House Rules

SPEAKER_00: Years ago I did some work for a business that had uh a data center unlike, you know, pretty much anything I'd ever seen. And everything you expect, right? Erased floor, power, cooling, cable runs under the tiles, right? There's something really different about this data center. Every server on the floor could be moved. Each bank could be rearranged in a way that suited the needs of the business at the time, depending on how traffic flowed. Not the kind of traffic you think, though. These servers, they weren't you know, they weren't email servers or file servers or web servers. Each, you know, quote unquote rack was a set of slot machines. They could be laid out on that raised floor in any arrangement the machines allowed because the data center was the casino floor of a hotel in Las Vegas. Now, I worked with a lot of uh gaming and gambling companies and payments and you know and otherwise over the years. And so when one of my daughters mentioned something, you know, she read about rigged games, I figured, you know, that sounds like a good topic for us to be talking about. And we'll look back at the tech around gambling.

SPEAKER_04: Yeah, you know, I hate gambling. I hate losing. It's just a feeling I can't get over. Like I can't get over it. And so why do that? So I'm gonna take the $250 I would have put in that slot machine and pretend to have fun when really it was just crushing my soul every minute. I just go to the spa. There you go. And so we used to go to Vegas, but we used to go to Vegas around the holidays. So we would go for Thanksgiving or we would go for Christmas because it's it's all decorated and it's nice and you know, and we were like, oh, let's get out of LA. Right. And then 2008 rolls around and we don't have any extra money to go do anything, let alone Vegas at Christmas time. So we stayed home. And that was the year we realized everyone leaves LA. If you just stay, you have the whole place to yourself. So after that, we just stayed because that was the vacation. All you clowns left, and now we had Santa Monica to ourselves. Yeah, that's how it worked. Um, so no, so when I remember even now, like Vegas to me means work. Like, like I go there for conferences a lot, right? Yeah. But I will also say I do get to eat at the best restaurants, I get to stay in the best rooms of the best hotels, and so I'm not complaining. There it is. I'm not complaining. I will say though, lately, lately, you can you can either eat or you can gamble. You cannot do both, unless you're a billionaire. You cannot do it. So it's so expensive.

SPEAKER_01: Yeah.

SPEAKER_04: It's so and that's what I've been telling you about where I get it now, is like it's expensive. Oh, but Las Vegas is also one of the biggest data centers ever, which is Switch, the Switch data center there. Is it a middle of the desert? It doesn't use any air conditioning, it it it uses heat pump features to pull the suck the hot air out, right? Like it's it's an amazing place. Those like data centers out there are amazing. Yeah, so that's what I would say. Vegas, my memories of Vegas aren't really gambling. Like, I don't do that, but I do go there a lot and I don't particularly you know, I like it. Plus, I get to drive. I get to drive to Mojave. So yeah, it's a good thing the whole way around. I love it. I love it.

SPEAKER_00: So so what my daughter was interested in was these sort of mobile games, and there was some research that that recently, but also you know, in the last several years, into how some of them are built to take as much as they can from players without telling them. And that's the pattern this whole, you know, we're gonna talk about in this whole episode, right? So every every time gambling gets a new piece of technology, it uses it to take more from more people and faster. Right? What do we talk about all the time? Technology, it just increases speed, scale, reach, scope, right? So then the regulators will show up, and what they produce is a rig with a ceiling on it, right? The game is rigged, but there's a ceiling. So, welcome to another episode of the Nostalgic Nerds Podcast where we talk about tech past, present, and future. So tonight is about gambling.

SPEAKER_02: Shut those wrapper up at night. I'm the first one through the door. There you are, old friend of mine. Wait, like the day before. Folks rush by, they got no clue. They don't know ya, then I got clue. I'm still here.

SPEAKER_04: Hey, before we go back, how is any of this legal if it's rigged? If it's like legitimately rigged, how is it legal? I know, isn't that? It's because it's well, it's just a little rig renee. It has a cap. That's right. The rig has a cap. It's not it's not rigged like like a fountain of riggedness. It's it's it's a little leak of riggedness. Like, how is that it? How is that legal?

SPEAKER_00: You're absolutely right. The rig is a number, right? And the law sets the number. So let's talk about roulette, right? Because this one's easy to easy to think about. So you have to put your math caps on for most of this episode today.

SPEAKER_04: You said this was going to be easy, and now you're telling me about math cap.

SPEAKER_00: Math cap. It's okay. It's not that hard. It's not that hard. All right, so a European wheel on roulette has 37 pockets. That's the little silver things that the balls fall into, right? The numbers one to thirty-six plus a zero, which is the green one. If you bet on a single number and it comes up, you're paid 35 to 1. Wait a minute. Yeah, I just said there were 36 pockets, but the odds are 35 to 1. Okay. Which is what the payout would be if there were only 36 pockets. So on average, for every $37 you bet, you get 36 back. The missing dollar is 30 is, you know, in 37 is about 2.7%. That's the house edge. An American wheel adds a double zero, so it has 38 pockets, and the edge goes up to about 5.3%. A casino could lose plenty of individual bets, but over millions of them, the edge does the rest. Regulation decides how big that edge is allowed to be and leaves the edge itself in place.

