William “Billy” Walters is a modern-day version of James “Diamond Jim” Brady or George “Pittsburgh Phil” Smith, a sports gambler so feared by the Las Vegas casinos that they won’t take bets from him.  Instead, he hires others—called “runners” or “beards”—to bet for him, to the tune purportedly of $2 million per day.  (While the practice of using surrogates is prohibited, it is difficult to prevent.)

Seventy-year-old Walters is a rags-to-riches story, rising from a hardscrabble background in rural Kentucky to become a legendary sports bettor of immense wealth, and the owner of golf courses, car-rental agencies, and automobile dealerships.  Reportedly, his father was a professional gambler and his mother was a teenage alcoholic; Walters was raised by grandparents.  His interesting and unusual life was profiled on 60 Minutes.

On April 7, 2017, Walters’ luck ran out.  A federal grand jury in New York convicted him of insider trading (10 counts of conspiracy, wire fraud, and securities fraud) of Dean Foods Company stock over a multiple-year period of time.  Walters was found to have made $43 million trading on tips provided to him by the former chairman of Dean Foods, who testified against him.

In sports betting and horse-race betting, the use of insider information is not only widespread but is legal.  Making wagers with inside information on publicly-traded stocks is another matter.  The legal/illegal distinction was the undoing of the most recognized sports gambler of our time,

After the verdict came in, Walters commented:  “I just did lose the biggest bet of my life.  Frankly I’m in shock.”

Meanwhile, Walters’ friend golfer Phil Mickelson, who was playing in the Masters tournament in Georgia, declined to comment on the verdict.  Mickelson previously had repaid $1 million in profits, per an agreement with the Securities & Exchange Commission, that he made on stock trades with information from Walters.

Walters is facing a stiff fine and possible imprisonment.

The caveat-emptor environment of sports- and horse-race betting is not as characteristic of stock trading, with the SEC around to ferret out and prosecute cases of insider trading on securities.  Thus Walters should not be “shocked” by his fate.

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