Month: January 2024

The NRA accounts for the levels of money laundering and terrorist financing risk in Malta throughout 2023. For the first time, the 2023 edition also accounts for proliferation financing and targeted financial sanctions.

The report was created in conjunction with the National Coordinating Committee on Combatting Money Laundering and Funding of Terrorism (NCC), as well as government authorities.

The NRA classifies threats with a three-pronged system – impact, likelihood and threat level. It states that the use of virtual financial assets, cash and prepaid cards as payment methods form part of the money laundering threat in Malta.

In terms of the overall residual risks for money laundering in remote gaming and land-based gaming, the NRA defines these as ‘medium’. However, for both, the effectiveness of mitigating measures is ‘high’.

Impact of customer-related vulnerabilities

Customer-related vulnerabilities are also of high concern for the remote gaming industry in Malta, according to the NRA. This relates to customers who have a higher level of money laundering or terrorist financing risk.

The report classifies customer-related vulnerabilities as having the highest ratings possible across the board – ‘severe’ impact, ‘very high’ exposure and a ‘high’ vulnerability level for remote gaming.

For remote gaming, the impact of licensed operators being controlled by criminals is classed as ‘severe’. While the likelihood is graded as ‘possible’, the threat level is ranked as ‘medium-high’.

Looking at land-based gaming, the report outlines that a large part of its money laundering threat is the use of cash. It states that the impact of laundering criminal proceeds through cash payment methods is ‘significant’, with the likelihood of occurrence ‘likely’ at a ‘medium-high’ threat level.

The risk for land-based bingo halls and national lotteries is ranked as ‘low’.

Recommendations for AML

To mitigate money laundering, the NRA report outlines recommendations for each sector.

For remote gaming and land-based gaming, the NRA recommends that they augment their risk-based approach. This involves updating customer risk profiles periodically. Both sectors should also continue to maintain risk-based customer due diligence procedures.

Both should also monitor their transaction monitoring systems to detect any emerging risks.

The report’s publication comes after a busy period for the Malta Gaming Authority (MGA). Yesterday (18 January) the regulator cancelled its fifth licence this month, and the third this week. The affected operators are Super7Plus, Winners Malta Operations, Genesis Global, Rush Gaming and Betago Limited.

While company valuations broadly increased in 2023, there was significant divergence across geographies and sectors. With the increase in interest rates globally, investors have grown more selective, preferring to invest in profitable businesses.

In 2023, there were two stand out contributors to the fund’s +39.5% performance:

Project Tennis – a professional betting syndicate founded by Tom Dry focused on tennis. It was first discussed in December 2022 and invested in on 1 July 2023.Saintly – a crypto wagering operator and B2B platform. Position exited in August 2023.

Beating the house

We are very pleased with the operational performance of Tom Dry’s betting syndicate going into 2024. The fund is on track to earn back in distributions its entire investment in the syndicate by January 2025. This will be just 18 months after the investment was made. More broadly, professional betting is a key focus area for the fund. We are actively exploring several professional betting opportunities.

In addition to tennis, we are looking at other professional betting opportunities in horse racing. Horse racing is particularly interesting due to the rebates offered by totes. Large syndicates benefit from generous rebates in pari-mutuel/tote betting, thanks to their role in supplying liquidity. This gives them a significant advantage – which varies based on the tote pool – over other bettors.

To qualify for these rebates, syndicates must wager substantial amounts of money. For example, US totes typically only grant rebates to those who wager over $5m per year, according to the Sports Trading Network.

Emerging professional betting syndicates focused on racing are already behind the larger syndicates by a few percentage points because of the rebates that the larger syndicates receive. The accumulation of the rebate advantage has resulted in substantial and lucrative profits for the largest racing-focused syndicates.

If Waterhouse VC could own a stake in a syndicate that bets on racing and receives rebates from the totes, that would be a very exciting portfolio holding.

Saintly – a seven month journey

Saintly was the largest single contributor to the fund’s performance in 2023. We negotiated an option to buy 20% of Saintly in February 2023 because of its technology platform, which positioned the company well to take advantage of the burgeoning opportunity in crypto wagering, which we first discussed in May 2022.

Online crypto operators – such as Sportsbet.io and Stake.com – which have a similar UX to online fiat operators like FanDuel and DraftKings are already recording extraordinary turnover.

