Democracy in action
HG Vora sues Penn over boardroom maneuvers
Activist accuses board of corporation and securities law violations.
Here’s a prediction: Flutter signals prediction markets intent.
Big sky no more: Montana nixes sweeps.
National regulators “not doing enough” to fight illegal gambling.
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Three’s a crowd
Riding roughshod: HG Vora has accused Penn Entertainment of committing an “affront to shareholder democracy” in its attempt to close down the activist investor’s efforts to effect boardroom changes.
See you in court: HG Vora is suing the company in a Pennsylvania court action, alleging Penn violated state corporation law and its fiduciary duties when it reduced the number of seats up for election at the upcoming AGM from three to two.
The news comes ahead of the Penn Q1 earnings statement and call later today.
Sins of omission: The complaint in the US District Court for the Eastern District of Pennsylvania further alleges Penn violated federal securities laws.
It claims Penn failed to abide by universal proxy rules and made “materially false and misleading statements and omissions” in the recently filed proxy materials.
The complaint seeks declaratory and injunctive relief determining that the board reduction scheme is invalid and that Penn must correct said materially false and misleading statements in its proxy materials.
Three to do what I want: It has further asked the court to order that Penn must allow shareholders an opportunity to elect all three independent nominees proposed by HG Vora.
Recall, last month Penn accepted two of HG Vora’s nominees – former Superbet CEO Johnny Hartnett and Sorelle Capital co-founder Carlos Ruisanchez.
But it pointedly left off the third nominee Bill Clifford, a former CFO at Penn.
At the same time, Penn announced the immediate resignation of board member Ron Naples and that it was cutting the number of board members from nine to eight.
Sore losers: In yesterday’s press release, HG Vora said Penn’s scheme to reduce the number of board seats up for election was done in order to stave off the prospects of losing out on all three seats and seeing the activist gain an even greater foothold in the boardroom.
It was, HG Vora alleged, “a self-serving action with no legitimate corporate purpose.”
In its proxy statement, it made the point that by taking one board seat away it reduces the impact of the two new board members.
“Substantial changes are necessary to restore accountability and ensure all options are considered to maximize shareholder value,” HG Vora said.
Proxy dispute timeline
No director home: In its proxy filing published yesterday, HG Vora fully outlined its interactions with Penn since it submitted a nomination notice in late January, when it first put forward the names of Hartnett, Ruisanchez and Clifford for the three Class II director seats that were up for election at the 2025 AGM.
On March 25, Penn held a video conference with HG Vora, offering to retire a single board member and immediately seat Hartnett, which HG Vora declined, emphasizing the need for more substantial board changes.
Penn revised its offer on April 3, including a proposal to seat both Hartnett and Ruisanchez, but without Clifford, which HG Vora also rejected.
In a subsequent call on April 10, Penn representatives warned HG Vora of potential regulatory challenges if their dispute continued, followed shortly thereafter by a restrictive letter from a gaming regulator.
Another video conference took place on April 15, where HG Vora reiterated its demand for three board seats and noted that it would file its preliminary proxy statement soon.
On April 24, Penn made a final offer to immediately seat Hartnett and Ruisanchez, excluding Clifford, which HG Vora again rejected, standing firm on its three-nominee demand.
Behind the eight ball: On the morning of April 25, HG Vora notified Penn of its intent to file its preliminary proxy statement. That afternoon Penn issued a press release announcing the immediate retirement of Naples and the reduction of the board size from nine to eight members; effectively reducing the available Class II director seats from three to two for the 2025 election.
Penn filed its definitive proxy with the SEC on April 28, confirming the reduced board size and omitting any mention of Clifford’s nomination, further signaling its intention to reduce the number of contested board seats.
Penn responded to HG Vora’s request for corrective action on April 30, denying any wrongdoing and rejecting the demand to restore the eliminated board seat.