SPEAKER_04: I you know, I j Okay. People I how is that it's like usury. Well, you can do some of it, but if you but listen, you go over 24% and we're having a talk.

SPEAKER_00: Like what we talk about. Yeah, when we talk about the slots, you'll see the the how low the number is. It's pretty it's pretty sp yeah, spurious. It's bad.

SPEAKER_04: I always make money on slots though, so I don't know what I'm doing. But I uh there have been times I walked away with fourteen hundred bucks from a slot machine and I only put five bucks in. Like, yeah.

SPEAKER_00: Well the slots are like times I've done it. It's what's interesting is you know, I we I didn't put this in the script, but you know, the the they have to publish their percentages and the the the numbers the numbers are in the nineties, but the regulated value is much lower than that. So it's kind of like they've built it like an economy of you know, you'll lose less if you come here.

SPEAKER_04: So you know they call it loosest slots in town.

SPEAKER_00: That's right, that's right. Exactly.

SPEAKER_04: Because it's one percent less loss for them. That's it. Like they gave you a percent back, you and the eight million other people who come to this casino every year. Yeah.

SPEAKER_00: That's right. That's right.

SPEAKER_04: So benevolent of them. Anyway, people have been gambling for about as long as there's been anything to bet. Before dice, there were astraguula, the ankle bones of sheep and goats, which land on one of four even sides. And the Greeks and Romans gambled with them constantly. Well, how does that not surprise me? Proper cube dice turn up around 5,000 years ago in Iran, Mesopotamia, and the Indus Valley. And cheating is about as old as the dice because, as I've always said, if you ain't cheating, you ain't trying. I learned that from NASCAR. You ain't cheating, you ain't listen, y'all, you ain't cheating, you ain't trying. It's a NASCAR thing, right?

SPEAKER_00: Rubbin is racing.

unknown: There you go.

SPEAKER_00: There's there's a bone dye from a Roman villa at Abe Le Ville in southern Belgium. It was dug up in about 2000, the year 2000. Somebody hollowed it out and filled a part of it with mercury so it rolls heavy toward one face. Like, like it's one thing to you know have dice from like, you know, a couple thousand years ago and say, you know, they just didn't know what they're doing. No, no. This one had mercury. No, they knew exactly what they were doing. Exactly. They knew exactly what they were doing. Yeah, yeah. The archaeologist who restudied it says it's the only Roman example of its kind anyone has found. Yeah, because nobody wants to like, you know, dice.

SPEAKER_04: I'm not doing this loaded dye.

SPEAKER_00: Yeah. Yeah. Yeah. Dice also got fairer over time, and players seem to have been the reason, right? A study of a hundred and ten dated dice from the Netherlands found the Roman ones were lopsided and uneven. From about fourteen fifty, they start being made so that opposite faces add up to seven, and the researchers linked that to people wanting dice they could trust. Then gambling gave us a bunch of mathematics. In fifty in 1654, a French writer and gambler, the Chevalier de Mer, de Merais, sorry, put a question to the mathematician Blaise Pascal, which, you know, the Pascal language that's named after him. If a game is stopped halfway, how do you split the pot fairly? Pascal wrote to Pierre de Fermat, uh, you know, as in Fermat's Enigma, uh about that, and in a few letters that summer and autumn, they they worked out how to count the outcomes still to come. This is the start of probability theory. Once you can calculate what a bet is worth on average, you can set the payout just below it. And the gap is the house edge.

SPEAKER_04: And the house edge turned out to be something casinos would compete on. In the 1840s, two French brothers, Francois and Louis Blanc. We're running the casino at Bad Homburg, a spa town in Germany. Roulette Wheels had a zero and a double zero. The Blancs dropped the double zero, which roughly half the housed edge, and gamblers came to them instead of their rivals. In 1863, Francois Blanc was even given the gambling monopoly at Monte Carlo for 50 years. And that's the casino everyone pictures. Governments wanted a share as well. England's first state lottery was drawn in January 1569.

SPEAKER_03: I know. Crazy.

SPEAKER_04: That's crazy. At St. Paul's in London to pay for repairing the country's harbors, and it sold badly. In America, lotteries in the 1740s helped found King's College, which is now Columbia, and helped fund Yale and Harvard. So there you go. There you go. They like to think that it all started with high-minded ideas. Nope, they sold lottery tickets, just like your band. Like your high school band. And Harvard did the same thing. They came to Louisiana lottery. It was chartered in 1868 amid accusations that the legislature had been bribed. It paid $40,000 a year to the charity hospital in New Orleans in return for a tax-free monopoly. And more than 90% of its money came from players outside of Louisiana. Hang on, by mail. They were entering the lottery outside of Louisiana by mail. Congress banned lottery material from well, it's in the 1800s. You can't watch it on TV. There's not a guy in a bad suit going one, nine, six.

