The Man Who Invented Online Sports Betting—and Went to Prison for It

Jay Cohen’s journey into the world of online sports betting began in the early 1990s when he worked as a trader on the Pacific Options Exchange in San Francisco. During this time, he and a colleague experimented with creating a market for betting on the outcome of the O.J. Simpson trial. Unlike traditional yes/no wagers, they introduced a system where individuals could buy futures based on the trial’s results, allowing the value of these bets to change dynamically as new information emerged. This innovative approach laid the groundwork for what would become one of the earliest forms of financial betting tied to real-world events. Inspired by this experience, Cohen envisioned a broader application of similar principles to the realm of sports. He saw potential in creating an online platform where users could place bets on sports outcomes using a model akin to stock trading. To pursue this vision, he chose to establish his business in Antigua, a country where sports betting was both legal and regulated. Alongside two partners, he founded the World Sports Exchange (WSEX), launching a basic website that allowed users to place standard bets such as moneylines and spreads, as well as more complex futures contracts that could be traded in real-time during ongoing games. This concept represented a significant leap forward in the evolution of sports betting technology, mirroring features found in modern prediction markets like Polymarket and Kalshi. Initially, the betting volumes on WSEX were modest. However, after receiving some media attention, the site quickly gained traction, facilitating millions of dollars worth of bets annually. As its popularity grew, WSEX began to surpass the combined betting volume of traditional sportsbooks in Las Vegas and Atlantic City. The influence of WSEX extended beyond mere numbers; it affected how odds were set in Las Vegas, with many bookmakers aligning their lines with those established by WSEX. Cohen remained committed to maintaining high standards of integrity and reliability, ensuring that all bets placed on the platform were settled promptly and transparently according to Antiguan regulations. Despite these efforts, tensions arose between WSEX and the major sports leagues in the United States. These organizations exerted pressure on a New York-based law firm known for its close ties to prosecutors in the Southern District of New York. Eventually, this led to legal action against Cohen and his associates, with charges of wire fraud being brought against them. Cohen strongly denied any wrongdoing, emphasizing that all operations were conducted within the bounds of Antiguan law and that no customer complaints had been received. Determined to defend his business, he returned to the United States to confront the charges directly, while his partners opted to remain in Antigua to manage the company away from U.S. authorities. Upon his return to the U.S., Cohen faced immediate arrest and arraignment. However, the path to justice proved arduous, marked by a series of legal challenges. One particularly adverse factor was the assignment of Judge Thomas Griesa to oversee the case. Known for his lack of familiarity with internet technologies and his skepticism toward gambling, Griesa consistently ruled against Cohen’s defense arguments. Ultimately, the judge instructed the jury to deliver a guilty verdict, despite Cohen’s insistence on his innocence. Following the trial, Cohen claimed that a juror confided in him that the panel believed he was not guilty but felt compelled to follow the judge’s directives. Cohen was subsequently sentenced to 21 months in prison. After serving his sentence, Cohen continued his fight to overturn the conviction through appeals and even sought intervention from the Supreme Court. Despite his persistent efforts, the legal system did not provide the relief he sought. His story highlights the complexities of navigating international legal frameworks and the challenges faced by pioneers in emerging industries. As the landscape of online betting continues to evolve, Cohen’s experiences serve as a cautionary tale about the intersection of innovation, regulation, and the law.