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Peru has reportedly cut illegal online gambling by 40%, as part of its push to clean up the digital betting space. The country’s Ministry of Foreign Trade and Tourism (Mincetur) said it was all thanks to a new law that took effect in February 2024.
South Korean police are targeting illegal Texas Hold’em venues, which charge a fee on entry to a casino-like experience without real-money wagering. The government believes that is often not the case and the unlicensed bars are raking in millions of dollars.
The Gaming Commission of Ghana is partnering with the country’s media to spread a high-profile messaging campaign across television, radio, print and digital outlets to warn against underage and illegal gambling.
Colombia’s gambling regulator can send blocking requests directly to internet service providers, following an update to the country’s communications laws.
The Texas state Senate is moving to repeal the Lottery Act as part of a bill that would dismantle the Texas Lottery Commission. The bill is a response to controversy surrounding lottery couriers in the state. The commission recently introduced a lottery courier ban following pressure from Lt. Gov. Dan Patrick.
The Michigan Gaming Control Board has sent a cease-and-desist letter to BetUS for illegally operating online gaming and sports betting in the state. The brand has two weeks to halt operations there or potentially face further legal action, the regulator said.
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Flutter’s prediction position
The puts, the takes: On Flutter Entertainment’s Q1 earnings call overnight, CEO Peter Jackson said the company was exploring its options and looking to leverage its existing exchange capabilities should FanDuel seek to enter the prediction market space.
“There’s puts and takes and we’re working our way through it,” he told the analysts.
The company has “brought some of our team who have experience in building these products and services from the Betfair exchange business and put them into FanDuel to help us evaluate the opportunity.”
Pump, primed: He noted the potential to use prediction markets as a way into states that are yet to regulate OSB. “In states that haven’t regulated, there’s a prime-the-pump type of opportunity that is not that dissimilar to some of the DFS stuff,” Jackson said.
“We’re very thoughtful about it, particularly having seen so much success in terms of having the best product in the market.”
Read across: For more on Flutter’s Q1 earnings, see today’s Earnings Extra (E+M PRO subscribers only).
Sweeps moves
Goodbye, big sky: Montana is on the verge of becoming the first state to ban sweepstakes games.
A potential veto from Gov. Greg Gianforte aside, Senate Bill 555 introduces a wide-ranging ban of all kinds of online casino gaming.
Many major operators, including Chumba Casino and McLuck, have already quit Montana in anticipation, with others such as Stake.us expected to geofence the state.
Connecticut is to debate the banning of lottery couriers and online sweepstakes casinos. Senate BIll 1235, out of the Legislative Commissioners’ Office, has been assigned to the Senate calendar.
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Unregulated warning
You can’t see me: Illegal betting is rapidly expanding worldwide but still slipping past the radar of national regulators, a major anti-corruption gambling industry figure has warned.
Martin Purbrick, chairperson of the International Federation of Horseracing Authorities Council on Anti-illegal Betting and Related Crime, said he believes many regulators are too focused on their licensed operators to properly tackle the problem of illegal encroachment.
“Regulation is de facto of what they see,” Purbrick said, pointing out that many regulators concentrate only on overseeing licensed betting and gambling businesses while ignoring the growing reach of unlicensed offshore operators.
“What they do not immediately see, and in the past have devoted less or no resources to detecting, is illegal betting by operators that silently encroach into legal markets.”
Tool up: Purbrick has produced a toolkit for regulators to help build strategy as they fight illegal wagering.
It urges gambling regulators to partner with government agencies, telecoms, banks and law enforcement to block illegal sites and payments.
He also called for international cooperation, intelligence sharing and regular communication with licensed operators to ensure they can compete fairly.
“The problem now confronting gambling regulators is that online betting (and other gambling) provided largely by offshore operators has created global choices for local consumers,” Purbrick said.
Events
May 14: Player Protection Symposium, SBC Americas, Fort Lauderdale
Jun 5: Gaming in Holland, Amsterdam
Jun 9-12: IAGA, Berlin
Jun 26: Gaming in Spain, Madrid
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