SPEAKER_01: Pulling the balls out.

SPEAKER_04: Congress banned, I think my grandmother did it for a while. If it was an Italian thing, like if you were Italian, you'd probably Congress banned lottery materials from the post in 1890 and banned carrying tickets across state line in 1895. State lotteries didn't come back until New Hampshire started one in 1964 to pay for schools. And now all but a handful of states actually run one. So there you go.

SPEAKER_00: All right. Yeah. Well, it pays for schools and hospitals and universities, Renee.

SPEAKER_04: Okay, when we shut this off, let's talk about how many times Jeffrey Epstein or someone Jeffrey Epstein knew won the lotto in New Mexico. Like let's let's talk about that later.

SPEAKER_00: Yeah, okay. Sometimes after. Okay, you know what? I can tell this this is funny. Uh you remember Dukakis, right? I do remember Dukakis. Yeah, so so Dukakis shows up at Occidental when I'm at university then. And and and he and I'm and he's doing a rally, not a rally, but more like a sit-down with college students, you know, and he's talking to stuff, talking to people and stuff. And and and he and he's sitting there and I'm like really close to him, like I'm like within arm's distance of him. And he says something about like, you know, do you know what they call the tax on on the stupid? And and I and I and I looked at him and I said, Social security. And he and he just like he glared at me and like he didn't acknowledge that I said it right, but he's but you know, what he was trying to get to was the lottery. So Right, right, right, right. Yeah.

SPEAKER_04: Well there's like it's like Homer, it's like that that episode in The Simpsons where Homer's like, like like he goes and buys a bunch of lottery tickets, and Marge is like, Homer, why do you buy the lottery tickets? It's a million to one. He's like, no, it's not, it's a million to fifty.

SPEAKER_00: I've doubled my odds. Yeah. Yeah. Okay. Anyway, go ahead. Well, I I think this is cool because there's this real transition, you know, from whatever, paper and maybe dice and mail and all this stuff, right? To a machine. All right. The machine that took over arrived in the 1890s. In 1891, a Brooklyn company, Sittman and Pitt, built a coin-operated poker machine with five drums of ten playing cards each. They left, this is this is great. I love this. They left two cards out, the Ten of Spades and the Jack of Hearts, which halved the chance of a royal flush. There was no automatic payout. You showed the bartender your hand, and he paid you in beer or cigars. A few years later in San Francisco, a mechanic called Charles Fay built the Liberty Belt with three reels and a mechanism that paid out coins by itself. And that's the basic, you know, sort of shape of every slot machine since then.

SPEAKER_04: When anti-gambling logs came after them, manufacturers disguised the machines. Around 1910, the Mills novelty company was selling machines that dispensed fruit-flavored gum. So the reels got cherries, lemons, and plums. And the bar symbol came from the logo of the Bell Fruit Gum Company. The fruit on a slot machine is left over from when it was dressed up by as a vending machine. Nevada is where it all became legal. Nevada legalized gambling in March 1931 in the middle of the Depression, largely for the tax money. The state set up the gambling control board in 1955 and the gaming commission in 1959, partly to push organized crime out after the Senate hearings into the mob. So it takes Senate hearings into the mob to be like, wait, they're where? They're all in Vegas? Well, we don't we don't want that. Let's get rid of them. Oh my gosh. So the rule for machines is still in the books as regulation 14.040. 14.040, as I'm being told in the parentheses. Every bet on the slot machine has to pay back at least 75% over time. So the law allows a machine to keep up to a quarter of everything you put into it. We which, you know what, when you think about it, that's as bad as Bank of America. So I guess we're good.

SPEAKER_00: Oh rough. Oh, rough.

SPEAKER_04: Sorry, I couldn't let it go.

SPEAKER_00: But like 75-25 split. So you put a dollar in, you're losing 25 cents every time. Yeah.

SPEAKER_04: And you gotta sit there long enough to only lose that, right? Because if you lose 150% and walk away, like then you lost it. You gotta stay until you're only you can claw your way back to 25% loss, and then you can leave knowing that you did your job. It's aesthetic.

SPEAKER_00: Yeah, it's it's that to me, that's really rough. And and but a lot of the slots in in Vegas, you know, when they publish the numbers, it's it's in the 90s. So so they've created a market where you know people are like, where's the where do I lose the least? Yeah, I know.

SPEAKER_04: It's why Sam plays blackjack and poker and not roulette or craps or slot machines. He will not go near a slot machine.

SPEAKER_00: Don't play, don't play video poker or you know, slot poker because they take the ten of diamonds or ten of hearts when around.

SPEAKER_04: Yeah, the heart is Jack of Hearts. Yeah, no. No, he won't play those either. He thinks they're scams, but he'll sit down and play at a table. He'll play he'll play a lot of poker at a table. He'll play for hours and hours and hours.

SPEAKER_00: Poker as a game, I think, is you know, there's a lot to it. It's not it's a place for us. Anyways.

