. We've got a lot more coming. And now back to the show. So Justice Roberts actually shows up in this case. Okay, he's the future Chief Justice. Yes.

Tell me about that. Well, what had happened was we lost our appeal in the Second Circuit. And Ben Broffman and his team, there are amazing attorneys. Mark Baker also handled the appeal. Melinda Saroffa, brilliant. But I kind of got this feeling like that this is an insider's game. I said, I've got to find someone on the inside to petition the Supreme Court. So I went in Martindale Hubble, and I searched Supreme Court practice, Harvard College, Harvard Law School.

I came up with about 40 lawyers. And I looked at all of them. And there was this gentleman named John Roberts at a law firm called Hogan and Artson. and I read his bio. He had clerked for Rehnquist. He was an associate solicitor general. He had appeared before the court than any other lawyer practicing alive. I said, this is my guy.

So I call him up, and he said, I don't take just any case. You know, send me your papers, and I'll let you know. So we send them all the documents, the appeal papers. And a few days later, he calls me back. He says, this is not a frivolous case. You have real issues. I'll take the case. Send me a retainer.

And I just need to clear it with my executive committee. Shouldn't be a problem. And we sent him a retainer. And about a week later, I get a call from him. He said, I can't take the case. I need to conflict out because it was an 800-person law. firm, they send around what they call a conflict check. And he said, we have lawyers in the firm that represent the American Gaming Association and the NCAA, and they don't want me taking the case.

So that was, they sent back our retainer, and that was the end of our relationship with John Roberts. But that was before he was a Supreme Court justice, before he was any justice. It was such a great story. You know, the one thing that, you know, when I read the book, The one thing that, because I went to law school, I never was a lawyer, though. I only play one on television, Jay. I'm not really one. But it was something that happened in the case that I want you to discuss. The judge kept the Wire Act key exception from the jury.

So tell our viewers and listeners what the Wire Act is. And then I'm going to ask you the obvious question. Do you believe that the fix was in? And how does the citizen compete with Deba Voice in the Department of Justice? We're learning from Donald Trump that we have a two-tiered system. So you learned that three decades ago. So tell me what all of that is about. Well, the Wire Act is what I was charged with.

It wasn't wire fraud. A lot people hear wire and they think fraud. My case was using the wires, telecommunication wires, to transmit gambling information. And that's what the Section 1084A says. Section 1084B says there's an exception if it's legal to place a bet where the bet's being placed where it's legal to receive a bet and all that is being transferred is information

assisting in the placement of a bet then you fall under the exception. You remember this whole law was written to go after horse racing mafia horse racing bookies in 1961. So and at the time, Capital OTB was actually operating New York OTB was actually operating under the same exception. So we made this argument to the judge, and the judge, and of course the prosecution objected,

and the judge agreed with them, and he would not let them see or be, have the jury instructions, allowed them to consider the exception. He went so far as to when, and I had testified on my own behalf and talked quite a bit about 1084B, which is the exception. The judge went so far as to when the jury came back and asked for a copy of the law, he only gave them a written copy of the law. He did not include 1084B. He did not even include the little letter A in the first subsection

to imply that that was the whole thing and there was nothing else to talk about. The judge, the jury also asked for a readback of my testimony, which the judge redacted half of it, and they did not hear half of my testimony. Now, fast forward to today, and this is really the hypocrisy never ends. Recently, in the last couple of years, there's a case between some Indian tribe in Florida against the state of Florida. And the Indians are taking sports bets, and they're trying to take them from throughout Florida. And Florida is saying, you can only take sports bets on your reservations.

Indians are saying, the bet takes place on our server. we can take bets from around the state because the bet takes place on our server. Now the feds come in with a letter on the side of the Indians. The same thing they said to me was simply not true. They're taking the same exact position I had

in favor of the Indians, and that's just kind of how it went. The whole trial, I mean, there were things that happened to trial with Ben would turn to me and say, 28 years I've never seen this. I mean, the prosecution even filed a motion ahead of the trial to stop me from testifying. And as tilted as the judge was against me, even he said there's no legal way I can stop them from testifying.