The timeline below shows the history of Waterhouse VC’s option deal with Saintly from signing in February 2023 through to exiting in August 2023 for 23 times the option conversion valuation.

India and Brazil – emerging market opportunities

As we look forward to 2024, emerging markets such as Brazil and India will be key growth regions for both operators and B2B suppliers.

​​The online wagering industry in India is growing at over 20% per annum (Sportskeeda). It has been fuelled by the country’s rapid economic progress, with GDP per capita up 2x since 2009, and a substantial market size of over 370 million bettors (MyBetting India).

Wagering turnover on cricket alone is estimated to be $150bn, with approximately 85% of Indian bettors engaging in cricket wagers (GiiResearch). The legal status of wagering in India remains grey in most areas.

Brazil recently introduced online wagering following official approval from the country’s president Lula da Silva. Operators are anticipating the imminent launch of the newly regulated industry, with 134 operators having already signed pre-market ordinance measures.

Looking to 2024

We are particularly excited by professional betting, emerging markets such as Brazil and India and B2B suppliers that provide a critical or truly unique service to gaming and wagering operators.

Waterhouse VC has identified several companies in the industry currently valued attractively at just 1x revenue plus approximately their net cash on the balance sheet. We offer wholesale investors unique access to these larger deals, which remain at depressed valuations.

Handle amounted to $48.9m (£38.6m/€44.9m), down 34.3% from $74.4m in Mississippi in December of 2022. This was also 21.6% lower than the $62.4m spent in November 2023.

As for revenue, this reached $4.9m. While this was 56.6% lower than $11.3m in December of the previous year, it was not all bad news for the state.

The December total was some 58.1% ahead of November’s $3.1m haul.

Beach betting: Mississippi coastal casinos take $31.6m in bets

In terms of where players in Mississippi in December preferred to bet, coastal casinos remain the venue of choice.

For December, coastal casinos processed $31.6m in bets and posed $2.4m in revenue. Of all wagers placed here, $14.5m were on American football and $7.7m basketball, while $4.9m was spent on parlay bets.

Elsewhere, central casinos took $11.0m in wagers and reported $1.7m in sports betting revenue. Basketball accounted for $3.6m of central casinos bets, with American football at $2.6m and parlay cards $4.7m.

Finally, Mississippi players spent $6.3m betting on sports at northern casinos in the state, with revenue reaching $770,498. American football bets totalled $2.9m, basketball $1.8m and parlay cards $1.5m.

Win percentage in the state stood at 10.0% for December.

The updated report, commissioned by the Indiana Gaming Commission and conducted by Spectrum Group, estimated the first three years could bring in between $1.9bn and $2.1bn of revenue. This is a 5% increase on predictions made in the 2022 report.

Additionally, the study identified a potential $929m in igaming tax revenue over the first three years following legalisation. This was also a 5% rise on the previous report’s estimations.

Igaming has long been floated in Indiana, with a long-running push for online casino in the state dying in committee in 2023 having not been called for a hearing. There have been fears over a potential cannibalisation of the industry, although Spectrum Group’s report found igaming didn’t have a negative effect on other forms of gaming in other states.

Its chances of being legalised in 2024 appear slim, too, with state legislators agreeing not to bring in any new igaming legislation this year.

Igaming legislation yet to take off in the US

The US’ sports betting sector has grown rapidly, with online sportsbooks live in nearly half of all the nation’s states. Igaming is yet to find the same success, however, currently only being legal in seven states.

The lack of igaming legislation is affecting the American online scene. It has already prompted a major WynnBet roll-back in August, closing its operations in a number of states.

Only Nevada and Massachusetts operations, where WynnBet operates land-based properties, are guaranteed to continue.

Igaming also looks unlikely to be introduced in New York in 2024 after online gaming wasn’t included in Governor Kathy Hochul’s executive budget for 2025. This came after state senator Joseph Addabbo filed a revised igaming bill last week.

Yet, the potential for igaming is evident. Michigan, one of the states where it’s legal, recorded monthly gross igaming receipts in November. Igaming was also a big factor in Pennsylvania’s gambling revenue hitting a record $5.7bn in 2023.

