Month: March 2023

De Kansspelautoriteit (KSA) announced the enforcement action on 3 March. N1 was issued with a fine alongside four other operators – Videoslots, Betpoint, Probe Investments and Fairload Limited.

While the operators had been made aware of the fines in December, they opted to go to court in order to delay the publication of the fines. Despite this, a judge eventually ruled to reject the request.  

According to KSA, N1 violated the provisions of the country’s Betting and Gaming Act which states that an operator is barred from offering games of chance without holding the requisite licence from the regulator. This was specifically in regard to the organisation’s Bobcasino.com online gambling platform.

Disputed fine

N1 “categorically disagrees” with the KSA’s analysis of the situation and alleged violation of the law.

The operator argued that it had already taken several measures to prevent players from the Netherlands from accessing its online casino offerings.

In addition, the business disputed the fine’s total – which at €12.6m ranks as one of the largest fines ever issued by the regulator.

“Moreover, N1 feels that the KSA has adopted an incorrect and baseless calculation to determine the amount of the fine, making it disproportionately high, which contradicts the legal basis for levying and calculating a fine under Dutch law,” read N1’s statement.

KSA had said the total fine is the result of it being the second time the operator had been subject to enforcement action by the authority. N1 was fined €500,000 by the organisation in 2021 illegally offering gambling to Dutch users without a licence.  

The fine is not final, as N1’s appeal is ongoing. N1 had asked the regulator to delay the publication of the decision for this reason, but this request was denied.

“At this stage N1 strongly believes that the KSA’s actions have exerted pressure on N1’s current standing in both the administrative as well as judicial proceedings,” said the igaming operator.

“N1 will bring forward evidence to appeal the fine and dispute its legitimacy and proportionality which is excessive, taking into consideration other sanctions imposed by the KSA on other operators in the past.”

Videoslots

N1 is not the only operator to dispute its fine. Prior to the publication of the fines, Videoslots said it would challenge the ruling in a release published on its website.

Videoslots was fined €9.8m by the authority for incorrectly displaying KSA’s logo for a short period on its website without having a Dutch licence.

Videoslots said that following this, the regulator attempted to sign up as a customer on Videoslots’ website but failed – however, it said that KSA managed to access the website after it pretended to be a German customer.

“Videoslots does not target but restrict the Netherlands, so the Dutch Gaming Act does not apply to its services,” Videoslots deputy chief executive Ulle Skottling said. “No Dutch players were able to access our site during the disputed period and there was no violation as a result.

“It is absurd that the KSA should fine us after gaining unauthorised access. It is simply not possible to protect fully against unauthorised access, and the KSA has no guidelines on what measures are sufficient.”

H2 Gambling Capital: US sports betting exceeding expectations

The fifth anniversary of the Supreme Court striking down the Professional and Amateur Sports Protection Act (PASPA), paving the way for legal betting in the US, is fast approaching. 

Over this time there has been a wholesale reshaping of the US gaming sector, with mobile betting racing across multiple states, and a pandemic arguably accelerating rather than slowing its spread.

What next for the market?

It’s against this backdrop that H2 Gambling Capital, in partnership with iGB, is looking at what’s next. As the pace of new state launches slows, where is growth coming from? 

For a sector in which a small cohort of brands tend to occupy podium positions in each state, there is there is perhaps more scope for upheaval than many would think. Over time, as markets  such as the UK, Australia and Italy show, dynamics – and market leaders – can be knocked off their perch.

Generating higher returns from US betting

There’s also significant potential for growth in existing markets. Bonusing may be skewing gross win figures, and greater adoption of in-play wagering (or its rapid-fire cousin, microbetting) may allow operators to drive higher returns, and market share, from maturing states.

This, of course, will be complemented by major new states – in 2023, H2 predicts that 20% of new gross win will come from just two: Massachusetts and Ohio.

A $23.2bn market by 2030

When H2 produced its first sports betting white paper with iGB back in 2019, we looked at what the US market might look like in 2030. Thanks to a period of rapid acceleration in the four years since our inaugural report, our projection for US sports betting gross win is now $23.2bn by that year. 

For a market that exceeds expectations, there’s still plenty more to come.

The establishment of the new body follows a number of recent match-fixing scandals in the Portuguese-speaking country, which have led to a national conversation regarding its betting laws.

Involved in the creation of the association are Genius Sports, Entain, daily fantasy sports operator Rei Do Pitaco, as well as law firms Bichara e Motta and Maia Yoshiyasu Advogados, who released a joint statement following the group’s formation.

Luiz Felipe Maia from the Maia Yoshiyasu firm argued that the association was being formed at a “critical time,” due to the pressures of the growing Brazilian market and the ongoing question of regulation.

ABRADIE

ABRADIE states that it will operate as a collaborative group that will partner with regulators, federal and state law enforcement and others to identify and deter fraud and other illegal activities connected to sports betting.  