SPEAKER_04: All right, so we live in Indian land, right? We're in the middle of seven casinos here. Yeah. Like literally in the middle of them. So we can go any night to the spa, the buffet, or the poker table. We could just do that.

SPEAKER_00: It's like a mini-vegas.

SPEAKER_04: It is. It's cute. Plus, it's Indian land, which means the gas is like a buck and a half cheaper. Not just cheaper, a buck and a half cheaper. That's a lot.

SPEAKER_00: That's a lot.

SPEAKER_04: That's a lot.

SPEAKER_00: All right. In the early 1960s, Bally, the Chicago manufacturer. Yeah, Bally.

SPEAKER_04: They make my favorite pinball machine. The Bally red carpet. The magic carpet. Oh, magic carpet.

SPEAKER_00: Okay, go ahead. Classic. They uh they brought out an electromechanical machine called Money Honey that could pay out up to 500 coins on its own with no attendant. Okay, so you know, that's cool. From so we go from 1890s to the 1960s, you know, with all like all mechanical stuff. Then microchips went into the machines. In 1984, an engineer called Inga Telnis was granted a patent on what's called a virtual uh virtual reel mapping, which IGT, International Game Technology, I I interviewed for them once. The Reno Machine Maker later bought. A physical reel only has room for 20 or so symbols, and that limits how rare a jack jackpot can be. Telness had a random number generator pick a much bigger set of numbers and then map those numbers onto the stops on the reel. The jackpot symbol might be one stop on the reel, but say one number in 64 inside the computer. So the reel shows you a far better odds than the machine is actually using. Yeah, you look at the thing, stupid wheel, and you go, oh, well, I have a one in whatever chance. No, no, no, no. You have a 64. That's right. Right. Even though there's 20, you know, symbols on the wheel. Yeah. It also lets the designer assign lots of numbers to uh to the blank stops right next to the jackpot. So the jackpot keeps turning up just above or just below the line.

SPEAKER_04: Oh my god, it does.

SPEAKER_00: Yeah. You know what that's called? That's called a near miss. And near misses They keep people playing. In 1989, Nevada ruled on it. Software that put an excessive number of near misses on the playline or pay line itself was unacceptable. Near misses just above or below the pay line stayed legal, and they still are.

SPEAKER_04: Wow. I didn't think that was You know, I'm I trust people too much.

SPEAKER_00: You did trust people too much.

SPEAKER_04: That's crazy they did that. Like, no, it's it did it on purpose.

SPEAKER_00: They did it on purpose. They did it on purpose. Like, yeah, that's yeah.

SPEAKER_04: So the players had ideas too. Edward Thorpe, a young math instructor at MIT in the late 50s, and he wondered whether blackjack could be beaten. Blackjack has a memory that Roulette doesn't. The cards that have been dealt don't come back until the shuffle. So the odds change as the deck gets used up.

SPEAKER_00: Yeah. So he used MIT's IBM computer, because you know, back then they had a computer to work through the maths, and showed that if you keep track of which cards have gone, there are moments when the deck favors the player, and you can bet more at those moments. In 1962, he published it as a book, Beat the Dealer. Huge, huge book. And it becomes the bestseller. The casinos responded by moving from one deck to four, and then six, and then eight, shuffling earlier and eventually in about 2000 with continuous shuffling machines that put the cards back after every hand, so there's nothing left to count. He's also built he also built something kind of a little stranger. In 1960 and 61, with Claude Shannon, the Bell Labs mathematician who founded information theory, Thorpe built a computer about the size of a cigarette pack to predict roulette. Switches in a shoe timed the ball in the wheel, and the the computer played one of eight tones into an earpiece to say which part of the wheel to bet on. They tried it in Las Vegas in the summer of 1961 and it was. It worked out that it gave them an edge of about forty four percent, but the wires to the earpiece kept breaking. It's often called the first wearable computer, by the way.

SPEAKER_04: Nevada's answer in nineteen eighty five was to make it illegal to bring any device into a casino to predict the outcome or track uh or keep track of cards. So when the players used technology, the state banned it. And when the house used technology, the state wrote rules for it and licensed it. So there you go. Like good luck trying to beat the house with your own technology. Here's what I'll say though, like that stuff they did in that basement back in the 60s, trying to beat the roulette wheel, that ultimately turns into Monte Carlo simulation that NASA starts using in order to predict catastrophic outcomes in space travel. So like that turns into a lot of other stuff. It wasn't just a bunch of guys trying to game the gaming system. It was, can we predict what seems like random? And then they turn around and say, can we predict the stock market? If we can do this, can we do that? Because they're both seemingly random. Like so this one thing that they did back in the 1960s set them on a trajectory that like really brought us a whole lot of predictive analytics today. So maybe they were the beginning of all that.

