Howard Lutnick: Soon-to-Be US Commerce Secretary’s Cantor Gaming Once Paid $22.5 Million to Settle Illegal Gambling Charges
Howard Lutnick, selected by President Donald Trump for the position of commerce secretary, is anticipated to receive confirmation through a Senate floor vote this week. However, did Democratic legislators overlook an opportunity in last week’s Senate hearing by not inquiring about Cantor Gaming from the Cantor Fitzgerald CEO?
Cantor Gaming was established by Lutnick and then-co-chairman of Cantor Fitzgerald, Lee M. Amaitis, around 2004 as a branch of the investment bank. In 2006, it received a gambling license in Nevada and started utilizing banking technology to enable customers to make bets via mobile devices.
In 2016, federal authorities imposed a $22.5 million penalty on the company to resolve allegations of unlawful gambling and money laundering. The penalty freed the company from being prosecuted.
‘Jersey Boys’
This came after the federal indictment of the company's VP of Risk Management, Michael Colbert, who faced accusations of participating in unlawful sports betting operations that utilized Cantor Gaming's Nevada sportsbooks to place and offset high-stakes bets.
Since Cantor took on high-limit wagers, it had to control risk through hedging, but it found it challenging to transfer these substantial bets in the then-restricted regulated US market.
Faced with pressure from his higher-ups, Colbert turned to the black markets to acquire substantial amounts of “buyback.” One such betting organization, referred to as “the Jersey Boys,” was allowed to conduct its illicit activities via Cantor Gaming’s authorized sportsbooks in Nevada.
In 2014, two years prior to the federal penalty, Nevada authorities imposed a $5.5 million fine on Cantor Gaming to resolve these compliance issues. It remains the largest fine that the state has ever levied on a licensee.
There is no proof that Lutnick participated in any misconduct. While he was the main owner of Cantor Gaming, he held no formal management position at the company after resigning as CEO in 2009. Nonetheless, he continued to be "personally involved" with the operations of Cantor Gaming, as stated by "three individuals familiar with the matter," who talked to Politico last week.
Constant Difficulty
Cantor Gaming rebranded as CG Technology (CGT) to dissociate from the scandal, yet new controversy was on the horizon.
In 2016, CGT faced an extra penalty of $1.5 million in Nevada for deliberately underpaying customers at its sportsbooks by more than $700K across 20K different instances.
The firm knew that a flaw in its software had inaccurately calculated numerous parlay bets, yet it did not take steps to fix the mistakes. Subsequently, CEO Amaitis had to step down as a condition of the agreement.
In 2018, CGT faced the Nevada Gaming Control Board (NGCB) once more, this time for taking bets from outside the state on its mobile sports betting app exclusive to Nevada, accepting wagers post-event, and issuing incorrect payouts to 1,483 clients.
The board halted just before canceling CGT’s license but demanded a “cultural shift” and an “essential reset” of the company. Regulators imposed a $2 million fine on CGT and required the operator to eliminate all proprietary wagering technology in Nevada.
In 2019, Cantor Fitzgerald divested the remainder of CGT.
