Origins III: When A Question Chose Me
How an obscure bankruptcy case became a Supreme Court petition
After many sleepless nights, early mornings fueled by strong coffee, and countless hours staring at statutes and court opinions, I finally found the question I had been looking for:
Is sports performance an excluded commodity under the Commodity Exchange Act?
The year was 2013. Before prediction markets became mainstream, before the repeal of PASPA, even before daily fantasy sports became a national phenomenon. Outside Nevada, there was no meaningful market for betting on sports.
Yet the question was already there. Not many people were asking it, and even fewer appreciated where it could lead. But if you traced the statutes, the history, and the incentives carefully enough, you could see it bubbling beneath the surface. I was convinced that if it remained unanswered, it would eventually force the courts to confront problems they weren’t prepared to answer.
So I did something that, in hindsight, seems almost absurd: I turned that question into a petition for the Supreme Court of the United States.
A Predictable Future
Sports performance was a commodity, even back then. My conclusion wasn’t driven by prediction markets—there were no mainstream prediction markets to defend. It emerged from reading the Commodity Exchange Act, studying financial history and trying to answer the question honestly.
My request to the Court was straightforward. I asked the Supreme Court to answer the question by granting certiorari. In a nutshell, the argument was this:
The fact that sports performance is perceived at the margin in the universe of all possible commodities is precisely the reason why this case is an ideal vehicle to draw the boundaries between state regulated gambling and federally regulated capital markets. While the boundary question could arise through other financial innovation, no other dispute involving a novel financial contract would be so polarizing and powerful to draw the boundaries between state and federal regulation. Consequently, the clarification of these issues by this Court would deliver the maximum impact. Therefore this Court should grant certiorari.
I also warned what would happen if the Court declined to answer the question:
Innovation paralysis and litigation jam is an intolerable future when our Nation is just trying to get back on its feet following a severe economic crisis.
And later:
How can one enforce financial transactions against challenges that they are unenforceable gambling contracts under state law? The 19th century courts were clogged trying to answer this very question…Absent immediate clarification by this Court, our nation will enter into another period where the courts are clogged with decisions that are inconsistent and conflicting with each other.
I wrote those words in 2013.
Thirteen years later, they read very differently.
Litigation jam is no longer a prediction. It is a description of the world we now live in.
To be clear, this wasn’t some prophetic insight or extraordinary act of foresight. The conclusion was almost inevitable if you were willing to study the history, understand the gaps in the law and think carefully about incentives.
And it all came down to one word.
As I wrote in the petition:
The problem, at the core, has always been the inability to define gambling.
Thirteen years later, I still don’t believe that question has been answered. If anything, we’ve managed to build an entire industry around avoiding it.
Which raises an obvious question: How did a Ph.D. economist end up writing a petition to the Supreme Court of the United States in the first place?
A Brief Recap
If you’ve read Origins I and Origins II, you’ll recognize some of what follows. If not, here’s the condensed version:
My Ph.D. in economics unexpectedly led me to a sports finance start-up in Costa Rica founded by Chris Rabalais. Chris believed sports belonged in the financial markets, and he wasn’t content to simply build another betting platform. He wanted to build regulated financial products around sports.
His first attempt was AllSportsMarket® (“ASM”), a sports trading marketplace. To determine whether the concept could survive regulatory scrutiny, he retained one of the best lawyers he could find: Paul Architzel, principal architect of the Commodity Futures Modernization Act. Architzel saw promise, but he also saw legal risk.
So Chris pivoted.
Working with former Acting CFTC Chair, Sharon Brown-Hruska, the team developed SportsRiskIndex® (“SRI”)—a sports risk management product designed specifically for commercial hedging rather than gambling. A designated contract market was lined up. Meetings with the CFTC were held. All that remained was an informal meeting between the Division of Market Oversight and the Commissioners.
Then the financial crisis intervened.
Our DCM partner, USFE, didn’t survive and SRI was left without a home at the 1-yard line. As devastating as that was, it wouldn’t prove to be Chris’s biggest challenge. While pursuing federal regulation, he was blindsided by a lawsuit from one of ASM’s most active traders.
His name was Seth Leon.