SPEAKER_00: Yeah, yeah. No, it's Thorpe, you know, with information theory and stuff like this is really big deal. So yeah, lots of cool research came out of that. Uh and so this is what I was talking about on the on the casino floor, though. From from the late 80s, the machines makers started wiring slot machines into a central system. And IGT developed a protocol called SAS, the slot accounting system, so every machine on the floor could report every coin in and every coin out. IGT handed it to an industry body, the Gaming Standards Association in 2001, and it became the common language. Once every machine reports back, you can tie the play to a person. This is like I feel like cookies and analytics and stuff. It was it was like 10 years before, you know. Yeah. In 1997, the casino company launched the a loyalty card. Harris launched a loyalty card called Total Gold that uh worked across all its casinos, later renamed Total Rewards. The man behind it, Gary Loveman, a Harvard Business School professor, who went on to run Harris, found that the most profitable customers were regular slot players on modest budgets. The figure the casino tracks for each of them is the theoretical loss or theo. How much you bet times how fast you play, times how long you play, times the house edge. That's what they expect you to lose. And your free room and meals are worked out of a share of share of that number. By 2005, machines could be changed from a central central server so the casino could swap the game on a machine without anyone touching it, or change the odds.

SPEAKER_04: There you go. And people have studied what this does to the players. Natasha Dal Scholl, an anthropologist, spent about 15 years with gamblers and machine designers in Las Vegas and published Addiction to Design in 2012. The heavy machine gamblers she interviewed talked about playing to keep playing, staying in what they called in the machine zone, where time and money stopped registering and the machines are being designed to keep them there. In 2010, a team at the University of Waterloo in Canada wired up a nov wired up novice players to measure their arousal and looked at what's called a loss disguised as a win. On Modern Machine, you can bet on lots of lines at once. So you bet a dollar and win back 40 cents. The machine still flashes and it plays the music and you just lost 60 cents, right? I mean, that's that's leading loss of crap, right? The players' bodies react to those spins the same way that they reacted to real wins. And so, yeah, that's crazy. Like they're building it in, they're helping you find flow. And the flow that you're finding is giving them your money.

SPEAKER_01: Yeah, yeah. Yeah.

SPEAKER_00: I know. That's crazy. It is crazy. Like, I think about this stuff, and you know, just the psychology that's gone into it, and you know, the amount of study that they've gotten. Because you know, so this woman, Natasha Schule, you know, she studies it and publishes it, but you know that the casinos are doing the same thing. You know, they're spending a lot of money to figure out what patterns people you know behave in to get them the most, you know, the most return.

SPEAKER_04: Dude, they have narrow margins, five and two percent bull crap. Like, yes. Exactly. Yes.

SPEAKER_00: They've got to. They've got to. So they that that's how they're using the technology. They're using it to get you into that flow state so that you'll you'll pour just a little bit more and just a little bit more, just a little bit more.

SPEAKER_04: So flow is dangerous, man. It happens to me when I crochet, and then you just wake up and it's six hours later, and you're like, uh oh. Like I have not moved for six there's no longer sun outside, right? And that's why there's no windows in in those places either, right? Like flow gets disrupted by like the change of your of the circadian rhythm. Flow gets disrupted by that.

SPEAKER_00: So the next big change here it is the uh gambling goes goes internet and then onto your phone. In 1994, Antigua and Barbuda in uh the Caribbean, Caribbean, passed a law licensing online gambling companies, and online casinos followed within a couple of years.

SPEAKER_04: The U.S. tried to choke it off in 2006 with a law that stopped banking banks and card companies processing payments for unlawful online bets. And on the 15th of April in 2011, which poker players call Black Friday, the federal prosecutors indicted the founders of the three biggest online poker sites. Then in May 2018, in Murphy versus the NCAA, no relation, the Supreme Court struck down the federal law that had kept sporting sports betting largely confined to Nevada.

SPEAKER_00: I remember like when we were at the dot-com, so this is like 99, right? I remember reading in Yahoo magazine, because Yahoo actually had a like official. Had a magazine. Yeah, had a magazine back then. There was an article about one of the founders of one of these online betting things. I can't remember his name. But it was it was the article was hilarious because it was about how he couldn't get back to the states. And and they it it was tr they tried to make it like this, oh my gosh, that's so sad. You know, he's he's built a business, it was a gambling site, and he's not welcome in the United States because if he shows up in the States, he'll get arrested. And he's giving the interview from his you know massive yacht down in the down in the Bahamas or something. And he's like, I can't go visit my parents, so I have to fly them out, you know, to the It's like, I just I remember that article on a What a first world problem. I know, and I just like dude, don't even, you know.

SPEAKER_04: Right? Yeah, don't even. I have to fly my parents out, put them up at the four seasons, and they come over to the yacht. Oh, your poor parents. I know. Oh. Whatever. I'm so sick of the one percent. Yeah. The one tenth of one percent. The one percent, I guess I'm okay with. It's the one-tenth of one percent they're starting to crate on my nerves.

