Evolution feels the heat over gray market activity
Evolution’s shareholder lawsuit, Maryland news, new OSB bills, Sibella/MGM’s illegal bookie action +More
Evolution in hot water with shareholders over gray market activities.
In +More: an NFL arrest, French regulatory strategy.
Maryland gives iCasino legislation another spin.
New OSB bills in Mississippi, Georgia and Washington.
Nix’ed: Sibella pleads guilty to illegal bookie action at MGM Grand.
It's just time to pay the price for not listening to advice.
Evolution shareholder lawsuit
Last week’s class action in Pennsylvania resuscitates the thorny issue of gray and black markets.
Secrets and lies: According to the lawsuit brought by shareholders in a class action lawsuit in Pennsylvania, the world’s biggest live casino supplier made materially false and misleading statements regarding its exposure to gray and black markets between 2019 and 2023. Specifically, it failed to disclose that:
In “allowing play” from certain jurisdictions, multiple customers of Evolution’s were, or were deemed by regulators to be, unlicensed and/or in breach of the laws of those jurisdictions.
The lawsuit also alleges Evolution’s statements were false, as they misrepresented the extent of Evolution’s involvement with regulatorily noncompliant customers.
Hide and seek: A lawyer not linked with the case said: “Our industry has a long history of legislative changes having significant impact on revenue and the risks are well known. That said, evidence of deliberate concealment of known risks will still be actionable.”
Haven’t we been here before? Recall, three years ago the investigative report ‘Evolution’s Online Casino Presence in Illegal Markets’ was released by a US-based competitor. Interestingly, this was released before the period when the class action alleges “the truth” about Evolution’s compliance policies came to light.
The report accused Evolution of involvement in sanctioned countries such as Iran, Sudan and Syria and also in black markets such as Hong Kong, Saudi Arabia, Turkey, Tunisia and the UAE.
It also questioned its compliance with local laws in France, Spain, Italy and Sweden.
Evolution responded by reaching out to the New Jersey Division of Gaming Enforcement, promising an internal review of its policies and procedures. No further action was seemingly taken.
Evolution’s reported share of revenue from regulated markets has been stable at 40% for some time. One analyst suggested 90% of EBITDA might come from unregulated markets, albeit legitimately labeled ‘regulated’ because it comes via the company’s Malta license.
The damage done: The class action had a minimal impact on Evolution’s share price, unlike the report that wiped $3bn from the company’s market cap back in 2021. “It seems like the market is blowing off the lawsuit,” confided a source, “but some things that are damning might come out during discovery.”
The 2021 report highlighted a lack of enforcement of operators obfuscating IP addresses from sanctioned countries.
A failure to have addressed this problem would likely prove costly.
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North America
NFL arrest: A rookie NFL wide receiver with the New England Patriots, Kayshon Boutte, has been arrested and charged with using an alias account to place thousands of bets while underage, including bets on his then College team Louisiana State University.
Police allege Boutte placed more than 8,900 bets between April 2022 and May 2023 when he was only 20 years old.
17 of the wagers were placed on LSU, with six of those occurring when he was in the team.
Against the rules: A cheating scandal has erupted with a fantasy sports site called National Fantasy Football Championship run by SportsHub, which involved an employee making changes to players’ rosters after the game had started.
PrizePicks has partnered with provider Xpoint for geolocation and anti-fraud solutions, with the latter’s technology embedded within the former’s platform.
Independent testing laboratory eCOGRA has opened a new office in Denver, Colorado, as part of its US expansion.
Global
France: L'Autorité Nationale des Jeux has outlined a two-year strategy plan through 2026 that prioritizes protecting minors from gambling harm. The regulator’s priorities are to:
First, reduce the number of people gambling excessively and limit gambling ads.
Second, to increase industry transparency and integrity through stepped-up enforcement against illegal operations.
Third, to monitor new trends and ensure they comply with player protection measures.
Double standards: Meanwhile, the Irish government is being accused of “safeguarding” the interest of Française des Jeux, the French lottery monopoly operator, which last year acquired Premier Lotteries Ireland for €350m.
According to an article in the Racing Post, the Irish government will exempt lottery ads from its ban on gambling advertising during the watershed hours of 5am-9pm.
Separately, the new head of the Gambling Regulatory Authority of Ireland, Anne Marie Caulfield, went on national radio over the weekend to defend the draconian measures, saying problem gambling was a “serious issue” in the country.
BAGO nails: The Belgian Association of Gaming Operators has criticized the new rules that require players to have separate accounts for differing gaming activities or verticals but with the same operator.