Igaming grossed $1.5bn in the US in Q3. That was up 26% year-on-year and an all-time quarterly record. The numbers are clear to see, yet getting legislation through is still proving a struggle.

Indiana sports betting market flourishing

The report on the potential benefits of igaming to Indiana come after the state reported its highest month of sports betting revenue in December.

Indiana reported $50.6m in adjusted gross revenue for the final month of 2023, up 18.5% on the previous December. It was also a 64.8% hike on November 2023.

Consumers spent $503.1m during December, the second highest monthly amount since the state opened its legal market in September 2019. The total handle fell just short of another all-time high, just 2.1% behind November 2023’s $513.7m.

Ameristar Casino and partner DraftKings edged back into the lead in the Indiana market for December. The partnership generated $19.3m in revenue from $179.8m. In second, meanwhile, were Blue Chip Casino and FanDuel, which led in November ahead of Ameristar Casino and DraftKings.

The fresh deal is set to run out in December 2025. The agreement will see Intralot continue to operate MDJS’s lottery, while also offering sports betting and other games of chance.

Intralot has had a long-term partnership with MDJS, powering its offering since 2010. The Greek operator will continue to operate MDJS’ lottery games, which include Tifo and Chrono.

In March 2021, Intralot announced it had agreed to reduce the term of an eight-year deal with MDJS, signed in 2019, to end in December 2022.

However, despite MDJS launching a tender in January 2022 for a new supplier, a new one-year extension was agreed with Intralot in March 2022. This most recent extension, announced on Friday, prolongs the long relationship between the pair.

Intralot at risk of not meeting 2024 bond obligations

In November 2023, Intralot announced a return to net profit for Q3. Gross gaming revenue (GGR) was up 2.2% year-on-year to €5.6m (£4.8m/$6.1m).

However, Intralot also posted a €21.7m (7.2%) decrease in consolidated turnover from 2022. A large percentage of the company’s turnover drop was down to the absence of revenue caused by the expiration of its Malta licence in July 2022. This accounted for a GGR loss of €43.9m.

Consequently, the company’s Q3 earnings reports highlighted the risk of not being able to meet its 2024 bond obligations. Intralot issued €135m in new shares, with the Q3 report stating it lacked the cash resources to cover the majority of the debt.

Despite the net consolidated turnover loss year-on-year, Intralot’s Q3 revenue was 8.1% up on the same period the previous year, as well as a €7.8m hike on Q2 2023.

EBITDA also jumped to €101.0m for the first nine months of the year, 14.7% up on 9M22. Intralot attributed the rise in EBITDA to promising growth in Turkey, Croatia, Taiwan and the US.

Pietersz will take on his new role from 1 February 2024.

As CEO , Pietersz will be charged with monitoring all current licensing activity that takes place under the current law, the National Ordinance on Offshore Games of Hazard (NOOGH).

In his new role, he will also oversee Curaçao’s transition to the National Ordinance for Games of Chance (LOK).

Previously, Pietersz held a number of roles at the Centrale Bank van Curaçao en Sint Maarten over 20 years. His roles ranged from supervisory to managerial. During his tenure, Pietersz gained operational, anti-money laundering and regulatory experience.

Pietersz said he is prepared to help Curaçao’s gaming market move into a new phase.

“I am honoured to join the Gaming Control Board at such a dynamic time,” said Pietersz. “I am confident that together with the team and the Supervisory Board we will strategically steer the GCB into a new era while delivering value to all stakeholders including the minister of finance.”

Fons Simon, chairman of the GCB Supervisory Board said Pietersz’s appointment kicks off a new era for the jurisdiction.

“The GCB is at a pivotal juncture, and Cedric’s appointment marks the start of a transformative era,” said Simon. “With a proven record of exceptional service in the financial sector, he brings a unique blend of strategic foresight, regulatory prudence, and operational excellence.”

Misreporting on LOK

The announcement of Pietersz as CEO comes after a week of false speculation over Curaçao’s LOK. While reports surfaced that stated the LOK had been rejected by Curaçao’s parliament, these were not correct.

The LOK was sent to parliament last month. As with every draft law in Curaçao, it had been sent to the Council of Advice.

On 3 January 2024, the Council’s response to the ministry of finance regarding the LOK was published online. This was first received by the ministry in June 2023, and contained phrasing that suggested the law could not be sent to parliament. It it thought that this fuelled rumours that the LOK had been dismissed.

