Senate Bill 443 and the entity structure

On June 2, 2015 Nevada ratified Senate Bill 443. The bill allows an individual or group to form a business entity which seeks out investors from anywhere in the world, with the purpose of placing wagers on the outcomes of sporting events to profit and divide between the group. The law's purpose is to increase tax revenue due to the increased sports betting handle, slow the flow of American money being spent offshore with illegal bookmakers, and create transparency in the domestic sports betting market.

The law itself is not complicated, but can also be very vague. This has caused all but one sports book and bank in the valley to take a wait and see approach. The law is now over a year old and progress has been slow adapting it to the sports betting scene in the state. This will change rapidly as the firms begin to show consistent returns, more entities get vetted, and additional sports book operators become involved.

Nevada has created a new investment vehicle similar to a mutual or hedge fund. This form of investing is so new that the individuals getting involved now will shape the future of the sport wagering industry.

What follows from that structure is the shape of every entity on this desk. The entity itself is the licensed party at the sports book counter. The investor is passive: money is placed with the entity, and the entity decides what is wagered and when. That is the line that separates this from an ordinary betting account, and it is also why each entity publishes a fee split and an assessment cadence rather than a price.

The vagueness noted above is the reason the group stayed small. A book that accepts entity wagers takes on a counterparty it must satisfy itself about, and a bank that holds pooled investor money for a wagering entity is in unfamiliar territory. Through the first year, one book in the valley took that on. The news log records the consequences, from the slow start reported in 2016 through the SEC subpoenas of November that year to the 2018 entries on entities closing their books.