SPEAKER_00: Yeah. Okay, so so Nevada, you know, has their their thing, but then roughly 39 states have legalized it since, and Americans bet about a hundred and sixty-seven billion dollars on sports last year. The product that that's grown fastest is the same game parlay, where you bundle several bets on one game into a single ticket and all of them have to win. Flutter, I worked with I used to work with the CEO of Flutter. The company that owns FanDuel reported that its margin on same game parlays rose from about 13% to 18.5% between 2019 and 2023. On a standard single bet, the bookkeeper keeps around about four or five percent.

SPEAKER_04: Britain had its own reckoning. Betting shops had machines called fixed odds betting terminals.

unknown: Yeah, okay.

SPEAKER_04: I mean, you could have called it anything, and that's what you called it.

SPEAKER_01: Yeah, I know.

SPEAKER_04: You could have called it the box. You'd be like, that that'd be interesting, right? No, no, the fixed odds betting terminals. Where you could be where you could bet 100 pounds every 20 seconds. And in April 2019, the government cut the maximum stake to two pounds. In 2025, it capped online slot spins at five pounds and two pounds for 18 to 24 year olds. In America, the targeting is now done by software. Last month, the New York Times reported that DraftKings, one of the two biggest sports books, had built a model in 2023 that scored online casino customers on how much they were expected to lose for every dollar of promotion the company gave them. And that around $400 million of its promotions last year were personalized by AI. DraftKings says it's promotions reward sustained play rather than losses. A class action suit was filed at the end of September. No, no. Reward is sustained by play, not because you're losing. You're not trying to win it back. You're just playing. You're just playing. Yeah, you don't care if you lose money. That's not why you're playing. The class action was filed at the end of September, and this month, New York's regulators propose banning AI personalized promotions, odds, and betting limits, but it's still a proposal. I don't think they should be able to use an algorithm against you when you're doing something like that. Because I don't have the I don't have the ability to use mine against you. I mean, let's let's do it then. Like let my agent be your agent and we'll see who's better at this, right? But that's not what we're doing. Like we're that's not what we're doing.

SPEAKER_00: Tech Bros win again, Renee.

SPEAKER_04: Yep.

SPEAKER_00: All right, all right. So which brings us to you know what my daughter was reading about. Mobile games have been studied by researchers, regulators, and developers for the ways they they're built to take advantage of players, adjusting what you're offered, how hard the game is, and what it costs you based on what it knows about you without telling you it's doing it and without asking, which is which is like almost worse, right, than gambling. A lot of the money in those games comes from very a very small number of people. A peer-reviewed study of 69 million players across nearly 3,000 mobile games found that in most LOPS, that in the most lopsided games, around 38% of the revenue came from 1% of the spenders. Yeah. Yeah. Yeah. The industry calls those players whales, the same word the casinos use.

SPEAKER_04: Here's what's sad. Those people think that by doing that, by playing, you know, a game where you have to spend 999 to get a thousand more points so you can get past this place that you're stuck. Like there was a time when we paid 999 for a game.

SPEAKER_01: Yeah.

SPEAKER_04: Not for 20, you know, credits to get past I and the same thing that would trigger a sick brain who has obsessive compulsive disorder when it comes to gambling, this turns on the same part of your brain. It's the exact same thing.

SPEAKER_00: It is. It is. And you're not getting anything from it. You're not even you don't even have the chance. You know, the the whatever the 75% loss, you know, win loss, you know, rate, you you don't you it's all it's all going away. It all leaves. Yeah.

SPEAKER_04: And the closest thing to a slot machine inside a video game is the loot box where you pay real money for a sealed box of random items and don't know what's in it until you open it.

SPEAKER_00: Digital items, by the way. Digital items. Digital items. Not even real.

SPEAKER_04: You don't have any of them. They're not real. And they only work in that gaming environment. So good luck with that, right? In 2018, Belgium's gaming regulator ruled that paid loot boxes in games, including FIFA and Overwatch, were illegal gambling. The Netherlands tried to find EA, the publisher of the FIFA games, 10 million euros, and the country's highest administrative court overturned it in 2022. That same year, the UK government decided not to legislate. Australia's approach to 2024 is age ratings. So a game with paid loot boxes is now rated M, at least, I guess. In the US, the Federal Trade Commission went after the design. In 2022, Epic Games agreed to pay $520 million, $245 million of it in refunds over what the FTC called dark patterns, buttons, and menus designs to trick players, many of them children, into buying things in Fortnite. Okay, and you think about your own, like your own experience where you've clicked that button and you're like, oh my God, it's like like click here, double click, and I'll charge your card. It's like, I didn't mean to do that, and I sure as heck ain't doing that. And I don't pay for apps, so no, right? But if I'm a kid and it tells me to do that next, I'm gonna do it. Yep. Right? And that's how it happens. And the FTC already in the United States anyway, the FTC has a lot of rules around dark patterns, even before that's just algorithms, right? That was that's been on the books forever. Forever. It's been on the books since the 90s, right? This isn't new legislation. You are not allowed to use dark patterns or like syncopature.

SPEAKER_00: Deceptive practices.

