Customers are shying away from doing business with a unit in Mark Walter’s empire that forms part of the plumbing of the U.S. financial system, adding to the pressure on the billionaire sports-team owner from a federal probe.

Guggenheim Treasury Services connects investors who want a safe place to stash cash with banks that need short-term funding. It sets up vehicles that sell commercial paper to money-market funds and other investors, using the money to finance the trading operations of global investment banks, a market that has boomed in recent years.

Vehicles operated by the division had around $45.8 billion in outstanding paper at the end of September, down from $53.1 billion at the end of the second quarter, according to data from the Depository Trust & Clearing Corp., a decline of around 14%. The amount owed by Guggenheim-run vehicles continued to fall through last week, the data show.

Most competitors didn’t record similar declines. Nearwater Capital, the biggest player in the market, slipped about 1% to $86.1 billion in the quarter.

In theory, the debt investors aren’t exposed to Guggenheim, which structures the transactions and takes a small cut. But since news of the investigation into Walter’s businesses broke over the summer, some investors have backed away from Guggenheim’s commercial-paper operation, market participants said.

Separate market analysis by JPMorgan, which gathers data directly from issuers, shows Guggenheimed a 12% decline in the third quarter, people familiar with the data said.

A spokesman for the Guggenheim commercial-paper business said it remains strong and that the third-quarter moves in interest rates led to declines for several market participants.

“Fluctuations in a markets-driven business are normal and reflect a wide range of factors,” the spokesman said.

Guggenheim Treasury Services grew from a business Walter set up in the 1990s, Liberty Hampshire. It was one of the pioneers in issuing commercial paper to fund banks’ lending activities, without being a bank itself. It operates separately from other divisions of Walter’s Guggenheim Partners business and his insurance companies.

The Justice Department is investigating whether those insurers have financed other parts of his business group without proper disclosure. It has also examined whistleblower allegations that Guggenheim’s asset-management arm might have artificially boosted revenue.

Walter and his holding company, TWG Global, deny any wrongdoing. The probe became public in July, and in August Guggenheim Treasury Services sent a note to clients saying it wasn’t involved.

“Repayment of commercial paper is not dependent on the performance of GTS or Guggenheim more broadly,” it said.

The market for asset-backed commercial paper teetered on the brink of collapse during the financial crisis before stagnating for a decade. It has grown since the pandemic, though it remains much smaller than precrisis levels, Federal Reserve data show. The companies closely guard their fee structures, but market participants said they can vary from around five hundredths of a percentage point for simple transactions to around a quarter of a point in more complex cases.

The way the deals are structured has changed, as has the underlying activity being funded. Before the crisis, banks often financed auto loans or mortgages. These days, the deals are also likely to backstop securities trades for hedge-fund clients. Banks use the arrangements to improve various capital and liquidity measures tracked by investors and regulators.

Demand from investors has been strong. Rising interest rates have meant better returns on short-term assets, said Ian Rasmussen of Fitch Ratings. The paper mostly matures in under a year.

Write to Joe Wallace at joe.wallace@wsj.com and Margot Patrick at margot.patrick@wsj.com