The Leon Lawsuit
At the time, Seth Leon worked as a statistician at UCLA, my alma mater. He was also one of the most active traders on ASM. Perhaps because of his statistical background, he quickly recognized something many others missed: On ASM, winning streaks mattered.
ASM wasn’t a sportsbook. It was a marketplace where investors bought and sold SportShares®. Every trade generated commissions that funded team dividend pools. Winning teams accumulated reserves, and a portion of those reserves were periodically distributed to shareholders as well as after wins. Similar to the New York Stock Exchange, price reflected market expectations. Dividends reflected both trading volume (popularity) and what happened on the field (performance).
Chris described ASM as “The World’s First Sports Stock Market.” It wasn’t just a slogan. It reflected how he thought about the business.
Leon understood the mechanics. He invested heavily in Duke men’s basketball. Under Coach K, Duke went 32-4 that season. Leon’s account value grew dramatically. By the time the dispute arose, it exceeded $379,000, consisting of approximately $159,000 in cash, $94,000 in SportShares valued at the last quoted market prices, and roughly $125,000 in internally valued shares of ASM’s parent company that had been gifted to Leon. He then began requesting withdrawals from his account.
There was one problem: The company didn’t have enough cash in its treasury to satisfy those requests.
Over time, I came to believe there were only three plausible explanations. The company could have suffered from gaps in execution, the market design itself could have been fundamentally flawed, or Chris could have been running a fraud.
The courts ultimately embraced the third explanation.
I never did.
Not because Chris was my friend. Not because I had money invested. But because I had witnessed a very different story. I watched Chris spend years trying to bring sports into the federal regulatory framework. I watched him retain Paul Architzel and later Sharon Brown-Hruska. I sat in meetings at the CFTC. I watched the SRI emerge after experienced counsel concluded ASM faced regulatory uncertainty. I watched Chris repeatedly abandon ideas his advisors considered legally risky, even when doing so came at enormous cost.
None of that proves Chris ran the company perfectly. But it paints a very different picture from someone intentionally setting out to defraud investors.
The Problem, As I Saw It
My understanding of these events comes not only from what I witnessed firsthand, but also from years spent reviewing hearing transcripts, correspondence, and subsequent court filings. One of the most comprehensive summaries appears in Christopher Rabalais's 2021 California Court of Appeal opening brief, which Chad and I drafted on his behalf.
The problem, as I saw it, wasn’t that the court acted in bad faith. The problem was that it was presented with only one of two competing narratives.
The first narrative was the one I had lived through:
An entrepreneur trying to bring sports into the financial markets. Years spent pursuing federal regulation. Advice from nationally recognized experts. Meetings with the CFTC. A complete redesign of the product after counsel identified legal risk. Repeated attempts to take the harder path rather than the easier one.
The second narrative was the one presented in court:
We’re dealing with a bunco operation here, that is, taking money from poor people and middle class people, running a gambling scam on the internet…
That was how Leon’s counsel described Chris.
A month later, Chris made an attempt to tell his side of the story. His attorney asked the court for permission to let him read a statement into the record.
The answer was one word.
No.
The Changing Narrative
Leon’s original complaint alleged that he had invested on ASM:
Seth Leon began investing on the ASM exchange in November 2004.
That wasn’t a trivial choice of words. It reflected, at least initially, how Leon himself understood it.
The narrative changed.
When Leon’s counsel argued that Chris was operating a “gambling scam on the internet,” the court recognized the problem:
So if I’m correct, Counsel, the significance is if it is gambling, then that’s not lawful under California law, and therefore you wouldn’t be allowed to recover.
That should have ended the discussion.
If ASM was gambling, Leon’s claims were likely barred. If it wasn’t gambling, then the fraud theory built around gambling collapsed.
Instead, the narrative changed again.
Leon no longer argued simply that ASM was gambling. His counsel now maintained that Leon had been tricked into believing it wasn’t gambling:
It’s our position that whether this was technically gambling or not gambling, the plaintiff was tricked into believing it was not gambling.
I never understood how those positions could coexist.
If ASM truly was gambling, recovery should have been barred. If ASM was not gambling, then Leon could not have been deceived into believing it wasn’t. To me, those two theories could not both be true.
