James Krause, the Entrepreneur

James Krause’s career is a microcosm of the broader culture of corruption engendered in the UFC by its profit-driven ethos. A member of the UFC roster since 2013, as a fighter Krause was a solid, if inconsistent, performer in the UFC octagon. Over a seven-year tenure, he won nine of thirteen fights.

Like most professional MMA fighters, during this time Krause earned a meager and insecure income, despite the popularity and profitability of the company he fought for. At UFC 173 in 2014 — two years before the UFC was sold for $4.2 billion to entertainment conglomerate Endeavor — Krause received a reported $20,000 for his first-round technical knockout win over Jamie Varner. Three years later, following a decision win over Tom Gallicchio, Krause’s reported pay jumped to $48,000.

This increase, however, does not suggest a pay structure that appropriately rewards experience or length of tenure. Rather, it followed Krause’s stint on the UFC-produced The Ultimate Fighter reality series — basically Big Brother with cage fights — where he’d competed over a six-week stretch in televised “exhibition bouts,” virtually without pay. In short, Krause never achieved wealth or celebrity from his labor inside the cage. Rather, he won success and a profile by monetizing other fighters’ labor from the margins.

As he transitioned out of active competition, Krause assiduously redefined himself as an entrepreneur. Touting his success in real estate, he cofounded a MMA promotion company and took to coaching fighters in return for 10 percent of their earnings. Yet his biggest hustle was not coaching or promoting, but gambling. “I bet every single card just about every fight,” Krause told MMA Fighting in August. “I do pretty well. I make more money gambling on MMA than I do anything else.”

Krause organized his betting operations largely through subscription-service Discord, charging around two thousand users between $50 and $2,000 per month to access his fight picks. According to a report by ESPN, Krause also sought to take over other bettors’ sportsbook accounts, including those from outside the United States, likely with the aim of circumventing wager limits and other restrictions.

The symbiosis between Krause’s coaching and sports-betting hustles saw him achieve fast fame in both. ESPN offered him a regular cohost slot on their Best Bets program, while the UFC picked up Krause’s podcast for their Fight Pass streaming platform. Meanwhile, an increasing number of MMA fighters — among them current flyweight champion Brandon Moreno — schlepped out to Krause’s Kansas City gym for training.

Yet while Krause’s dual identity made him rich, it also created an obvious ethical minefield. Writing on Krause’s Discord in April, Krause protégé and UFC flyweight Jeff Molina described the situation well:

He’s trained w/ a lot of the fighters, lives and breathes this sport as a coach/fighter, & at times has the scoop on injuries — non-announced matchups — how fighters look like in camp, etc. In stocks this is called insider trading in MMA betting it’s called James Krause.

Molina’s analogy between Krause’s business model and financial fraud turned out to be apt. In November 2022, Krause-trained fighter Darrick Minner went down in the first round of his main-card fight against Shayilan Nuerdanbieke. Just hours earlier, there had been a huge influx of bets on exactly that outcome. As was later revealed, Minner went into the fight with an undisclosed knee injury, casting more suspicion on his decision to throw hard kicks with that leg, despite being in obvious pain.

Within forty-eight hours, internal regulators and external agencies had launched multiple investigations into the Minner-Nuerdanbieke match. Within a few weeks, regulators in New Jersey, Ontario, and Alberta had announced restrictions on betting on UFC fights. The Nevada State Athletic Commission stripped Krause’s coaching license and Molina and Minner’s fighting licenses. UFC fighters who remained in Krause’s orbit were barred from competing. Shortly after, the company revealed the FBI had launched an investigation of its own.

Suddenly, interviews in which Krause had bragged about betting on his own fighters came under scrutiny. A common refrain rose from gyms and media forums around the world: Why the hell did no one see this coming?

Low-Hanging Fruit

So far, analysis within the MMA bubble has largely focused on the obvious red flags in Krause’s public statements. The UFC has also come under criticism for failing to impose a ban on betting until mid-October, three weeks before the Minner fight, as well as for recklessly courting sportsbook partnerships without appropriately investing in measures to ensure betting integrity.

Of course, these are important failings. Yet they did not occur in a vacuum. In 2018, the Supreme Court overturned the Professional and Amateur Sports Protection Act, effectively deregulating US sports gambling. Since then, the UFC has signed major partnerships with betting agencies like DraftKings and Stake, which now saturate its broadcasts with gambling ads. For UFC, it was a way to boost short-term sponsorship income and ratings. Indeed, this dovetailed with the first COVID-19 lockdowns in 2020, during which the UFC’s viewership grew precipitously, in part because it largely managed to maintain its live event schedule. This allowed the company to attract a flood of problem gamblers who could no longer bet on the usual lineup of basketball, baseball, and football games.

On top of this surge of gambling money, by its nature, UFC is vulnerable to opportunistic bets. Fighters face a high risk of injury, and many compete out of mega-gyms where literally hundreds of pro fighters train under the same roof. Given all this, it seems blindingly obvious that insider information about everything from injuries to bad weight cuts would eventually be appropriated for gambling purposes.

However, if we view these factors in isolation, it can get in the way of understanding just how deep the UFC’s fight-fixing rabbit hole goes. To gain a full understanding, we need to analyze the political economy of the UFC.

The Political Economy of Ultimate Fighting

Ultimately, the UFC match-fixing scandal is a result of the poverty wages it pays many of its fighters.