The association said that its key focus is to discover and analyse suspicious betting patterns in Brazilian sports. In line with this, the body will also hold consultations and events to improve communication and collaboration between the multiple stakeholders in the system.

Additionally, the members of ABRADIE will collaborate on a report presented to the government that sets out recommendations to uphold integrity in sports and any related betting.  

Martin Lycka, senior vice-president of American regulatory affairs and responsible gambling at Entain, commented on the importance of this association in the context of the business’ previous announcements.

“As part of Entain’s ongoing commitment to only operate in well-regulated and governed markets, I’m pleased to see that the industry is coming together to support the integrity of Brazilian sports and prevent match-fixing,” he said. “This is one of the key underlying factors of any betting regulation, including the upcoming Brazilian one.” 

Genius chief communications officer Chris Dougan said that he was “excited” to be part of Brazil’s first sport integrity association.

“We look forward to working with regulators, members of law enforcement, operators, sports leagues and other key stakeholders to prevent fraud and protect the integrity of sports,” he added.

Safeguarding the integrity of sports is paramount for the sports betting industry and the ABRADIE membership will demonstrate their commitment to industry best practices, supporting the government, sports bodies and other stakeholders in protecting sports from the threats of betting-related corruption.” 

New hopes for regulation

The process of regulating sports betting in Brazil still remains ongoing, despite the country’s legislature voting in 2018 to legalise the activity. Recent match-fixing scandals have ignited new hopes that a legal path could be around the corner.

“Without regulation, and with such a huge amount of betting operations from offshore, the Brazilian leagues are an easy prey for fraudsters,” said Maia recently to iGB. “It was a matter of time until it created a series of scandals that could result either in the regulation or the shutdown of the market.”

The diversified operator had significantly busy year, with chief executive Jette Nygaard-Andersen (pictured) saying the business experienced “excellent” financial, operational and strategic progress.

Stand-out highlights included the completion of five acquisitions that Entain said helped to strengthen its position in regulated markets and allow it to launch in others, including the roll out of the Unirkn brand in Brazil and Canada.

Shortly after the year-end, Entain also made the announcement that it would exit markets with no “clear path” to regulation, with the aim of ensuring 100% of its revenue comes from regulated markets by the end of 2023.

Nygaard-Andersen said that despite these planned withdrawals, Entain is well positioned for further growth in 2023 and beyond.

“I am particularly proud that Entain leads our industry on responsible gaming and we are now the only global operator exclusively in domestically regulated or regulating markets,” Nygaard-Andersen said. “It is a mark of the strong progress we have made in executing our sustainable growth strategy, and we continue to see a vast array of opportunities around the world as we expand into the $170bn addressable market that we have identified. 

“We have a business model that is truly diversified across more than 40 territories, a platform that gives us demonstrable competitive advantages, and a total commitment to providing our ever-broadening customer base with a safe environment in which to enjoy our products and services. 

“These factors, combined with the strong underlying momentum across our business, mean that we continue to look to the future with confidence.”

Full year NGR

Taking a look at Entain’s results for the financial year ended 31 December 2022, NGR for the 12 months amounted to £4.35bn (€4.88bn/$5.15bn), up 11.9% from £3.89bn in the previous year.

This resulted in a a Group underlying earnings before interest, tax, depreciation or amortisation (EBITDA) of £993m – which stood as a 13% year-on-year increase and was on the top end of the business’s guidance range.

The trend of strong land-based growth offsetting a slight decline in online revenue can be seen in this metric; with the company’s online segment down 8% to £828m, while retail surged 319% year-on-year to £280m.

Entain ascribed the fall in online revenue to be the result of “regulatory changes in major markets” as well as the return of the vertical following the negative impact of the Covid-19 pandemic.

Entain may face more regulatory pressure in the year ahead as the long-awaited publication of the UK Gambling Act Review White Paper draws near. In the company’s outlook it specifically highlighted “regulatory headwinds” as a potential cause for concern.

After accounting for VAT and goods and services (GAT) taxes, revenue was £4.30bn, a rise of 12.3% on 2021.

Breaking down this performance, Entain’s online business accounted for £3.05bn of overall NGR for the year, a 0.5% decline on the previous year as the operator said this segment business “lapped” a Covid boosted 2021 and absorbed material effects of regulatory changes, particularly in the UK.

Some £1.58bn of online NGR came from gaming, while £1.44bn was attributed to sports NGR, with sports wagers having declined 0.5% to £14.09bn. The remaining £29.9m in NGR was generated from B2B activities.

Turning to retail, NGR jumped 61.6% to £1.28bn, driven by a strong recovery from Covid-19, particularly in two of Entain’s core markets in both the UK and Italy. Belgium was partially impacted in the early part of 2022 when venues closed in January but recovered during the rest of the year.

