Flutter's Russia fluster cluck
PokerStars bribes embarrassment, KY and OK progress, New York casino last-gasp efforts, Dutch duty-of-care study news +More
Good morning. On today’s agenda:
Flutter says Russian bribery affair won’t impact US listing plans.
Kentucky and Oklahoma sports-betting bills advance.
New York State Sen. Joseph Addabbo attempts to rustle up action on iCasino.
The Netherlands authorities extend duty-of-care study.
Much wiser since my goodbye to you.
Flutter’s Russian fluster
Flutter won’t let the matter of federal bribery charges derail its plan to list in the US, company insiders have told C+M, following claims it paid kickbacks to Russian politicians.
This is my inheritance: A $4m civil penalty agreed with the SEC and announced Monday related to PokerStars’ activity in Russia prior to its 2020 acquisition by the then Paddy Power Betfair. Sources at the firm told C+M the setback would not knock the owner of FanDuel, Paddy Power and others off its bid to dominate the North American market.
“There is no change to plans, as this is a legacy issue that we inherited through the acquisition, and one which we’ve kept stakeholders aware of,” the senior source said.
As reported in our sister publication Earnings+More, Flutter is consulting with shareholders over the formalities as it gears for a pivot away from Europe.
Shut up and take my money! SEC investigators alleged that between 2015 and 2020, ’Stars paid nearly $9m to consultants in Russia to bribe government officials as the business pushed to have online poker legalized in the country.
Few records of payments or supporting documentation of activity were kept, as ’Stars handed over cash to various third-parties to engage politicians and other influential individuals, including lawyers allegedly helping to draft bills.
An email from a ’Stars employee stated an invoice was “urgent now and needs to be paid this week. The bill is going to the Duma and could be rejected if we don’t pay”.
Payments to lobbyists linked to the country’s media and internet regulator were referenced, along with evidence of cash paid to individuals inside the watchdog itself and New Year’s gifts for Russian politicians.
As poker remains banned, the efforts failed, and Flutter pared back its operations in the country in 2022 when Russia invaded Ukraine.
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Russian laundromat
No more drama: The group must now weather the sustained scrutiny from exchanges, underwriters and potential investors, as it moves ahead with its listing plan, legal experts told C+M.
“A Foreign Corrupt Practices Act settlement will not necessarily be fatal to listing prospects, but a company would need to demonstrate that it has addressed the issues that led to the resolution,” said international sanctions expert Michael Casey, partner at Wilson Sonsini.
“This settlement contains many familiar facts, including the company’s use of third-party consultants and dealings with government officials in a country deemed to be high risk from an anti-corruption perspective,” he said.
Nine non-US government agencies were name-checked by the SEC, indicating an escalation of corruption enforcement activity by western states.
“As highlighted by the SEC, following our acquisition of TSG we made significant changes to implement a framework of controls in line with Flutter’s existing standards,” a Flutter spokesperson said.
Could be better, could be worse: While never helpful to be publicly sanctioned when everyone knows a listing is coming, Flutter may emerge stronger, said Tony Walker, co-founder and head of financial services and gambling at data intelligence firm Armalytix.
“You can get your unknowns out there, it’s unlikely to happen twice and now the public knows your dirty laundry,” he told C+M.
“I would go so far as to say that if they knew this was coming, this was a good way to do it – let the SEC fine them, apologize and move on to the IPO.”
Foreign bribery charges brought by US agencies have routinely averaged around $100m over the last decade, dwarfing the $4m punishment, added John Joy, managing partner at FTI Law.
In many cases, a parent company can be genuinely unaware of illegal activity because the right internal controls are not in place to pick up such payments, added Roman Gutchenko, compliance manager at PXP Financial.
“It’s crucial that gaming companies maintain proper books to ensure accuracy, prevent fraud, corruption and other economic crime,” he said.
KY and OK advances
There is good news on the sports-betting bills in Kentucky and Oklahoma, which both passed key stages in their respective legislative journeys.
In Kentucky, local media reports that HB 551 has passed out of the committee stage and now heads to the state House where it has already garnered bipartisan support. In Oklahoma, meanwhile, a bill that would open up the state to sports betting via the tribes has advanced from a key committee stage.
The Kentucky House vote is slated for early next week. The bill has the support of Gov. Andy Beshear.
Next time around: A similar bill failed at the Senate stage last year but bill sponsor Rep. Michael Meredith believes the new effort has the votes.
Just the facts: The tax rate is set at 9.75% for retail betting and 14.25% for online betting, with operators paying an upfront licensing fee of $500k while platform providers would pay a fee of $50k.
In Oklahoma, HB 1027 was given a pass by the House Committee on Appropriations and Budget. The deadline for a full House vote is March 23.
The tribes hold exclusive rights to gaming within the state and the new bill would allow them to open up retail operations and partner with sports-betting operators for online.
