June 12, 2015
Last week, the Governor of Nevada signed into law a bill that will ostensibly provide out-of-state residents with unprecedented access to Nevada’s sports books. The law allows for the formation and registration of business entities, likened to traditional mutual funds, to place race and sports pool wagers. Notably, the sports gambling law allows investors to join those entities and to share in the profits and losses from wagers placed at licensed Nevada gaming establishments, without any restrictions on the state of residence of the investor.
What are the sports gambling law’s requirements for compliance?
The law requires any business entity that seeks to place wagers at Nevada sports books to register with the Nevada Secretary of State and maintain an account with a bank or other financial institution in Nevada, from which the entity must transfer and receive all money used in wagering. The business must also maintain a wagering account at the sports book at which it is placing wagers, and keep all records provided by the sports books for the wagers it places. Additionally, the bill requires that the business entity provide various documents and information to the sports books themselves, including:
- The entity’s formation documents and all filings with the Nevada Secretary of State; and
- The name, address, social security number or individual taxpayer identification number and a copy of a valid photo identification that indicates that a person is at least 21 years old for each of the following:
- every officer, director, manager, partner, equity owner, holder of indebtedness, and any person entitled to payment based on the profits or revenues of the entity;
- every person who is paid any compensation by the entity;
- every individual who is paid profits by the entity, on whose behalf a wager is placed, and who provides money to the entity for a wager or who otherwise receives a percentage of revenue from the wagering activity of the entity.
Potential Complications with the Nevada Sports Gambling Law
We have previously detailed various efforts to legalize sports gambling around the country, and how those jurisdictions ultimately run into conflicts with existing federal laws, most notably New Jersey’s ongoing battle with the federal government. While Nevada lawmakers view the new law as a means to provide people additional options to participate in wagering in a legal way, there is a palpable risk that the law will draw the ire of federal government. In much the same way that the recent trend of the legalization of marijuana has seemingly existed in a legal grey area due to inherent conflicts between state and federal laws, the new Nevada law could perhaps be rubbing up against the outer contours of what the federal government deems acceptable under the current framework of federal gambling regulations, specifically the Professional and Amateur Sports Protection Act (“PASPA”) and the Wire Act. Whereas PASPA was passed to outlaw sports gambling outside of a handful of grandfathered-in jurisdictions, including Nevada, the Wire Act, at its core, makes it a crime for anyone to transmit wagers or information that assist in the placement of wagers on any sports contest using a wire communication facility. While the Wire Act was initially enacted to give the federal government the necessary tools to combat organized crime, conservative judges or federal regulators could nevertheless theoretically interpret the Wire Act as prohibiting the very activity that this new Nevada law seeks to facilitate: the use of wires to transmit money and information to place wagers from out-of-state residents to Nevada business entities. As this law is rolled out, it will be fascinating for casual observers and gaming attorneys alike to monitor how the federal government responds to Nevada’s most recent attempt to liberalize access to its state-sanctioned sports books.
If you are interested in learning more about this topic or pursuing a venture in this area, please e-mail us at info@kleinmoynihan.com, or call us at (212) 246-0900.
The material contained herein is provided for information purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney. Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.
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