Sports betting NGR accounted for £705.2m of all retail NGR in 2022, while gaming machine NGR reached £572.6m. Entain also noted that sports wagers in retail were 68.0% higher at £3.82bn.

In terms of other NGR, this declined 23.0% year-on-year to £25.1m, primarily due Entain’s disposal of its Exchange business.

Costs and profit

Looking at spending during the year, cost of sales was 13.5% higher at £1.58bn, while Entain also said administrative expenses increased by 14.4% to £2.19bn. This meant an operating profit of £522.7m, up 0.9% year-on-year, though £194.1m of this was attributed to joint ventures and associates, after which operating profit was £328.6m.

Entain also noted £225.7m in total financial costs, including a £112.2m loss from foreign exchange on debt instruments, leaving a net profit before tax of £102.9m, down 73.8% on the previous year.

The group paid £70.0m in income tax during 2022, resulting in a net profit of £32.8m, down 88.1% on 2022. After also including a post-tax loss of £13.4m from discontinued operations, Entain was left with a total net profit of £19.5m, a 92.5% drop from £260.7m in the previous financial year.

However, EBTIDA for the year edged up 0.3% to £903.9m, while underlying EBITDA was up 10.3% to £993.2m.

“Our growth strategy comprises four pillars which will continue to broaden our reach, diversify our audiences, increase our scale and drive a strong sustainable performance across the group,” Nygaard-Andersen said. 

“These pillars are leadership in the US; grow our presence in existing markets; expand into new regulated markets – both organically and via M&A; and extend into interactive entertainment.”

Smith took on the role in December 2022 after it was announced that co-founder David McDowell would step down as CEO of the business.

During that short period, Smith oversaw FSB’s entry into the North American region via an expanded relationship with long-term partner Fitzdares in the regulated Canadian province of Ontario.

Prior to taking on the interim CEO role, Smith was UK managing director and group board member at a Northern European technology and consultancy business. 

Smith’s experience includes running a number of large-scale, multi-jurisdictional regulated market delivery programs, as well as leading business scaling and transformation initiatives in telcom, travel, market data, manufacturing and IT sectors.

“Taking full-time charge of FSB is a great thrill for me,” Smith said. “What became clear during my three month period as Interim CEO was the opportunity that lies ahead for our organisation. 

“The combination of our dynamic proprietary platform technology alongside our driven, determined people and Tier 1 partnership portfolio gives us every reason to look forward with confidence.

“Having taken our first assured steps in North America last month we are now well positioned to move forward boldly in 2023 with our core markets and products strategy.

“Working closely with our committed private equity partners, Clairvest, I’m hugely energised to accelerate the growth of our award-winning company.”

Clairvest managing director Mohit Kansal added: “Adam’s commitment and impact at FSB in a short few months with the support of the senior management team has been exemplary. We look forward to working closely with him and FSB towards a bright future.”

Flutter Entertainment did a good job of overshadowing its own annual results by announcing just two weeks earlier a shareholder consultation over a potential dual listing for its share in New York.

The statement to the London Stock Exchange, still its listing home at least for now, noted that its board “regularly evaluates how best to position the group to deliver its strategy in the interests of shareholders”.

One area that the board had been “assessing for some time”, the statement continued, is the group’s listing structure. The Capital Markets Day held in New York in mid-November – a meeting which was attended by over 300 people – had “highlighted the growing importance” of FanDuel to the group as a whole and was on its way to becoming Flutter’s largest business by revenue and an ever-greater proportion of its overall value. 

“In this context, the board has reached a preliminary view that an additional US listing of Flutter’s ordinary shares will yield a number of long-term strategic and capital market benefits,” the statement went on.

These benefits include enhancing the group’s profile in the US, better enabling the recruitment and retention of US talent, giving the group access to much deeper capital markets and to new US domestic investors, providing greater overall liquidity in Flutter shares; and the optionality to pursue, as a second step, a primary US listing – one of the criteria for access to important US indices.

Number one

That growing importance of the US was hammered home by the results. To take it from the top, FanDuel has achieved a clear market share advantage with 50% share in the fourth quarter and 21% share in igaming. 

To illustrate the point, the company showed in the accompanying result presentation that FanDuel is the number one sportsbook in 15 of 18 states, with the outliers being limited to Colorado (where it still managed 33%), Iowa (42%) and Wyoming (18%).

Apart from the investments made ahead of the market launches in Maryland and Ohio – which respectively launched late last year and in January of this year – the company said FanDuel reported positive quarterly earnings before interest, tax, depreciation and amortisation (EBITDA) contributions in the second and fourth quarter.

US revenue was at the upper end of expectations at £2.6bn, up 67% year-on-year, while the yearly EBITDA loss was restricted to £250m – which was at the lower end of previous guidance.

