This Is A Little Awkward
Entain, the Winner of the 2022 Socially Responsible Operator of the Year award, has agreed to a 9-figure settlement with the HMRC over a "legacy matter" when the company was known as GVC.
The Bulletin Board
NEWS: Entain reaches $729 million agreement following bribery investigation.
NEWS: Another reason Iowa is eyeing online casinos.
QUICK HITTER: Michigan online poker gets a boost from interstate pooling.
NEWS: California Attorney General investigating the legality of daily fantasy sports.
BEYOND the HEADLINE: The legal line to determine where a product falls on the gambling axis is extremely blurry.
AROUND the WATERCOOLER: Those are some rough numbers.
STRAY THOUGHTS: Tough on the eyes.
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Entain Agrees to $729M Settlement
Entain has agreed to pay $729 million to settle a bribery investigation by HM Revenue & Customs (HMRC) that was initiated in 2019 - iGaming Business has a terrific writeup of what occurred to trigger the investigation.
Per Earnings+More, “The settlement removes one obstacle to any potential bid for Entain. As reported on Friday, activist investors are lining up to express disappointment with the company’s progress, with suggestions the company’s own bolt-on acquisition strategy has run out of road.”
As for the settlement (which Entain had prepared for) and the next chapter, Chairman Barry Gibson said:
"This legacy matter concerns a business which was sold by a former management team six years ago.
“The group has changed immeasurably since these events took place, and the DPA process has provided a reminder of the stark differences between the GVC of yesterday and the Entain of today.
“We are committed to continuing our journey towards operating only in regulated markets, and are now widely recognized as a best-in-class, responsible operator with the highest levels of corporate governance across all aspects of our business.”
On the responsibility front, Gibson hints at several recent awards Entain has collected (here and here).
As reported by SBC Americas, Martin “Lycka, Entain’s SVP of American Regulatory Affairs and Responsible Gambling, was the recipient of the Don Feeney Award For Responsible Gambling Excellence for his work with Entain and the Entain Foundation, of which he is the chair.”
On the opposite of the ledger, Entain was hit with a £17 million fine from the UK Gambling Commission in 2022 and threatened with license revocation. In 2019, the company paid a £5.9 million fine. There was also the smaller matter of a €400,000 fine in the Netherlands earlier this year.
All of this is occurring parallel to Goldman Sachs downgrading Entain from Buy to Sell. Per iGaming Business, the downgrade stems from “Entain having problems with growth during recent months. Goldman Sachs said this is the result of regulatory headwinds, increased competition, and market dynamics.”
As Jamie Salsburg tweeted following the $729 million settlement last week, “Tough day for the Socially Responsible Operator of the Year.”
Iowa Has a New Reason to Legalize Online Gambling
Iowa casino and sports betting revenue were down in FY2023. Casino revenue saw a slight .7% decline in total revenue, while sports betting, legalized in 2019, experienced its first year-over-year decline, with revenue tumbling 8.5%.
The land-based casino dip is more troubling when considering the number of admissions to Iowa casinos has steadily declined since 2018.
Despite the declining admissions, revenue was still increasing until FY2023. However, tax revenues declined from FY2021 to FY2022, indicating that the lightly taxed sports betting numbers were propping up the state’s total revenue.
As I’ve argued with Lousiana, declining gambling revenues drive online gambling legalization talk. Iowa is already having those discussions, and the FY2023 numbers could provide some ammunition to legalization supporters.
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Quick Hitter: Interstate Online Poker Boosts Traffic
PokerStars Michigan has seen its traffic increase 32% year-over-year after it began pooling players with New Jersey, per PokerFuse.com.
More importantly, the interstate pooling has grown the overall market, as total traffic is up 20%. With its increased liquidity, PokerStars has caused a slight decline in traffic at WSOP.com (down 4%) and BetMGM (down 10%), as players have likely moved to PokerStars.
