Two of Nevada’s sports entity wagering funds have settled with the U.S. Securities and Exchange Commission over violations of federal securities laws.
Contrarian Investments and Nevada Sports Investment Group, which invest pooled money on legal sports wagers much like a stock or bond mutual fund, were not fined or suspended as a result of the agreements, which resolve complaints the SEC filed against the two for conducting unregistered offerings of securities, but they consented to permanent injunctions should there be future violations.
The Nevada Legislature approved entity wagering in 2015, allowing out-of-state residents to participate in the state’s regulated sports betting market through mutual fund-style pools. The funds have to be managed in Nevada𑁋$437,500 from 25 investors in the case of Contrarian, approximately $1 million from 35 clients of Nevada Sports𑁋with profits from winning bets split among the investors.
As such, the funds were considered in compliance with Nevada law. But that wasn’t the case federally, according to the SEC.
“While some might view this as a negative, it was necessary to make us aware of all of the federal requirements to operating such a fund,” Contrarian owner Chris Connelly said.
“We now know that all sports entity funds have to be viewed as securities and register as such,” said Kenneth Murphy Jr., fund manager for Nevada Sports. “We have always endeavored to be fully compliant with the SEC.”
Murphy said Nevada Sports stopped taking new investors in 2016, “primarily because only one sports book operator”𑁋CG Technology𑁋was accepting entity wagers.
Bad news continues to stalk the fledgling sector in the meantime. Earlier this year, clients of a third entity-wagering firm, Bettor Investments, filed complaints with the Nevada Secretary of State and the state Attorney General’s Office claiming the fund had not responded to requests to return their money.
CG Technology, meanwhile, is facing a shaky future of its own, having paid tens of millions of dollars in fines the last five years to satisfy state and federal charges ranging from regulatory violations to money laundering. The company currently is at risk of losing its Nevada license after the state Gaming Commission rejected the company’s latest settlement with the state Gaming Control Board.
CG operates sportsbooks at seven Las Vegas Strip and Las Vegas-area casinos.
