The Securities and Exchange Commission filed litigation in US District Court in Nevada against a pair of “entity wagering” funds that are a part of the Nevada sports betting industry, the SEC announced on Monday.
The cases were subsequently settled and closed as part of an agreement between the SEC and the two funds.
The complaints come nearly two years after the SEC initially started investigating the funds, which pooled money on behalf of a group of bettors and placed wagers, not unlike a mutual fund for sports wagering. Any profits from wagers are split among the investors.
Nevada legalized such funds in 2015, and the first launched in 2016. There are nine such funds in Nevada, per the state’s gaming control board.
What the SEC didn’t like
The complaints — filed last week — were made against Contrarian Investments, LLC and Nevada Sports Investment Group, LP. The SEC charged both with “violating the federal securities laws.” While the funds appear to be in compliance with Nevada law, the SEC believed they were not in compliance federally.
You can read the complaints here:
The SEC laid out the cases in releases on Monday:
From 2015 through 2017, Nevada Sports raised over $1 million from more than 30 investors. Nevada Sports conducted a general solicitation by widely offering its investment opportunity on the internet and further failed to make a determination regarding whether all of its investors were accredited.
The Complaint charges Nevada Sports with conducting an unregistered offering of securities in violation of Sections 5(a) and 5(c) of the Securities Act of 1933. The Commission accepted Nevada Sport’s offer of settlement in which, without admitting or denying the Commission’s findings, it consented to the entry of a judgment ordering a permanent injunction against future violation of Sections 5(a) and 5(c) and requiring it to send a copy of the final judgment to each investor.
The two funds then consented to entry of judgment “without admitting or denying the allegations of the Complaint”:
- Judgment against Nevada Sports
- Consent to judgment by Nevada Sports
- Judgment against Contrarian
- Consent to judgment by Contrarian
The charges are nearly identical for Contrarian, except the SEC said that it “raised over $400,000 from more than 30 investors.”
Interestingly, CG Technology is the only known sportsbook to work with entity wagering funds. CG — which operates sportsbooks for several Las Vegas casinos — is currently in trouble with regulators for problems with its sports betting technology.