SPEAKER_04: Yeah, deceptive any of that stuff in advertising. You're not allowed to do it. And yet, y'all do it. You'd all do it all day long, right? Some big screen takes up my whole thing, says click here, and if you don't click here, you have a thousand like anti-vir. No, yeah, none of that's true, right? Anyway, all right, I'm gonna go back to this. In January 2025, the company behind Genshin Impact settled for $20 million and agreed to stop selling loot boxes to under-16s without a parent's consent. Then there are casino games, so so does it okay. I'm gonna admit I I play with I play one time I accidentally voted like bet everything on one reel. Like I like hit the button, like bet max, which was everything I had. And I got like 786 billion coins. And I thought, even if that's pennies, that's a lot of money. So like now I just play forever on their dime because I won so much, as crazy as that would sound. But I play these. There are casino games sold as entertainment. Social casino apps let you play slots with virtual chips you can buy, but supposedly can't cash out. In 2018, a federal appeals court ruled that in Washington State, those chips counted as a thing of value, which made the game illegal gambling there. And Churchill's Downs and Aristocrat, the companies that own Big Fish Casino app, settled for $555 million in 2021. The I'm sorry, $155 million in 2021. The latest version of the Sweepstakes casino, which uses sweepstakes law to let players win real money. And over the past year, California, New York, and a string of other states have banned them. Because you don't win real money. You lend like 39 cents.

SPEAKER_01: Yeah.

SPEAKER_04: 10 cents, 12 cents. But here, if you bet $15, you might win $150. Like that's how that stuff runs, right?

SPEAKER_00: Yeah, it's yeah, it's messed up. It's messed up. There's there's quite a lot of that in the UK. Like there's a like you can do these things where the it it basically, you know, you text a number to buy entries, you know, but and then and it's funded by the price that you pay when you text. You know, each text is like two bucks or four bucks or you know, ten pounds or whatever it is, and then then they're like, Oh, you'll win 750,000 pounds or whatever, you know, in our cash pot prize drawing, but you know, yeah, nobody ever wins. I mean somebody wins, but you know, yeah. All right. This is where this is where t I just got angry. All right. So the newest fight is over prediction markets. I just like I I hate even the word comp prediction markets. Companies like Calci, Poly Market, and Robin Hood let you buy a contract that pays out if a team wins. Okay, it's not just that. Like, you can buy anything, prediction markets on you know, the outcomes of you know ships that go through the Straits of Armuz or the number of cars that's we've talked about this.

SPEAKER_04: Yeah. I found an iPod. I can put this up on CalChi. What do you think's on this? And as soon as I can find a charger for it, I'll let you know, and you can bet.

SPEAKER_00: Then you can bet, yeah. They say that it's a financial product regulated by the Commodity Futures Trading Commission, that's the CFTC, the federal agency that oversees futures trading, which would put it outside state gambling law. So it's a financial product, quote unquote, right? Calling it a federally a federally regulated contract means the platform doesn't need a gambling license in each state and doesn't pay state gambling taxes. In January, the CFTC chairs dropped a proposed ban on sports contract and said the agency has exclusive jurisdiction over them.

SPEAKER_04: Like I'm gonna bet somebody gave a lot of money to that administration and now it's not a problem anymore. I didn't say that.

SPEAKER_01: Yeah.

SPEAKER_04: The states disagree, and so do the courts. So there's the good news. The states disagree and so do the courts. In April, a federal appeals court sided with Calchi in New Jersey. In August, another ruled against it in Nevada. In September, a third ruled against it in Ohio and Tennessee, holding that these contracts are bets and state gambling laws apply. New Jersey asks the Supreme Court to take the case. Thirty-nine states in Washington, D.C. have backed it, and the court hasn't decided whether it wants to hear it yet. It's the same move gambling has made every single time. A new technology with a new label on it, and this round is still being decided.

SPEAKER_00: I this one gets smacked. This one just drives me nuts.

SPEAKER_04: Like, like, how is that? We start talking about polymarket and couchy too, like it's a polling organization too. Like, look at the betting against who's gonna win the mid-doesn't matter. It literally doesn't matter.

SPEAKER_01: Yeah.

SPEAKER_04: Right? It doesn't mean that anybody believes anything. It just means they want to make money and they think this is the way to do it. Like, yeah. No, like I don't people are crazy. I didn't this one just up into working hard for a living. Like, like you go to the office every day and you work your butt off and you make almost no money. Remember that time at cooking.com where we tried to figure out how much we made an hour and it was like $3 when we figured it out? Because we were only making so much a year, but we were working like dogs. Like, yes, that's what you do when you're young. You make almost no money working like a dog. That we've all done it. We've all done it.

SPEAKER_00: Yeah. Yeah. I like this is this is just feels like it's the derivatives trading all over again. It's hedging all over again. Like, but this is worse. This is so blatantly obvious that it is gambling. Like, how how can I buy a contract on the outcome of the world like the World Series? No, that's not a financial product or a computer.

SPEAKER_04: No, no, it's not. No, it's not.

