updated May 26, 2023
Well, we’ve heard that it is ever since we’ve lived here (and that's a long time).
It seems to us to be similar to the way it’s drummed into visitors’ heads that it’s hopelessly uncool to call San Francisco "Frisco." (The late San Francisco columnist Herb Caen was the point man on that detail; he published a book, as far back as 1953, titled Don’t Call it Frisco.)
Though we’ve never seen anything official, or even unofficial, about it, we suspect it’s just a way to separate us (the locals) from them (the out-of-towners), though it doesn't really; we call it Vegas plenty, both in speaking and in print, as do most other Las Vegans we know. (As for Vegans and vegans, the upper- or lower-case "v" does all the work.)
Case in point: The most successful marketing campaign this city has even seen was, "What happens in Vegas stays in Vegas." And that was thought up by locals for sure.