This of course is merely some of the building blocks for what is to come. FanDuel is forecasted to be EBITDA positive for 2023 as a whole. Chief executive Peter Jackson – on the call with the analysts – put the case for FanDuel’s “compounding advantages”. 

“We’re continuing to see higher levels of hold against or handle that our competitors do,” Jackson added. “We have a structural advantage in revenues, and we know that we are more efficient than anybody else from a customer acquisition perspective.”

New York conversation

It is against the backdrop of this operational performance that the potential for a dual listing in the US should be viewed. Indeed, James Wheatcroft at Jefferies in London suggested the move was the precursor to Flutter choosing New York as its primary listing over time.

Ivor Jones at Peel Hunt agreed.

“Flutter continues to pivot to North America and a US listing makes increasing sense,” he suggested.

But for all the US promise, it shouldn’t be forgotten that should the company list in the US, it will still be a global gambling entity and one that is already producing sizable profits. It achieved EBITDA of £1.62bn in 2021 and in revenue terms, while the US business is the largest revenue generator by geography, the UK & Ireland business was still worth £2.14bn despite the impact of various affordability and responsible gambling measures.

Australia contributed £1.26bn of revenue and the international business recently augmented by the addition of the Sisal acquisition, produced revenues of £1.68bn.

Combined, these parts of the business have provided both the engine and the fuel – in terms of profits – to propel the US business.

“FanDuel is proving its time advantage and the tie to a large global operator separates itself from any US competitor,” said Jordan Bender at JMP.

As Paul Leyland at Regulus Partners summed up the situation “it is hard to see how disruptors dent Flutter’s market share in key markets without a radical shakeup of the customer proposition”.

Although a primary US listing looks like an inevitability, what New York will be gaining – and London losing – is a global betting operator of unprecedented scale and reach. That has an impact not just on Flutter, but on the rest of the sector from top to bottom.

Financial terms of the deal were not disclosed, but Affinity did state that it expects the sale to complete before the end of the year, subject to regulatory approval and the satisfaction of customary closing conditions.

Rail City Casino has approximately 24,000sq ft of gaming space with over 400 slot machines, a keno lounge and a number of dining options.

Read the full story on iGB North America.

Their appointments will take effect on 8 March.

Kay has been appointed as an independent director of the board. He will also accept the role of chair of the audit committee – succeeding Harry You – and will serve as a member of the board’s nominating and corporate governance committee.  

Most recently, Kay held the role of CFO at MGM Holdings. He also held CFO roles with a number of companies, including Dole Food Company, CB Richard Ellis Group Inc and Las Vegas Sands Corporation. Kay also had board and audit committee experience through his time on the board of Summit Hotel Properties.

“This is an exhilarating time to join Genius Sports as it continues to transform the way the world experiences sport,” said Kay. “I look forward to working closely with the board as the company enters the next phase of its journey as a global leader in sports data and technology.” 

Kay is set to receive compensation in line with the company’s director compensation policy.

David Levy, chair of the Genius Sports board, said that Kay’s experience will benefit how Genius operates.

“We are delighted to have Ken join the board and take the lead as our new audit chair,” said Levy. “Ken’s diverse expertise and depth of knowledge will undoubtedly serve the company extremely well as we continue to develop products and services that sit at the centre of the sports data ecosystem.”  

Messara is joining the board as an independent observer. Messara is the co-chief investment officer at Caledonia Investments, a shareholder in Genius Sports.

Messara joined Caledonia in 2006 after beginning his career as an analyst in equity research with UBS AG in Sydney. Additionally, he sits on Caledonia Investments’ board of directors as well as being a non-executive director of Arrowfield Pastoral Company.

“Since Caledonia first invested in Genius Sports, we have shared a strong commitment to continue building on Genius’ many successes and increasing shareholder value,” said Messara. “With this new appointment, we look forward to deepening our relationship with the board, Mark and the whole Genius Sports team.” 

Levy added: “We are pleased to welcome Michael as an independent observer to our board, demonstrating Caledonia’s continued support and commitment to Genius, as it has from our original listing.”

Last month, Genius Sports agreed to a data distribution deal with XFL.

Developed in partnership with King Media, “Don’t Regret the Bet” will promote safer gambling with licensed operators in Michigan.

The campaign will include broadcast TV and radio advertising, point-of-sale video ads at gas stations, digital billboards, social media and digital media, including streaming services and podcast audio.

Read the full story on iGB North America

Golden Entertainment will sell the assets for aggregate cash consideration of $322.5m, plus an additional $39.0m of estimated purchased cash at closing.

J&J Ventures, a privately held business and distributed gaming operator with a presence in a number of states, will acquire Golden’s distributed gaming operations for $213.5m plus an estimated $34.0m of purchased cash.

Read the full story on iGB North America