Whether the pooling would cause a shift from one legal site to another or move customers from the illegal market, reactivate lapsed players, and create new players appears to be answered.
California AG Investigates Daily Fantasy Sports
It’s a headline plucked out of 2015: California is looking into DFS.
According to Vixio GamblingCompliance’s Matt Carey, at the request of State Sen. Scott Wilk, California Attorney General Rob Bonta opened an investigation into the legality of daily fantasy sports and is preparing an opinion (likely negative).
As attorney Daniel Wallach tweeted, “California applies the “predominant factor” test to determine whether a game or contest is one of chance or skill. This will be one of the threshold questions.”
That means California will weigh whether skill overcomes chance, but there is a lot of wiggle room for where a state draws that line. As Klein Moynihan Turco put it, “The analysis is relatively simple when comparing, for instance, dice games to chess, but it is the grey area in between that is difficult.”
The opinion request is listed as pending on the OAG website:
“Does California law prohibit the offering and operation of daily fantasy sports betting platforms with players physically located within the State of California, regardless of whether the operators and associated technology are located within or outside of the State?”
According to Carey, the investigation wasn’t limited to Pick’ Em style games.
“However, Wilk’s inquiry is not limited to pick ’em operators, instead targeting the entire daily fantasy industry in a state where FanDuel and DraftKings suffered a massive defeat last November in their efforts to pass a ballot initiative legalizing mobile sports betting,” Carey’s colleague Chris Sieroty posted on LinkedIn.
Beyond the Headline: Gambling’s Blurry Legal Lines
The current fight over what constitutes daily fantasy sports and what constitutes sports betting is just the latest iteration of a much larger issue that has remained unresolved for decades. What’s the line that makes something gambling, and more importantly, what makes something illegal vs. legal?
Can I invite friends over and host a poker tournament? What if I host it at a bar? What if I rented a space and offered the game weekly to the public? What if it’s a heads-up game where I take on all comers?
The answer is it depends. And it depends on a lot of factors. Where you live. Is the host taking money, and how? To name a couple.
There is a lot of talk about “vs. the house” and “games of skill,” but at the end of the day, it comes down to where we draw the line between gambling and a legal contest. That line is as blurry as when I look at an eye chart without my glasses.
In an interesting LinkedIn post, Daniel McGinn, an attorney at Dean Mead, chimed in on the DFS debate, writing, “This question is not as simple nor as decided as FanDuel makes it sound” in its recent White Paper submitted to Florida regulators where it draws the line between peer-to-peer and vs-the-house games.
But as McGinn notes, that’s where FanDuel et al. are drawing the line. Others might draw it elsewhere. The example McGinn uses is whether participation in a paid contest of skill is the same as participation in a paid contest decided on the results of games of skill. Or, simply put, is playing darts the same as handicapping a darts contest?
Each state is going to take a different approach to this question. But the real issue is something I’ve said about the Wire Act over the years: There’s no permanence.
In a 2022 article, when everyone was cheering a Wire Act legal victory, I wrote:
“… if you consider the history of the Wire Act in the era of online gambling, the DOJ’s argument – that IGT has nothing to fear – doesn’t exactly instill confidence.
“Essentially, without a Supreme Court opinion or Congress amending the Wire Act, the threat of a new administration performing another about-face remains in place.”
DFS 2.0 companies are learning that a license and approval to operate can be rescinded without a statutory change. When a legal gray area exists, a regulatory agency can change its mind.
Around the Watercooler
Social media conversations, rumors, and gossip.
Jamie Salsburg highlighted some really rough numbers from Monday’s Massachusetts Gaming Commission meeting, where operators divulged the percentage of customers utilizing specific responsible gambling tools.
Stray Thoughts
Nothing to do with anything, but seeing highlights from NBA games, the new NBA courts for its “In-Season Tournament” are brutal on the eyes. I wasn’t a fan of the images, and I’m less of a fan after seeing video highlights.
I’m kind of with Steve Kerr on this, “can we just have a basketball game anymore?”