But he handled that on the instructions when he told them my testimony was not relevant. Was it a conspiracy? I don't know. I mean, the deep state, I mean, I don't know. Listen, you paid the price. You're a visionary. You paid the price. The book is awesome. And I wanted to bring you on because I think it's just some things that we think about are legal until the future catches up with making it legal, right? So we're, we finally are allowing stem cell injections as an example in Florida. So I predict that that will be all 50 states. And these athletes won't have to go to Panama anymore. You know, it's just one of these. things that we do to ourselves for some reason. But I admire you. I appreciate the honesty in the book and I appreciate the wisdom and the vision. So this is a half hour program. So we're down of our last couple of minutes. If you ever watch this, I have five words that I pull out of your

book. All right. I'm going to say the word and then I want Jay Cohen to give me a sentence or two. You ready, Jay Cohen? I'm ready. All right. I say the word sports. You think of what? I mainly speak of, think of just professional sports, basketball, football, baseball, hockey. I really don't go golf. Golf was very big, but just competing. That's all. It's interesting. I think of adrenaline and dopamine and vicariousness, right?

That's what we live often, right? What about gambling? I say the word gambling, you think of what? Well, I told you earlier. To me, gambling is wagering at unfavorable odds. I distinguish it from the word wagering. And yes, I do believe a lot of business is wagering, and you're always trying to set positive risk reward. So that's what I would say about gambling.

All right. So corollary to gambling, I say the word risk. You say what? Well, risk is what can happen the consequences if things don't go well. And 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. And going back to the trading floor with risk, you know, people, there were some guys who didn't really understand what we were doing as option market makers. They thought it was all just a joke. I said, we standing here, besides we're here to make money, we take risk. 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 and quite often hold some of it ourselves.

And without us here as market makers, the entire financial system could not be as robust as it is if this platform didn't exist. Amen. Okay, I say the word justice, you think of what? All right. The lack of it. Okay, yeah.

and capricious. It can be arbitrary and capricious. We both know that. I mean, I'm sorry, go ahead, sir. You read about the whole WTO case as well. Yeah, of course. The U.S. just refused to comply, and that was it. So it's like, might make's right. How was it? Yeah, well, we remember the middle powers are also learning that there's a two-tiered rules-based system. Superpowers have a certain tier. Remember, the Russians were not allowed to play in the 2002 World Cup in Qatar. They started a war, in Ukraine. The Americans started a war in Iran, no problem. We're the host countries. The way the world works. You have to live in the world the way it works, Jay, not the way we want it to be.

Okay, so George Carlin, what does he say? It's a club and you're not in it. It's a big club, and you ain't in it. Well, amen. The world sports exchange, I say that. What do you say? The father or grandfather of online gaming, I mean, we were doing stuff back then that no one was doing. We were fully transactional. And when I hear them talk about some of these new companies as revolutionary, something, like, these are things we were doing and had perfected 30 years ago. This is not, when other websites were counting traffic, we were having transacting in dollars. And we had real money flowing back then.

There were some other sites at the time that would have their lines up, but it were just a link to an 800 number. You could do everything on our site back in the 90s. Betting on games in progress, bet, check your balance, everything. Never deal with a human. People didn't believe it was possible at the time. But we were way ahead of our time. Well, I want you to keep your phone line open

because if I'm ever the FSC chairman or the chairman of the CFTC, I'm going to call you up. I'm going to say, hey, man, I need your help in writing the rules for these prediction markets because I think you're the guy. And I really appreciate you coming on today. The title of the book is Odds Man Out, the untold story of how professional sports crushed the pioneers of online betting. It's written by Jay Cohen. He's the co-founder and former president of the World Sports Exchange. It's a fantastic book, Jay. I appreciate you coming on.

I wish you great success with this book. Great. Thank you again for having me. Really appreciate you covering it.