Yet somehow they became one.
The Power of Labels
Judges can decide cases only on the record before them. When important facts are missing, legal conclusions inevitably rest on an incomplete foundation.
By the time the litigation was over, Chris had gone from entrepreneur to “bunco artist.” ASM had gone from financial innovation to a “Ponzi scheme.” Years spent pursuing federal regulation, working with nationally recognized experts, and developing SportsRiskIndex had largely disappeared from the story.
The court ultimately described ASM this way:
“[T]he fraud that’s permeated this entire enterprise… On its face it seems to be a clear Ponzi scheme. You don’t actually own anything. You need new investors to keep coming in. So it either seems like a Ponzi scheme or gambling or something other than a true investment platform. Something I can’t figure out in spite of the doctoral thesis or whatever that it purports to be. The only way this would really work is if you actually had true derivatives and all the sports teams agreed to be bought and sold and traded. Otherwise it’s fantasy football.. If it looks like a duck and walks like a duck, it’s a Ponzi scheme or gambling….” (emphasis added)
I remember reading those words and thinking they were profoundly wrong.
Not because Chris lost.
Not because I lost money.
But because, as a matter of financial concepts, the court fundamentally misunderstood the market.
I had watched an entrepreneur abandon ideas his advisors considered legally risky. I had watched him pursue the harder path rather than the easier one. I had watched him spend years trying to bring sports into the federal regulatory framework.
I had watched an entirely different story unfold.
And because Chris was never allowed to fully explain his side of the story, the story I had watched never made it into the courtroom. The interactions with the CFTC, the pivot from ASM to SportsRiskIndex—none of it meaningfully made it into the record on which the court based its conclusions.
Instead, what remained were labels:
“Bunco artist.”
“Ponzi scheme.”
“Gambling.”
“Something other than a true investment platform.”
Those weren’t merely colorful descriptions.
They became legal conclusions.
I didn’t realize it then, but that opinion changed the trajectory of my career.
One lesson stayed with me.
When I see someone change positions in litigation, my instinct is to ask why. Conflicting statements don’t automatically prove someone is wrong, but they are often the first sign that something deserves closer scrutiny.
In this case, I couldn’t reconcile the competing theories. If ASM truly was gambling, recovery should have been barred. If it wasn’t gambling, then the fraud theory collapsed. What I couldn’t understand was how both propositions could coexist.
I became obsessed with definitions—not as an academic exercise, but because I had seen how profoundly they could shape people’s lives.
That experience didn’t just make me question one court opinion.
It made me wonder how many legal outcomes begin with the wrong definitions.
A Different Return
There are plenty of procedural twists and other details that are not discussed here. In any event, they’re all in the petition and in the brief included above. The short version is this: Leon deposited approximately $31,000 and successfully withdrew roughly $27,000, leaving him with an out-of-pocket loss of about $4,000. The litigation, however, quickly became about something much larger: The value of his ASM account.
The court ultimately awarded relief that bore little resemblance to Leon’s actual economic loss. It treated SportShares marked at their last quoted market prices and internally valued shares of ASM’s parent company as though they were realized assets, even though Leon had no cash entitlement to either. In my view, that was a fundamental accounting error.
My own out-of-pocket loss was more than twice Leon’s. I could have pursued the same path. I could have ignored the bigger picture and simply tried to maximize my recovery.
The recovery never interested me. The puzzle did.
What had actually gone wrong? What exactly was this market? Why did intelligent people reach such radically different conclusions about whether it was investing, gambling, or something else entirely?
Only years later did I realize I had received a return far greater than any lawsuit could have produced. Not a financial return. An intellectual one.
The investment I thought I had lost ultimately became the education that shaped everything I built afterward.
Chris never appealed the California judgment. Whether because of limited resources, the focus on SportsRiskIndex, or simply exhaustion, I honestly don’t remember. Life quickly unraveled. He lost the support of his team and principal financial backer, went through a divorce, fell behind on his mortgage, and ultimately filed for bankruptcy.
