Casino OK’d to buy betting tech
Judge approves sale of bankrupt football league’s prized asset
Las Vegas casino company MGM Resorts International has received a San Antonio bankruptcy judge’s approval to buy the gambling technology owned by the now-defunct Alliance of American Football.
The technology, intended to allow viewers to bet on each play during a game using their mobile devices, is considered the bankrupt league’s only significant asset. USA Today reported earlier this year, before the league folded, the technology “may revolutionize pro sports and gambling.”
The deal was approved at a Monday court hearing despite an objection from lawyers for some former AAF players, who claim the technology is worth far more than MGM’s bid. The company agreed to pay $125,000 and to a $2 million reduction of its claim against the league. MGM invested $7 million to help finance the development of the technology.
“While I don’t like it, and I’d sure as heck would like to see more money put on the table, at the end of the day, I think the evidence is more than sufficient … this is in the best interest of the (bankruptcy) estate,” U.S. Bankruptcy Judge Craig Gargotta said.
MGM likely would move to foreclose on its interest in the technology if he didn’t approve the agreement, Gargotta said. Under the agreement, bankruptcy trustee Randy Osherow gets some money to administer the estate and determine whether there are any other assets to pursue for the benefit of creditors, the judge added.
AAF co-founder Charlie Ebersol told USA Today in February the league planned to spend $500 million in $750 million to get the technology off the
ground.
The cash-strapped league, though, pulled the plug April 2 — less than eight weeks into its inaugural season. It joined a long line of failed football leagues. Besides running out of money, the AAF was unable to reach an agreement with the National Football League to become an official development league.
Six league-related companies filed for Chapter 7 liquidation April 17. Gargotta described the case as “hopelessly insolvent,” with roughly $680 million in debts.
A day before the league folded, the AAF and MGM entered into a intellectual property license that gave MGM a right to use the gaming technology.
The app would “allow almost immediate transmission of data and what’s going on in an event to your mobile device, which will
allow us to have play-byplay gambling, which is nonexistent today,” Scott Butera, MGM’s president of interactive gaming, told USA Today.
“It’s not fully functional, but it’s almost there,” Butera said.
Osherow testified during the court hearing that the app is not finished or “seamless.”
“Apparently, they had to send the engineers out to every game to make sure it was working,” he said. “It doesn’t sound like it was a completed project.”
For that reason, Osherow said there’s no way the technology is worth more than $7 million — the amount of MGM’s claim.
“I’d be the happiest guy in this room if it was worth more than $7 million,” he said.
Brian Engel, Osherow’s lawyer, added he spoke with the AAF’s chief software engineer about the technology.
“Frankly, judge, he told me if you can get $2.5 million, make sure you put the bandanna over your face before you get it,” Engel said.
Boris Treyzon, one of the lawyers for the former players, told Gargotta the technology is a “significantly more valuable asset than the court is being led to believe.”
Treyzon’s colleague, Jonathon Farahi, sought to put Deel Szeklinski on the witness stand to testify about the value of the AAF’s technology. Szeklinski is a principal with Round Rock’s UB the Pitcher, a fantasy sports game app that let’s players accumulate points for correctly selecting what pitch a pitcher will throw in a Major League Baseball game. Users can’t
actually make bets, though.
Gargotta wouldn’t allow Szeklinski to testify and declined to give him 48 hours to come up with the money to top MGM’s bid. Nevertheless, Szeklinski said he’s going to try to put together a group to raise the money over the next two weeks.
After the hearing, Szeklinski alleged the AAF app infringes on UB the Pitcher’s app.
Farahi told the judge it would be a “great disservice” to creditors if the technology was sold for $125,000 and a $2 million reduction in MGM’s claim.
Doctors, he added, are “coming after” former San Antonio Commanders players to collect on medical expenses related to their time on the gridiron.
About a week after the league shut down, two former AAF players filed a class-action lawsuit alleging they were defrauded. The case is pending in San Francisco.