Gov. Kevin Stitt has already indicated he would sign any sports-betting legislation. However, passage through the Senate is by no means a done deal.
New York’s last-chance saloon
New York State Sen. Joseph Addabbo made the media rounds following an iGaming roundtable on Tuesday, telling anyone and everyone that online gambling was running short on time.
Per Addabbo, if online gambling isn’t included in the Senate or House budget (due at the end of the week), it will not be an agenda item moving forward in 2023.
If online gambling isn’t in either budget, the issue would be pushed off until 2024, with the earliest launch sometime in 2025.
One hope is that online gambling revenue replaces Gov. Kathy Hochul’s budget item, which reroutes some downstate casino revenue to the NY MTA. The Assembly and Senate are expected to reject Hochul’s proposal.
Glass half-full: The ever-optimistic Addabbo sees the state’s recent spate of gambling expansions as a sign of momentum. The alternate view is the legalization of OSB and fast-tracked downstate casino licenses has given the state a case of gambling fatigue.
US notebook
Momentum swings: 2023 has been a frustrating year on the legalization front, with many of the top candidates on, or heading towards, the sidelines.
Indiana’s iGaming dream turned into a nightmare.
New York iGaming is trending negative.
Georgia’s sports-betting bills were left for dead.
Only three states, and only one of consequence, legalized sports betting in 2022: Maine, Kansas and Massachusetts; 2023 could produce even worse results.
A Lone Star surprise: The lone bright spot is Texas, a state that has seemed out of reach is suddenly in play. Texas moving towards legal OSB would help the industry overcome the lack of movement on the OSB and iGaming fronts elsewhere.
Where there’s smoke: In totally unrelated news, Atlantic City casinos could soon be smoke-free. Legislation that “Eliminates smoking ban exemption for casinos and simulcasting facilities” is gaining legislative support.
A public hearing on the bill will occur today, Thursday, March 9.
Gov. Phil Murphy supports ending the casino loophole.
Then there were six: A Massachusetts Gaming Commission meeting on Wednesday disclosed that micro-betting specialist betr wouldn’t be on the starting grid come tomorrow, Friday’s, launch, bringing the number of operators that are to launch to merely half-a-dozen.
Betr will now launch in a fortnight, whereas Fanatics and Bally’s have said they will open in the coming months and Betway says it will start next year.
PointsBet and bet365 have foregone their licenses altogether.
Dutch duty
The Dutch gambling regulator is extending a study into responsible gambling practices and duty-of-care provisions after its initial findings proved inconclusive.
Let’s go round again: The Netherlands’ gaming authority, Kansspelautoriteit (KSA), began investigating duty-of-care activity by online providers in 2022, and will continue the probe into the latter half of 2023 following dissatisfaction with its first call for evidence.
KSA said it had learned that operators’ processes are markedly different, which presented diverse findings and called into question its own approach.
The regulator said it did not fully understand operator thinking into how and why some interventions are made, and would require further information.
There are “major differences” in how lost amounts are handled, variations in average loss, playing time and number of bets, and differences in how young persons are handled.
“This means that the investigation will take longer than previously expected,” the KSA said.
European notebook
The European Gaming and Betting Association has published its first pan-European guideline looking at how operators should conduct customer and business risk assessments. The rules have been reviewed and revised by anti-money laundering compliance experts.
The guidelines also contain customer due diligence processes, suspicious transaction reporting, record keeping and other essential areas that require strong AML compliance.
Ohio PG increase
There was a 227% YoY increase in calls to the problem gambling helpline, according to Ohio's Problem Gambling Network.
Wakey-wakey: "We knew the numbers were going to increase," said Derek Longmeier, executive director, Problem Gambling Network of Ohio, who added that the fact Ohio was matching the experience from other recently legalized sports-betting states was “still a wake-up call”.
The report also showed a 135% increase in helpline calls from Dec22, the last month prior to legalization, vs. Jan23, the first month of legalized sports betting.
“Warm transfer line calls” connecting gamblers in need of additional support increased 66% from December 2022 to January 2023.
Total chats increased 45% from December 2022 to January 2023, while calls to the Ohio helpline rose to 48 per day in Jan23 vs. 20 a day the month previous.
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Newslines
Odds On Compliance has announced a new employee resource group specifically made for women to encourage an empowering community for its employees to mark International Women’s Day and Women’s History Month.
Abradie, ob-la-da: Genius Sports and Entain are among the founders, along with three local law forms, of a new sports-betting integrity association in Brazil called the Brazilian Association for the Defense of the Integrity of Sport or ABRADIE.
Tabcorp CEO Adam Rytenskild used a speech at a conference in Sydney to call for the establishment of a national regulatory framework for wagering, gaming and gambling, suggesting the current state-based model of regulation no longer provides necessary safeguards.
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