In response, Javier Silvania, Curaçao’s minister of finance released a statement slamming the “misinformation”.

In a trading update for 2023, Flutter reported growth across all sectors, with the exception of its Australian business. The update also covered its performance in Q4, during which growth followed a similar pattern.

The stand-out figure for Flutter in 2023 was US-facing FanDuel, with revenue rising 38% year-on-year to £3.06bn. As was the case in 2022, US operations remain the primary revenue source for the group, drawing 37.9% of all revenue.

On a constant currency (CC) basis, US sports revenue jumped 39% while gaming was 47% higher. Flutter also noted a 38% increase in average monthly players to more than 3.2 million.

Double-digit growth for Flutter in the UK and Ireland

Turning to Flutter’s UK and Ireland business, revenue was up 15% to £2.46bn. Sports betting revenue was up 12% CC and gaming 17% CC, while total average monthly players climbed 5% to 3.9 million.

Breaking this down further, UK and Ireland revenue increased 15% year-on-year to £2.16bn, with double-digit CC growth across sports betting and gaming. Retail increased by 10% to £300.0m, with sports revenue up 10% CC and gaming 8% CC.

International success but struggles continue in Australia

Flutter’s International arm, covering markets outside the US, UK and Ireland and Australia, also reported growth. Revenue jumped 36% year-on-year to £2.29bn, with sports betting revenue up 60% CC and gaming 29%. 

Average monthly players across the international business increased by 31% to 4.1 million. Brands included in this segment include Italy-based Sisal, PokerStars and Adjarabet. 

However, the news was not so good for Flutter in Australia, where revenue slipped 8% year-on-year to £1.17bn. Flutter only offers sports betting in the country, with revenue down 3% on a CC basis. That being said, average monthly players were 2% higher at 1.1 million.

Flutter ends 2023 on a high with Q4 growth

Turning to the final quarter of the year and group revenue in Q4 was 15% higher at £2.67bn. Sports betting revenue climbed 8% to £1.66bn and gaming revenue 15% to £1.02bn.

Flutter again focused heavily on its US operations when analysing the Q4 performance. In the US, revenue was 19% higher during Q4 at £1.14bn. 

This, Flutter said, was helped by FanDuel’s sportsbook holding a 43% gross revenue market share across all US jurisdictions in which it operates. FanDuel’s igaming offering had a 26% share during the quarter.

However, Flutter noted that that US revenue in the period was lower than expected, missing an initial target by £147m. This, it said, was due to customer friendly sports results, which were primarily mitigated by expected gross revenue margin being better than anticipated.

“The group traded well in Q4 underpinned by our leading local brands supported by global Flutter Edge advantages,” Flutter CEO Peter Jackson said. “In the US, FanDuel consolidated its sports leadership position during the peak quarter for sporting activity, while FanDuel Casino went from strength to strength. 

“While sports results were very customer friendly, particularly on the NFL in November, the underlying momentum in the business remains very strong heading into 2024.”

UK and Ireland Q4 market share gains 

As for the rest of the group, UK and Ireland Q4 revenue was also up 19% at £647m. Flutter said this came as its brands continued to deliver market share gains through product improvements.

International revenue was level at £582m, but 4% higher on a CC basis. However, Australian revenue slipped 9% to £304m, the latter being in line with expectations due to guided racing trends.

“Outside of the US, the quarter traded in line with expectations, with continued strong momentum in the UK&I supported by recent product enhancements and International growth driven by our “Consolidate and Invest” markets,” Jackson said.

Land of opportunity: second US listing edging closer

Meanwhile, Jackson confirmed Flutter is close to listing its ordinary shares on the New York Stock Exchange (NYSE).

The listing was first mooted back in February last year, with Flutter saying it would support wider US growth plans. Shareholders approved the dual listing at the company’s AGM and it is hoped shares could launch on 29 January. CEO Jackson said in the trading update that subject to final approvals, the launch is “just days away”. 

“This is a pivotal moment for the Group as we make Flutter more accessible to US based investors and gain access to deeper capital markets,” Jackson said.

However, the NYSE launch will spell the end for Flutter on Euronext Dublin. Flutter has already notified Euronext Dublin of its intention to cancel its secondary listing on 29 January.

