The Security and Exchange Commission (SEC) released complaints against two Nevada entity sports betting companies last week to enjoin them from allegedly violating federal securities laws.
Nevada Sports Investment Group and Contrarian Investments are named in separate complaints. To start, the SEC alleges the companies were essentially mutual funds. As such, soliciting and collecting money from investors violated securities law. The SEC alleged that the companies did not qualify for exemptions under federal law, even if compliant with Nevada ones.
The settlements, entered in July, require both companies to provide all partners a copy of the settlement within 30 days. Future compliance meetings with the SEC are required upon notification by the federal agency.
No fine was included in the settlement, according to Chris Connelly, owner of Contrarian Investments.
Sports betting entities work like mutual funds
First of all, sports entity betting originated from a bill backed by CG Technology and passed by the Nevada Legislature in 2015. AG Burnett, then chairman of the Nevada Gaming Control Board, told the Assembly Judiciary Committee that his agency was neutral on the legislation. It passed the state senate 11-10 and the assembly unanimously.
Apparently, CG Technology was the only sports betting company that accepted wagers from these entities. In this kind of set up, people set up corporations, then created and collect funds from individuals or businesses across the country and world.
The fund’s management team places wagers with these deposits. The investors have no input in this part of the process.
Investors receive about 70 percent of the profit if the sports bets win over time. Those putting money into these sports mutual funds are accepting all of the risk. In the end, if the fund loses more money than it wins, the investors cover all of it.
Betting industry already had controversy
This is not the first controversy involving sports entity betting. Multiple people filed complaints with the Nevada Secretary of State regarding Reno-based Bettor Investments, according to the Las Vegas Review-Journal.
Clients alleged that Bettor Investments and its founder Matt Stuart were not responding to emails and missed interest payments, starting in December 2017. These payments were based on promissory notes issued to clients after Bettor Investments stopped placing wagers in 2016.
The company blamed its ceasing of operations on CG Technology’s legal problems.
CG Technology compliance woes continue
Seems like CG Technology is once again in trouble with regulators. In August, the Nevada Gaming Commission rejected a $250,000 settlement from CGT for accepting wagers across state lines and inaccurate player payments.
For that reason, there will be a September hearing to determine CG Technology’s punishment and future licensing status.
SEC Documents
- Judgment against Nevada Sports
- Consent to judgment by Nevada Sports
- Judgment against Contrarian
- Consent to judgment by Contrarian