SPEAKER_00: No, it's no commodity there to per me to which like there's no futures, you know, that I can buy against that. It's a bet. I don't know. Anyway, so if I were an orca, if I were an orca, I don't I wouldn't have to worry about any of this.

SPEAKER_04: I would just be floating around with my pod, speaking my own dialect.

SPEAKER_00: Yeah.

SPEAKER_04: Literally Pittsburghese. Okay, go ahead.

SPEAKER_00: Yeah. All right. There's a good book for for folks that are listening that have gotten to this point here. It's called Fiasco by Frank Portnoy. And it's about the derivatives market the first time around in the 90s that bankrupted like Orange County and teachers' unions and pension funds and stuff like that. So yeah. And then it literally happened again in 2008.

SPEAKER_04: So we have historic amnesia.

SPEAKER_00: Yeah, we we never learned from this stuff. But we should talk about futures and derivatives and stuff in an episode because like the tech is really cool, like how this all goes together and stuff. But like it the the that time that it happened in the 90s, like you get another generation of technology ten years later, and the structure, the reach, the speed, the size it's gonna happen again. The way it's it's inevitable. Yeah, this whole this whole triangle trade with the AI. I mean, anyways, yeah. All right, some other time. All right, so wrapping up here. So the dice got fair because players wanted dice they could trust, and Pascal and Fermat turned the house edge into arithmetic. The Blancs cut the edge to win customers, and Nevada set a floor of 75%. That means you lose 25% people. Uh the reels were mapped to make jackpot jackpots rare and near misses common, and Nevada stopped the worst of it on the pay line. The card counters were shuffled out, and the roulette computer was banged. And then the floor was networked, every player got a Theo, and now an app can do the same thing on your phone at any hour with no casino floor at all. Each step has made it faster and cheaper to take a bet from more people. And each round of rules put a ceiling on the edge without taking it away.

SPEAKER_04: And the regulation tends to arrive a long time later. In regulations defense, though, states' rights being states' rights, we let the states do it first, right? And then eventually the casinos will come back to you and be like, all right, listen, we need to harmonize this because this is getting to be ridiculous. We've got 32 different, 36 different, you know, laws. We want to harmonize those. So like I get it. I I get that it's far behind. It's always like that. But federal regulation lets the states sort it out first, and when they get a majority of states with that regulation, they'll step in to harmonize it. So I get it. The Louisiana lottery ran for more than 20 years before Congress closed the mail to it. Fixed odds terminals were in British betting shops for nearly two decades before the stake was cut. Loot boxes have been around for more than 15 years, and most countries still haven't decided what they even are. The house edge has been legal for centuries. And the fight has have always been around how big it's allowed to be and who it's allowed to target. Not that it should be illegal by itself.

SPEAKER_00: Yeah, yeah, exactly. I know. It's I never wanted to be an orca more. I know. Is this an industry that is is is purely predatory, you know? Does it what value does does it return to?

SPEAKER_04: Is it though? I mean, you're coming to it, know you're you know you're betting. I know it. You're coming to Vegas knowing you're gonna lose money. Like, like it's it's not like it's not like anybody's telling you, just give me your money, I'll make you rich. Like that's a scam. That's a full-on scam, right? This is maybe maybe if you give me some money, that might make you rich. Like that's not the same thing, right? So is it predatory? I don't know. Are is it silly for someone on fixed old people on fixed incomes to be spending so much time at casinos where to pay the penny slots, you have to spend 81 cents. Like, should they be there? No.

SPEAKER_01: Yeah, yeah. Yeah.

SPEAKER_04: You heard me right too. To pay the penny slots, it costs you 81 cents a bet. It's not a penny slot. It's not 81 credits to make one bet. Like, that's crazy. It's a dollar slot.

SPEAKER_00: All right. If you've ever worked on a casino floor or you've got a story about a slot machine that got the better of you, write us at nostalgic nerdspodcast at gmail.com.

SPEAKER_04: This is the Nostalgic Nerds Podcast. Thanks for tuning in. Please subscribe, follow, share this with someone who thinks a near miss means they're due. And we'll see you next time. You guys don't forget merch. Merch, merch, merch. It's a merch shop. Um go check it out. Holidays are coming. Oh yeah. Listen, Mark and I make no money off that.

SPEAKER_03: Yeah, there's some money in it.

SPEAKER_04: There's no money in this, but but we think it would be fun to run into one of you wearing a hat. It would be a good time. So definitely go check out the merch. Mark, thank you very much.

SPEAKER_02: See you next week. Wait, like the day before. Folks rush by, they got no clue. They don't know ya, like I do. I'm still here, still here by your side, old friend, nowhere to be you and me until the end. I'm still here, still here, still here. Strange filling about two. Lunch crowds going around the bed. Oh, my silver goes to you. That's the way treat a friend. Ain't no gambling, just a game. All I win's a little prize. Different windows, different name. Turns to catch and no surprise. Let it ring. They'll have to wait. You and me, why here to stay on the still here? By your side, friend. Nowhere else I go. You and