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July 07, 2020

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July 06, 2020

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Not All Sports Betting May Be Legal In Nevada

Last August, Nevada Secretary of State Barbara Cegavske issued a Summary Order to Cease and Desist on Thomas Becker and Wellington Sports Club, LLC, Einstein Sports Advisory, Ltd., and Welscorp, Inc.  The gist of Secretary of State's allegations is that the respondents' sports betting model is a security.  Shortly thereafter the Securities and Exchange Commission filed a civil complaint against Mr. Becker and several other individuals and entities.  The SEC alleges, among other things, violations of  Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, and the registration provisions of Section 5(a) and 5(c) of the Securities Act.  

Earlier this month, several of the defendants in the SEC action moved to dismiss the SEC's action, arguing that gambling contracts are not securities and cannot be regulated as such, "because the 'investor' never gains an interest in an underlying asset - such contracts rest on on the outcome of a game".  The SEC argue that the defendants' contracts are investment contracts under SEC v. W.J. Howey, 328 U.S. 293 (1946).  The SEC also rejects the defendants' argument that the regulation of gaming under other laws precludes SEC jurisdiction.  

U.S. District Court Judge Andrew P. Gordon will decide.

© 2010-2020 Allen Matkins Leck Gamble Mallory & Natsis LLP National Law Review, Volume IX, Number 326


About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm

Keith Paul Bishop is a partner in Allen Matkins' Corporate and Securities practice group, and works out of the Orange County office. He represents clients in a wide range of corporate transactions, including public and private securities offerings of debt and equity, mergers and acquisitions, proxy contests and tender offers, corporate governance matters and federal and state securities laws (including the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act), investment adviser, financial services regulation, and California administrative law. He regularly advises clients...