Sports betting entities aren't blocked by Wire Act

Jun 30, 2015 3:00 AM

With the passage of the entity wagering law, Nevada has made it legal for people to put money in a sports and/or race betting pool and see their betting dollars professionally managed, almost like a mutual fund.

In response to reader inquiries, this weeks’ column is focused on explaining how the new law is expected to work and answer a few particular questions.

The notion of people pooling money and betting a certain way is not new; it has been around a long time. But since one person holds the ticket it requires a great deal of trust by the rest of the group. It has also caused a headache or two with the tax man for the ticket holder and, of course, raised concerns about if the betting partner was breaking gaming regulations.

Over the advancement of time and the introduction of sophisticated analytic computer models, more educated and well funded groups started to express desires for the ability to use legal entities such as partnerships or corporations to make their studied wagers and not “just trust Joe to hold the ticket.” It would also make it easier for the group to have simpler and proper reporting on the net winnings to the authorities and have legal protections that companies enjoy.

On the regulatory side of things, past gaming laws and regulations were designed to recognize gaming licensees on one side of the wager and natural persons or other gaming licensees on the other side of the wager. The law and regulations never really anticipated a non-gaming licensed company making a bet on an event, so a bill was passed in the recent legislative session to permit such activity.

So how is entity wagering supposed to work?

In essence a business along with its bank accounts will need to be established in Nevada and the business and all of its participants will need to register with the Nevada Gaming Control Board. Once that is done they can set up an account with a willing sportsbook, declare who in the company can authorize wagers and cash outs, and start wagering.

The registration process will require all the people involved – owners, investors, lenders, employees, basically anyone putting money in, anyone involved in the business and anyone getting money out – to provide valid ID that proves they are over 21 and, of course, their taxpayer ID number.

The wagers will be managed and made by the company in Nevada, with such activity tracked and reported pretty much the same way a stock fund might work.

To be very clear, money invested in an entity for wagering purposes is to be managed wholly and independently by the company within the borders of Nevada free of direction or influence by parties outside of Nevada.

Regarding particular readers’ questions:

“Are people outside of Nevada allowed to invest money in the entity making race or sports wagers?”

Yes, as long as both the company and investing individuals meet the registration requirements they can invest.

“If non-Nevada residents can invest, does the Federal Wire Act have provisions covering the transfer of the money?”

Transferring money for legal purposes, such as investing or lending money to a company for its purposes and mission, even if it is gaming, is not illegal. What would be illegal is if Jimmy in New York wired money to the company from New York with instructions to bet it a certain way on a game or a race. The decision on any wager would have to be made by the appropriate company people present in Nevada.

Until the regulators get comfortable with entity wagering the governing regulations will likely be a work in progress so anything can change in terms of what is permitted and not permitted.

This said, I would expect initially the types of groups getting involved in entity wagering will be the ones that use computer models to search out statistical percentage advantages or that use a combination of futures wagers and game-to-game wagers to exploit wager arbitrage opportunities. I also expect some of the larger betting line touts will step up and try their hand; after all, if their picks are good enough to sell they should be good enough to back an entity wagering business.

Gaming education is part of this columns’ mission, so questions are always welcome.

The Analyst is an experienced gaming industry executive who offers insight each week on events and issues affecting the industry. Contact The Analyst at [email protected].