BAGO said this will make it harder to track players to check for signs of harmful gambling.
It also complained that the National Lottery was excluded from both measures.
Sweden: The CEO of Swedish operator ATG has again called for a rethink on the government’s proposed gambling tax hike. Hasse Lord Skarplöth has proposed a standalone rise in iGaming tax to 26% from 18% rather than the intended move to raise all taxes to 22%.
Entain has confirmed it is seeking damages against the owners of BetCity, which it bought in June 2022 for €450m, for failing to disclose it was the subject of two investigations on the part of the Dutch gambling authority.
The company alleges it only became aware of the actions on the part of the KSA when they were published on the regulator’s website post-acquisition in Nov. 2022
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Maryland iCasino attempt
Good morning Baltimore: Maryland is taking another look at iGaming, with Sen. Ron Watson filing a bill on Friday that would also bring online poker to the Old Line State. Watson proposed iGaming legislation SB 267 last year, but it failed to pass beyond the Senate Budget and Taxation Committee despite public support.
That pressure, along with numbers from the Maryland Lottery and Gaming Control Agency indicating it could bring in $30m-$40m annually, gave Watson a chance to try again.
Under existing Maryland law, brick-and-mortar casinos, retail sports betting and online sports betting are permitted, but online gaming is banned.
Elementary: Watson’s latest bill, SB 603, proposes allowing two online operators to partner with each of Maryland’s six casinos. This may head off concerns about possible cannibalization of brick-and-mortar revenue, as casino unions helped torpedo the previous efforts.
The 12 potential operators would pony up a $1m fee for a four-year license.
They would pay a tax of 47% of gross revenue, with 1% of that levy going to the state lottery while another 1% would go to the state’s Problem Gambling Fund.
The bill also mentions live dealer studios, which will likely be played up as local job creation.
Supporters of the bill noted a number of regulated states have reported record iGaming revenue gains in recent months, a decade on from the industry’s debut in the US.
Ready, willing and able: Several major names are already active in Maryland, including BetMGM and FanDuel, which have both retail and mobile sports-betting operations, Caesars and DraftKings.
The state’s legislative session runs through April 8, and the crossover deadline for bills to move into the opposite chamber is March 18.
Legislators have over a month to pore over the details.
If the bill passes, voters will also need to approve the legalization via referendum in November, with the question put to voters: “Do you favor the expansion of commercial gaming in the state of Maryland to authorize internet gaming for the primary purpose of raising revenue for education?”
Sports-betting moves
Hope springs: Mississippi, Georgia and Washington have all raised hopes that sports betting could yet be a part of their current legislative programs.
In the case of Mississippi, two bills have been introduced to expand into OSB operations after B&M betting was allowed in 2018. Both have been referred to the House Gaming Committee.
In Georgia, a second bill to legalize sports betting has been introduced. Unlike the first bill, SB 172, the latest one, SB 386, would allow for sports betting to be introduced without a constitutional amendment. The bill has bipartisan support.
Lastly, in Washington, legislation to expand sports betting has been introduced in both of the state legislature’s houses. Sports betting is currently limited to tribal-owned facilities.
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Sibella scandal
I’m shocked! Shocked to find that gambling is going on in here: The disgraced former MGM Grand president Scott Sibella took more than $4m in cash from an illegal bookie, according to a court filing.
Sibella pleaded guilty in a Los Angeles courtroom last Wednesday for failing to file reports of suspicious transactions.
Both the MGM Grand and the similarly MGM Resorts-owned Cosmopolitan paid a combined $7.45m as part of a non-prosecution agreement with the US authorities over AML and Bank Secrecy Act violations.
Nix-ed: The now-convicted illegal bookmaker Wayne Nix was given comped rooms and gambling credits between August 2017 and February 2019. He was also invited to high-roller ‘undercover weekends’, so-called because of Sibella’s previous appearance on reality TV show Undercover Boss.
The filing said Nix accepted illegal bets in central California as well as elsewhere in the US.
It also said Sibella knew Nix was transacting bets of over $5,000 on the property with clients of MGM Grand. This included a $5m bet on the Super Bowl in 2019.
The Nevada Gaming Control Board issued a statement last week to the Las Vegas Review-Journal saying it was aware of the court actions involving Sibella in California.
“The NGCB has been monitoring the situation, and will ensure that all individuals and entities involved in Nevada’s gaming industry are held to the highest standards,” the statement continued.
Calendar
Feb 6-8: ICE, London incl. World Regulatory Briefing
Mar 5-7: SBC Summit Rio
Mar 27-28: Player Protection Forum, London
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