Entity wagering still not making much impact in Vegas sportsbooks
October 25, 2016 3:00 AM
by Dave Dye
Entity Wagering is really more of a nonentity so far.
Sportsbooks have been extremely hesitant to embrace this new model of sports betting in which passive investors from even outside Nevada can risk their money on selections made by the registered business entities.
Senate Bill 443, which was enacted by Nevada lawmakers in June 2015, legalized this modern-day tout service, but there still seem to be more skeptics than advocates.
“That’s really driven by the sportsbooks,” said Katherine Hoffman, a lawyer who specializes in gaming issues for the Reno law firm of Fennemore Craig. “Individual sportsbooks get to decide whether or not they want to accept wagers from business entities.
“There hasn’t been a huge reception. I think it’s going to take a little time for other sportsbooks to come around.”
CG Technology, which operates The Venetian and six other sportsbooks in Las Vegas, pushed for this legislature and remains the only sportsbook in Nevada currently offering Entity Wagering.
“I haven’t been sold on the idea,” said Joe Asher, the CEO for William Hill, which is known for having one of the more aggressive and innovative approaches in the sportsbook industry. “We’re kind of taking a wait-and-see approach.”
The main reason for the reluctance by sportsbooks is the law makes them responsible for conducting background checks on the entities and investors, both initially and on an ongoing basis, to be certain there is no money laundering or other illegal activities involved.
The books clearly don’t want to take on that potential liability.
“The onus is on the sportsbook itself to verify that these entities are complying with the laws and have disclosed all of their investors,” Hoffman explained. “They are the ones that have that obligation to really vet these entities and make sure they understand who the investors are, and that these entities are complying with state laws and aren’t violating any federal laws.
“There is a risk to the sportsbooks in making sure that these entities are on the up and up. The burden’s on them to do that diligence, and there certainly is an expense associated with conducting that diligence on these business entities.”
CG Technology, which did not respond to requests for an interview, started offering entity wagering nearly a year ago.
Some of the requirements to open an entity account include:
• The business must be a Nevada entity registered with Nevada’s Secretary of State.
• A bank account must be established in Nevada with a Nevada-based bank.
• The source of funds and tax information of all individuals associated with the entity must be submitted for review.
Hoffman said the law is set up to be “very transparent.”
“It’s not a vehicle for anyone out of the state to place wagers,” she said. “No one’s identities can be hidden in this system. Investors cannot dictate wagers. It’s not a new method for them to place wagers. It’s a passive way for them to be involved in the industry without making any wagers themselves.”
One of the few current entities, Contrarian Investments LLC, started making plays for investors last April during the NBA playoffs. The company, which only picks football and basketball games, posted a record on its website of 20-4, with a return year to date of 78.24 percent, through Oct. 16.
It seems unlikely many more entities will get started until other sportsbooks change their point of view. The idea of having only one line to choose from in placing bets is not appealing to experienced/successful handicappers.
However, Hoffman is not ruling out the possibility that entity wagering could still catch on eventually.
“I don’t see why not,” she said. “Like any kind of new business model, everyone’s just sticking their toe in the water, kind of waiting to see how it goes.
“It’s an intriguing concept. Something different than a traditional mutual fund. If other sportsbooks see that this is opening up a new market for sports wagering and that there’s an upside to them, I don’t see why not.”
One scenario Hoffman mentioned is that success by the entities could drive interest from the public, which in turn, “might put some pressure on the sportsbooks to step up.”
Hoffman, in fact, insisted she’s considering making the investment.
“You’d have to find the right one,” she said. “Some of them have had pretty good records of return, although it’s a limited record at this point. But with the right tools and the right analytical skills, I think these entities have a really good chance of posting some impressive returns.”