Flutter also said the NYSE move will not impact the London Stock Exchange (LSE) listing FTSE 100 status. The group has a premium listing on the LSE, where it appears in the FTSE 100 index. 

Flutter completes acquisition of MaxBet stake

Elsewhere, Flutter has completed its acquisition of a majority stake in Serbian sports betting and gaming operator MaxBet.

The deal was struck in September 2023. Flutter agreed to pay €141m to purchase a 51% stake in the MaxBet business. Final financial terms of the acquisition were not disclosed.

Headquartered in Serbia and employing more than 2,400 staff, MaxBet also operates across, Montenegro, North Macedonia, and Bosnia and Herzegovina. 

During the 12 months to June 2023, MaxBet reported €145.0m in regulated revenue. It also posted €32.0m worth of adjusted EBITDA for the same period. 

Upon completing the deal, Flutter said MaxBet brings a wealth of expertise and experience to the group. It also said the addition of the brand will improve the experience of its players across the Balkans region.

“MaxBet is a household name in the Balkans,” Flutter International CEO Daniel Taylor said on LinkedIn. “We’re incredibly proud to have them join our team. 

“Their strong retail footprint, loyal customer base, and passionate team make them an ideal partner for our expansion plans in the region.”

Flutter eyes further growth with ongoing M&A strategy

The MaxBet deal marks the latest strategic acquisition by Flutter as it seeks to expand its presence in markets worldwide. While last year was relatively quiet in M&A terms, deals struck in 2022 have helped drive growth.

In August 2022, Flutter acquired Italian online gaming and lottery operator Sisal for €1.90bn. This deal, Flutter said, supports its strategy of investing to build leadership positions in regulated markets around the world.

Earlier in 2022, Flutter also acquired bingo operator Tombola for £402m. This increased its presence in the bingo market, an area in which the group has traditionally been weaker.

Revenue was 22.8% higher year-on-year, with GMGI saying this was driven by its diversified portfolio. Record revenue in 2023 is in line with a forecast published by GMGI towards the end of last year.

However, the sticking point for GMGI is net loss, which increased from $454,065 in 2022 to $1.0m in the past year. GMGI put this down primarily to general and administrative non-cash expenses of $2.5m for stock-based compensation. Tax also increased, while it spent more on Mexplay operations and consulting fees.

GMGI CEO hails “significant” revenue growth

On the whole, GMGI’s CEO Brian Goodman was upbeat about the yearly performance. He picked out the revenue increase as a key highlight for the business and said he was positive about further growth in 2024.

“Year after year, we continue to achieve significant improvements in revenue,” Goodman said. “This solid momentum has delivered four consecutive years of revenue growth and shareholders’ equity increases. 

“GMGI’s success in the past financial year was driven by our diversified portfolio, spanning B2B and B2C, in some of the fast-growing online gaming markets around the world.

“Increased costs incurred and investments made in our B2B and B2C platforms this past year have been critical to keeping us competitive and accelerating strong revenue growth. Our state-of-the-art gaming systems and superior gaming content continue to evolve to engage and increase our growing numbers of millions of participants.”

Mixed news as cost outweigh revenue growth at GMGI

Taking a closer look at the 12 months to 31 December 2023, GMGI said revenue from its B2B segment amounted to $15.6m and B2C $28.5m.

For the B2B business, GMGI current works with 785 gaming operators and has 8.2 million customers. Meanwhile, the RKings and Mexplay brands in the B2C segment now have over 325,000 and 61,000 registered users, respectively.

In terms of spending, cost of goods sold hiked 27.5% to $34.3m and total operating expenses jumped 15.6% to $10.4m. GMGI recouped $36,803 in other income, with this coming from interest earned during the year.

Pre-tax loss amounted to $489,444, in contrast to a $463,077 profit at the same point in 2022. GMGI paid $683,306 in income tax, leaving a net loss of $1.2m, wider than $250,038 in the previous year.

However, this loss shortened when taking into account $132,588 in positive foreign currency translation. As such, comprehensive loss attributable to GMGI amounted to $1.0m, compared to $454,065 in 2022.

“We believe that the results delivered over the last financial year demonstrate the ongoing resilience, competitiveness and diversification of our portfolio, IP and the sound fundamentals in the markets in which we operate,” Goodman said.