It’s common knowledge that since at least 2016, when Endeavor bought the UFC, the company has paid between 80 to 85 percent of its gross revenue to capital, that is, to executives and shareholders. What’s left has gone to labor, that is, the fighters. Reporting by Bloody Elbow’s chief financial columnist, John S. Nash, estimates that the UFC generated approximately $1.14 billion dollars in 2022. Around 15.5 percent — $176.6 million — of that went to the more than seven hundred fighters who competed for the company that year.

The lion’s share is paid to UFC champions and megastars like Conor McGregor. Beneath that tier is a decently sized middle class of fighters who make a reasonably consistent living over sustained tenures. Below them is an army of entry-level fighters who receive $10,000 (gross) per fight as guaranteed starting pay, and who may only fight a handful of times before getting replaced.

In many cases, the athletes in this third tier aren’t even breaking even. After splitting their purses between taxes, management, and coaching fees, many are forced to supplement their fighting income by taking second jobs. Compare this with Ari Emanuel, CEO of the UFC’s parent company Endeavor, who made $300 million in 2021. Even by late capitalism’s standards, the juxtaposition is jaw-dropping.

But revenue share and low wages are only part of the picture. On top of this, UFC fighters have to contend with a lack of job security and a host of exploitative terms they must agree to when they join the UFC roster.

The standard UFC contract — described by one attorney as a “pretty nice form of slavery” — is something straight out of a Suzanne Collins novel. These contracts are premised on the fiction that UFC athletes are independent contractors rather than employees, a classification that means the UFC doesn’t need to pay minimum wages or workers’ compensation. At the same time, these contracts prohibit fighters from competing professionally for other organizations. In addition to preventing fighters from accepting matches hosted by rival MMA promoters, these restraints also bar fighters from working in other sports-entertainment areas, like boxing, kickboxing, and professional wrestling. The UFC’s sweeping intellectual property rights over fight footage and fighters’ likenesses as well the company’s prohibition on fighters’ having their own sponsors further restrict athletes’ abilities to earn money.

These terms are more than an obvious abuse of market power. Worse, they drastically limit the means by which professional fighters can monetize the physical skills they spend years cultivating. As a result, UFC fighters end up trapped, both dependent on a meager income and barred from using their skills and training to supplement it.

Lack of job control is also a major issue. The UFC can unilaterally terminate a fighters’ contract after a single loss, or when a fighter is suspended due to injury. Fighters, however, have no equivalent rights. They must accept the matchups and dates that they’re offered, or they risk termination without notice or having their contracts arbitrarily extended, a form of informal, unpaid suspension. This gives the UFC the power to ditch fighters it deems less profitable while extracting maximum surplus value from those who remain.

Under this regime, fighters often compete despite serious injury or illness to avoid censure. And fighters who try to test free agency at the end of their contracts are often subjected to smear campaigns by UFC management to drive down their market value. Absurdly, UFC contracts also obligate fighters to work for little or no compensation promoting the brand, participating in motion-capture activities for UFC video games and wearing the apparel of the UFC or its commercial partners. At the same time, they are required to report their whereabouts around the clock to submit to random drug testing.

The Sport Neoliberalism Created

The case of Darrick Minner — the fighter at the center of the Krause controversy — is instructive in this regard. Minner had lost two fights in a row prior to his fight with Shayilan Nuerdanbieke and sustained a serious injury to his knee during training camp. He likely feared that if he pulled out of the fight on short notice, UFC would terminate his contract, leaving him with no pay despite the costs he incurred in his training camp. Minner’s only alternative was to go through with the fight, get beat up, and then cash a meager check.

In this scenario, isn’t it perfectly logical that Minner placed a large bet on himself to lose, cushioning his journey into unemployment? And are we that naive to believe that he’s the only one?

The plight of professional MMA fighters stands in stark contrast to athletes in other, much more established professional US sports, in particular boxing and stick-and-ball sports like baseball, basketball, and football. The former is subject to the monopoly-busting Muhammad Ali Boxing Reform Act, which bans coercive contracts in the prize ring and consistently sees top boxers earn tens of millions for their fights. Similarly, in stick-and-ball sports, strong players’ unions — backed by armies of highly paid economists, lawyers, and player-agents — ensure that athletes receive roughly 50 percent of the revenues generated by their labor.

However, neither the state nor organized labor has reined in hyperexploitation in MMA. Indeed, businesses crushed a nascent fighter union, Project Spearhead, in 2018.

The situation may change in the future. In 2017, legislators attempted to expand the Ali Act to cover MMA. Reportedly, Congress may return to these reforms this year. At the same time, an antitrust lawsuit initiated by a number of former fighters back in 2014 could also massively shift the paradigm when it finally proceeds to trial.

Right now, however, the status quo is getting worse, not better. And it’s precisely this precarious, hyperexploitative status quo that created Krause in the first place. In the same interview when he identified betting as his biggest source of income, Krause explained his backstory. “I’ve been in the UFC since 2013 and I’ve never had a sense of security about my job. . . . Everybody there is an expendable asset.” In the absence of progressive laws or unions to restrain the UFC machine, Krause instead found a way of exploiting the system that had created him.

For its part, the UFC insists that it can manage this latest fight-fixing scandal internally through tweaking its fighter code of conduct, implementing in-house betting integrity processes, and rooting out bad apples. This, however, is little more than window dressing. Millions of people place bets on UFC fights. And as long as the UFC forces its fighters to subside on poverty wages, under dictatorial contracts, it all but incentivizes match-fixing.

Indeed, whoever comes after Krause will likely learn from his mistake. He was seemingly caught because he broadcast the predetermined outcome of the rigged Minner fight to his gambling patrons, skewing the betting line and attracting regulators’ attention. The next match-fixer will likely be less conspicuous.