Leon intervened in the bankruptcy proceedings, transforming what had begun as a California state court dispute into a federal case. Chris argued that the state court had fundamentally misunderstood ASM, but neither the bankruptcy court, the district court, nor the Fifth Circuit ever reached that question. Instead, each concluded that–even assuming the California court had erred–the federal courts lacked authority to revisit the state court’s judgment.
The Fifth Circuit explained:
Even assuming, arguendo, that the California court erred by describing ASM as gambling or a Ponzi scheme, the bankruptcy court correctly concluded that it could not revisit that characterization. Generally speaking, bankruptcy courts may not sit as appellate courts and revisit the merits of state court decisions… Rabalais’s “attack” on the California court’s decision making ought to have been raised on appeal in the California court system, not before a federal bankruptcy court. Like the bankruptcy court, we lack the authority to review the decision of the California court.
Chris wasn’t ready to let it go. If the lower federal courts couldn’t revisit the California judgment, there was only one court left that could.
The Supreme Court of the United States.
Speaking Finance, Learning Law
Chris asked for my help.
By then, ASM was effectively dead, and so was the SRI. Chris was trying to rebuild his life. I was in a different position. I still had my job at PwC. I had lost roughly $140,000 on my investment, but I had long stopped thinking of it as simply a failed investment.
Looking back, it was the price of admission.
I didn’t get a financial return. I got something else entirely: A front-row seat to the creation of two sports-based financial products, years of conversations with nationally recognized experts, countless discussions about gambling law and financial regulation, and practical experience that no classroom could have given me.
I sometimes joke that I accidentally earned two more graduate degrees—an MBA concentrated in finance and another in law. Expensive tuition, perhaps. But I have never regretted paying it.
Helping Chris wasn’t about recovering my money. There was nothing left to recover. Even if we somehow succeeded, it wouldn’t put a dollar back into my pocket. It would simply remove a crushing liability from Chris’s.
But we had a history, and the intellectual challenge was impossible to ignore. So I said yes.
Writing a petition to the Supreme Court is difficult even for experienced lawyers. I wasn’t a lawyer. I had helped Chris with portions of earlier briefs, but I had never written a legal document from beginning to end. That was intimidating.
Then I reminded myself that while I didn’t speak the language of law fluently, I already spoke another language: Finance.
My UCLA dissertation examined sports betting exchanges and traditional bookmakers. At ASM, I watched one sports-based financial product evolve into another after experienced counsel concluded that the first might never escape the gambling label. I had spent years working with Paul Architzel and Sharon Brown-Hruska, sat in meetings with the CFTC, participated in product development, and even had my name on documents that would eventually become patents.
None of that made me a lawyer. But it meant I understood the financial problem before I tried to understand the legal one.
Finance and law are more closely related than people think. They are less like different disciplines than different languages. More like Italian and French.
Once I stopped worrying about what I didn’t know, I simply let my brain do what it had always done.
During the day I was committed to PwC. Mornings and evenings belonged to my family. Everything else belonged to the petition. Late nights. Early mornings. Weekends. Whatever I could find.
Then, after days—maybe weeks—of reading cases and staring into empty space, it dawned on me. This wasn’t really about fraud. It wasn’t really about bankruptcy. At its core, it was a state-versus-federal question.
The California court's conclusion rested on its characterization of ASM as gambling. But what if that threshold question wasn't for a state court to answer? States undoubtedly retain authority over traditional fraud claims. But when the alleged fraud turns entirely on the legal character of a novel financial market, was that ultimately a question of state law or federal law?
Years earlier, Paul Architzel had pointed us in that direction. Looking at the issue more carefully only confirmed what I suspected:
This wasn’t simply a state-law dispute. It was a federal question.
There was no media attention. No public buzz. The petition was attached to an obscure bankruptcy case. If there was any chance of getting four Justices interested, it had to be because the question itself mattered.
When I shared the idea with Chris, his response came back almost immediately:
“Alper, there is no doubt your thinking is growing on this and in all the right directions. It sounds like you are saying that we make this into a state/federal power case right at the core. My first reaction is electric. I think that just might be the sex appeal that gets us four votes.”
Chris wasn’t always the strongest executor. But when it came to the big picture, he often saw things well before others. On this one, we saw the same thing.
States, Take a Look
Chris filed the petition. If you’re curious, I’ve included it here:
Then came the difficult part.