GMGI edging closer to MeridianBet deal

Meanwhile, GMGI updated the market on its pending acquisition of MeridianBet. GMGI agreed to buy MeridianBet in January 2023, in a deal worth approximately $300.0m. 

GMGI hoped to close the acquisition in H1 of 2023. However, in July GMGI made several amendments to the deal, pushing the closing date back to Q4 of 2023. 

In October, it was revealed talks between the two parties led to further amendments. The main change was an extension to the proposed closing date, pushing this back as far as Q1 2024. 

Earlier this month, GMGI said it hoped to complete the purchase before the end of Q1. This, Goodman said, remains the goal for the business. 

“[The acquisition] is expected to significantly advance GMGI’s global footprint and significantly increase revenues and profitability,” Goodman said. 

“There will be numerous B2B and B2C product offerings in multiple regions worldwide and we believe that the combined company will be in a favourable position to participate in the online gambling markets in both the US and Canada.”

The ruling came into effect on 11 January, with Winners Malta Operations ordered to cease activities under the Malta licence.

The MGA did not disclose the specific reason behind the decision. However, it has set out certain steps Winners Malta Operations must now follow.

These include settling all outstanding fees due to the MGA within five days of the licence being cancelled. The operator must also return funds to customers and submit a report to the regulator confirming this has been completed.

In addition, Winners Malta Operations must remove any reference to the Malta licence from its websites.

The MGA noted that the decision to cancel the licence can be appealed. 

Malta clamping down on rule-breakers

Winners Malta Operations is the latest operator to feel the wrath of the MGA. The regulator has announced several suspensions and cancellations in recent weeks.

Just a few days ago, the MGA cancelled Genesis Global’s B2C gaming licence. Genesis Global had its licence suspended in January last year and full cancellation means it is no longer to offer gambling under the permit.

The operator had been running 23 websites using the licence. These include Vegasoo.com, Sloty.com, Casinojoy.com, Spinit.com and Genesiscasino.com.

Last week, it was announced that Rush Gaming’s licence is being suspended until further notice. Rush Gaming operates both the Fansbet.com and Onebet.com websites.

In addition, Betago also had its licence cancelled last week. The MGA ordered Betago to return all funds to players and remove any reference to the permit from its websites. 

Despite the sale, worth €152m (£130.5m/$165.5m), Gamma Intermediate retains a majority stake of 65.4% in Lottomatica.

Gamma Intermediate completed the deal at €9.50 per share, with the sale conducted through an accelerated bookbuilding process. The placement was made to institutional investors, with no public offering in any country.

Lottomatica expects the final settlement to be on or around 22 January. Gamma Intermediate has agreed to a 90-day lock-up for its remaining shares in Lottomatica.

Lottomatica plotting growth trajectory with SKS365 purchase

In November, Lottomatica agreed a deal to acquire 100% of the share capital in the Italian-facing operator SKS365. Lottomatica stated the purchase will strengthen its position in the Italian market, while also expanding its brand portfolio.

Lottomatica announced plans to issue and sell €500m in notes to help fund the acquisition, which is due to be completed in the first half of 2024. The company says the agreement places a €639m enterprise value on SKS365.

SKS365 has a strong online presence, while also running approximately 1,000 retail sports betting points of sale. With PlanetWin365 and PlanetPay365 among its brands, Lottomatica chief executive Guglielmo Angelozzi believes SKS365 will be “highly valuable and complementary” to the group’s portfolio.

Lottomatica won the race to acquire SKS365, with Playtech having previously confirmed it was in talks with the Malta-based operator. Lottomatica remained quiet until it reached a deal with SKS365, with Flutter also reportedly interested.

Strong Q3 for Lottomatica

The deals with Gamma Intermediate and SKS365 come after a positive Q3 2023 for Lottomatica, reporting both revenue and earnings growth. Q3 was also its first full quarter following its IPO in April.

Lottomatica also enjoyed a successful H1, after which it raised its full-year guidance. For the full year, Lottomatica expects revenue of between €1.63bn to €1.69bn and adjusted EBITDA of €570m to €590m.

Whether Lottomatica achieves this full-year guidance remains to be seen, with a date not yet announced for the release of its Q4 and full-year reports.