President Donald Trump chose billionaire financier Howard Lutnick as his next Commerce Secretary. However, Lutnick faces renewed scrutiny over his past involvement in the gambling industry.
Lutnick is CEO of Cantor Fitzgerald, the investment banking giant that previously owned Nevada-based sports betting group Cantor Gaming. The company's operations came under legal scrutiny amid accusations of rampant violations of state and federal gambling laws.
Cantor Gaming, now CG Technology, was among the early players in mobile sports wagering. The operator long provided phones for users to place bets before the industry was legalized.
However, law enforcement officials accused the company of operating its business in a way that disregarded laws aimed at preventing illegal gambling and money laundering. A settlement with the U.S. Justice Department revealed the company partnered with an illegal gambling ring, known as the "Jersey Boys," to hedge its financial exposure.
Though hardly a passive owner on any level, Lutnick also remained directly active in Cantor Gaming's operations. He frequently traveled to Nevada to oversee its activities and joined other executives in lobbying state lawmakers for rule changes affecting games.
Over time, Cantor Gaming's legal headaches piled up. In 2014, Nevada regulators charged the company with failing to properly supervise one of its top executives, Mike Colbert, who'd pleaded guilty to a conspiracy involving illegal gambling. Regulators also said the business kept poor records.
Cantor Gaming and Lutnick agreed to pay a $5.5 million fine, the largest penalty for gambling-related infractions Nevada issued at the time.
Cantor admits guilt
In 2016, Cantor Gaming settled with the Justice Department, accepting responsibility for a litany of criminal activities, including money laundering and promoting illegal gambling.
Federal authorities detailed how the company allowed out-of-state betting and engaged in "messenger betting," where a person places a bet for another individual. This is illegal in most jurisdictions. Cantor Gaming also processed significant cash transactions related to illicit activities.
Under the agreement, Cantor Gaming would not face charges from federal prosecutors if it cooperated with the probe. It then fired one of its executives implicated in the illicit activities and took other corrective measures to strengthen its compliance procedures.
By 2019, Cantor Fitzgerald sold out its stake in its gaming unit and was essentially done with the industry for good.
Despite these past legal entanglements, Lutnick's nomination moved forward. The Senate Commerce Committee advanced his confirmation to the Senate for a final vote. However, lawmakers and ethics experts remain contentious about his past ties to Cantor Gaming.
Ethics analysts have questioned his stewardship of Cantor Gaming during its legal issues, citing his ability to run a federal department that oversees economic policies and regulatory matters. Others say his business past reflects on his leadership and judgment, essential for a Cabinet position.
Lutnick's supporters say Cantor Gaming's problems were isolated and he wasn't directly involved. A Cantor Fitzgerald spokesman stated Lutnick's leadership compared well with his peers, adding he proactively helped the company address compliance problems.
Lutnick said he'd resign as Cantor Fitzgerald's CEO if confirmed to Trump's post. Despite officials criticizing Lutnick for his gambling-related past, President Trump hasn’t faced the same scrutiny, with gaming leaders supporting his second presidential term.
