NJ Bill Drafted to Allow For ‘Mutual Fund’ Sports Wagering

State legislators in New Jersey will soon receive the chance to debate and vote on ‘mutual fund’ sports betting making its way under the umbrella of the Garden State’s legal sports wagering variations.

New Jersey State Assemblyman Raj Mukherji, a Democrat from Hudson County, introduced the four-page A5138 bill in December in order to have “funds pooled together from different investors (that would be) used by fund managers to wager on various sporting events in an attempt to produce a profit for investors. The business entity’s gains or losses would be shared by each investor in proportion to his or her equity share.”

Breaking that down into layman’s terms, the law seeks to enable business entities such as mutual or hedge funds to wager on sports on behalf of their investors. The practice has already been law in Nevada for a number of years and has received a lukewarm reaction there. However, New Jersey could be different given its proximity to epicenter of the entire business world, the New York Stock Exchange.

Funnily enough, the bill’s co-sponsor, Raj Mukherji, represents a region of the Garden State (Jersey City) that is home to a large number of finance companies. It’s no coincidence that Mukherji doesn’t represent an area like the Meadowlands or Atlantic City, where sports betting is king. In the 4 years or so that this type of entity or ‘mutual fund’ wagering has been permitted in Nevada, sportsbooks there have shown little interest or uptake in the practice.

What is ‘Mutual Fund’ Sports Wagering Exactly?

Looking at how entity or ‘mutual fund’ wagering works in Nevada, it permits business entities to bet on sports on behalf of investors, regardless of how small or large the business enterprise. The Silver State’s model requires the businesses to be based in Nevada, including its bank account. Staff and investors must fully disclose their identities to the sports book where they’re wagering, however, investors are not required to be residents of the state of Nevada.

The idea originally had its genesis Down Under where an Australian hedge fund pooled its client’s money and wagered it via funds related to sporting events.

Rules bar individuals from accepting money to take bets on someone else’s behalf in Nevada sports books, however, the business entity fund law allows for the registered business and its employees to make bets, a distinction that satisfied the Silver State’s regulators.

The key to making the sports betting investment law practical in Nevada, laid in making the sports books responsible for collecting the information about the businesses and identities of those involved.

The prospective New Jersey law has been copied almost word for word from Nevada’s and allows for felonies related to the law to be punishable by a minimum of a 1-year prison term to a maximum of 10 years, alongside a maximum fine of no more than $50 000.

What New Jersey can learn from Nevada with this new sports betting type

As we mentioned earlier, New Jersey could be more successful in taking up mutual fund sports wagering given its citizens are arguably more literate and exposed top ebbs and flows of stock market style investments. However, there are lessons to learn from the experiences in Nevada.

The Silver State’s foray into mutual fund sports wagering has so far resulted in numerous investigations from both the state’s securities office in addition to the Securities and Exchange Commission.

If New Jersey is to offer mutual fund sports wagering for its residents, learning from Nevada’s mistakes, they will need to add some checks and balances to ensure everything is kept clear, transparent and above board.

The NJ bill should be debated when the State Legislature reconvenes in Q1 2021.

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