The question was, in my view, an important one. But importance alone rarely gets the Supreme Court’s attention. There was no circuit split. No nationwide litigation. No public debate. The issue was attached to an obscure bankruptcy case that, on its face, looked like nothing more than a dispute between two individuals.
If the Court was ever going to care, someone else had to demonstrate that the question mattered.
So Chris started knocking on doors.
Every state attorney general received a copy of the petition, along with a letter explaining why the case deserved attention. The list reads like a who’s who of American politics: Pam Bondi in Florida, Kamala Harris in California, Beau Biden in Delaware, and Eric Schneiderman in New York—years before his office would become one of the country’s most prominent voices in the daily fantasy sports debate.
Looking back, I sometimes wonder what might have happened if just two or three states had taken an interest. Ironically, they probably would have argued against us. They likely would have defended state authority over gambling rather than federal preemption.
But that was precisely the point.
If several states had told the Supreme Court that this case implicated the balance of power between the states and the federal government, perhaps the petition would have looked different. Perhaps the Court would have taken it. It may even have ruled against us.
We’ll never know.
I don’t recall receiving a single response from a state attorney general. There was some interest from the media, but it never gained meaningful traction. The petition remained what it had always been: One important legal question hidden inside an obscure bankruptcy case.
Predictably, the Supreme Court denied review.
It was the right question.
Just fifteen years too early.
Looking Back
There is one moment in this story that I keep coming back to. At the time, it seemed like just another damages ruling. Almost fifteen years later, I see it very differently.
During the proceedings, the judge openly recognized that he stood between two very different measures of relief. On one side was Leon’s actual out-of-pocket loss—approximately $4,000. On the other was an account value approaching $379,000, built largely on unrealized SportShare prices and internally valued shares of ASM’s parent company. He understood the dilemma:
So it’s either $379,026.14, which would be the expectancy, or $4,000 plus interest from the date requested.
A fork in the road… Minutes later, the Judge revisited the fork again:
So here’s what I’m going to do. I’m going to take this under submission. It’s going to be one of those numbers. $4,000 plus interest from 8-02-08 or the larger number. My tentative is the larger number because of the expectancy damages and the fraud that’s permeated this entire enterprise.
The court chose the latter.
A few months later, as part of an application under the U.S. Treasury Department’s Making Home Affordable mortgage modification program, Chris prepared a detailed statement of his household finances. As of May 11, 2010, excluding any value attributed to ASM’s parent company, his household net worth stood at negative $375,600.47. Leon’s judgment totaled $379,346.14.
The two numbers are almost identical.
By Chris’s own account, he was already in a “very financially precarious situation.” He cited legacy ASM debt, the loss of income, startup expenses for new business ventures, delayed revenues, and an unexpected increase in his mortgage payment. The court, therefore, was not choosing between financial stability and financial distress. That ship had already sailed.
Looking back, the judge wasn’t simply choosing between two measures of relief. He was choosing between two very different futures for Chris.
One would have left Chris with virtually nothing: A difficult place to begin again, but one that still left room for hope. The other imposed a judgment almost exactly equal to his entire negative household net worth.
The judge made a choice. Chris didn’t have one.
Had Leon simply been made whole, Chris would not have carried a judgment of that magnitude into bankruptcy. Without that judgment, the bankruptcy would likely have remained just another bankruptcy proceeding. There would have been no federal challenge to the California judgment. No Fifth Circuit opinion. And no Supreme Court petition.
I was standing at a fork in the road as well.
The real choice wasn’t whether to recover my losses. That thought never crossed my mind. It was whether to walk away or help Chris fight on.
I chose the latter.
In the process, I found myself asking a different set of questions. What had actually gone wrong? What exactly was this market? Why did intelligent people—including judges, regulators, lawyers, economists, and entrepreneurs—reach such radically different conclusions about whether it was investing, gambling, or something else entirely?
Years later, I realize we all walked away with something different.
Leon received a judgment.
He never collected.
Chris inherited a burden.
He still carries it.
I thought I had found a question.
Looking back, I realized a question had chosen me.
Is sports performance an excluded commodity under the Commodity Exchange Act?
