New York-based investment research firm Hindenburg Research has released a report alleging Draftkings subsidiary SBTech is involved in illegal operations. 

DraftKings: A $21 Billion SPAC Betting It Can Hide Its Black-Market Operations was published yesterday, and accuses the company of exposing investors to illegal activities, and generating 50% of its revenue from markets where gambling is banned. 

The report details a litany of damming issues, saying: “Unbeknownst to investors, DraftKings’ merger with SBTech also brings exposure to extensive dealings in black-market gaming, money laundering and organised crime.

“Based on conversations with multiple former employees, a review of SEC & international filings, and inspection of back-end infrastructure at illicit international gaming websites, we show that SBTech has a long and ongoing record of operating in black markets.”

The report goes on to claim that a former SBTech employee has said the company has “sold to plenty of mobs”, which contrasts dramatically with DraftKings’ brand image, and has the potential to cause serious issues with its partners like the NFL, NBA, NASCAR, PFL, UFC, WWE, and the PGA. 

It also claims that, prior to the SPAC merger, SBTech deliberately tried to distance itself from its black market operations, moving “illicit customer relationships” to a newly formed front “distributor” called BTi/CoreTech – a company staffed by 50 SBTech employees. 

Going even further, Hindenburg says BTi/CoreTech is headed by a former executive from a binary options gambling firm, which was raided by the FBI and charged by the SEC for scamming US investors to the tune of more than $100M USD. 

You can read the full report here.

In response, DraftKings told Yahoo Finance that the report was written by “someone who is short on DraftKings stock with an incentive to drive down the share price.” 

Furthermore, DraftKings, which combined with Bulgaria-based SBTech in 2020, says it thoroughly reviewed SBTech’s business practices and found no problems. It has also been pointed out that state regulatory commissions have not voiced any concerns about black market operations.

AYO.NEWS says:

We’ve got a feeling we’re going to hear a whole lot more about this over the coming months, so stay tuned…

Betsson Group has won its legal case against a SEK 20M ($2.4M USD) fine and warning issued by the Swedish Gambling Authority (SGA) last summer.  

The SGA had accused Betsson Nordic of violating chapter 11, section 2, of the Swedish Gambling Act, by offering illegal bonuses, and failing to register agents selling gambling vouchers. Betsson defended itself, insisting that it always operated legally. 

Now, after a year of proceedings, the administrative court has agreed with Betsson, ruling that the SGA “lacks legal grounds for its decision in both cases,” and overturning the fine and warning. 

The SGA may still take the case to the Court of Appeal. 

AYO.NEWS says:

Congratulations to Betsson for fighting it’s corner on this one. However, the SGA has time and again proven itself incapable of making rational, balanced decisions, so we expect it will appeal and continue to dig a deeper hole for itself. 

Staying with the Swedish online gambling market, earlier today we reported that the country’s Ministry of Finance has proposed introducing even stricter marketing rules.

Swedish gambling operators are facing the possibility of even tighter marketing restrictions, after a proposed amendment to the Gaming Act. 

Yesterday, the Ministry of Finance proposed amending the Gaming Act’s stipulated “requirement for moderation in the marketing of games to consumers,” to a requirement for “special moderation.” Predictably, proponents of the change to the law, which is slated to take effect on 1 July 2022, say it will further protect Swedish consumers. 

Though responses to the proposal are being accepted by the Ministry of Finance until 14 October 2021, the Swedish Trade Association for Online Gambling (BOS) has already flat out rejected the proposed change.

BOS Secretary General, Gustaf Hoffstedt, pointed out that licensed operators have already cut their advertising purchases by around 50% since 2018-19, and that advertising plays a critical role in persuading Swedish consumers to choose licensed operators rather than black market offshore sites. 

With the war between licensed gambling operators and those trying to supress the industry heating up, four of the country’s biggest operators, Betsson Group, Kindred Group, William Hill, and LeoVegas, have thrown their support behind BOS to launch Fakta om spel – a website providing objective facts and statistics about the licensed gambling market in Sweden. 

AYO.NEWS says:

Quite apart from the ludicrously vague wording of the proposed amendment, which is bound to lead to nothing but confusion, it’s quite obvious that there is a politically motivated campaign against the Swedish gambling industry from certain elements of the country’s government. 

Perfectly illustrating this politically, and possibly ideologically, motivated campaign is Minister for Social Security Ardalan Shekarabi. The mastermind behind Sweden’s draconian emergency gambling restrictions introduced during the height of the COVID crisis, Shekarabi has repeatedly been accused of lying and distorting the truth to further his agenda. Indeed, earlier this month, the Riksday’s Constitutional Committee judged some of his most influential comments were “unfounded.”

YouTube has added gambling to its prohibited list for its masthead advertisements – the platform’s most prominent advertising placement. 

Specifically, the ban applies to “assets that depict or reference gambling-related content, including offline gambling, online gambling, online non-casino games, and social casino games.” 

Political, electoral, alcohol, and prescription drugs ads have also been excluded from the masthead placement. 

YouTube says the changes, which follow last year’s move to replace full-day masthead ads with more targeted adverts, purchased on a per-impression basis, will improve the user experience. 

The changes are effective immediately. 

AYO.NEWS says:

While this change, which only affects the most expensive prime YouTube real estate, probably won’t directly impact most gambling advertisers, it’s yet another sign that gambling content’s days on the platform are numbered.

Following a public relations disaster, Norwich City FC has terminated its extremely short-lived sponsorship deal with online bookmaker BK8 Sports. 

The partnership, which was only announced a week ago today, instantly descended into farce when fans discovered BK8 had been using “sexually provocative” social media marketing – something that did not “align with the wider vision and values” of the club. 

In a statement, Norwich City said: “The club and BK8 have taken on board feedback from its supporters and partners, and after continued discussions we have agreed to immediately end the partnership.”

While Ben Kensell, chief operating officer of Norwich City, added: “We have worked hard to build trust and engagement through our countless initiatives with our supporters and partners. We place huge value on our open and honest relationships with our community and supporters.

“As a self-financed club there is always a fine balance between generating the revenue levels required to help maintain that model, whilst working within our visions and values. On this occasion, we made an error of judgement. Our standards were not at the levels we demand of our football club.

“We can now only apologise to our supporters and former players, Grant Holt and Darren Eadie, who were across the BK8 promotional launch campaign, for any offence caused.

“We remain highly committed to diversity and equality across our football club and its community. We want to continue to embed a highly inclusive culture across the club, together with an accessible and welcoming environment free of demeaning and discriminatory behaviours.”

AYO.NEWS says:

With this kind of debacle becoming increasingly common, whether it’s sports/esports clubs associating themselves with dodgy betting operators, or organisations getting chummy with dodgy regimes, one has to ask who the hell is advising these people?

Malta, the European online gambling hub, could be forced to choose between its sports betting industry and passing the Financial Action Task Force (FATF) Moneyval test. 

As previously explained, two years ago, Malta’s anti-money laundering framework failed a Moneyval review, and the tiny island country was ordered to implement a number of reforms before a reassessment. 

However, with the FATF expected to announce its first decision on Malta tomorrow, 15 June there is still uncertainty of the issue of illegal sports betting. More specifically, Malta is still vetoing the Macolin Convention. 

A Council of Europe treaty, the Macolin Convention aims to combat the manipulation of sports through illegal betting. Herein lies the problem. To comply with the treaty, Malta-based betting operators would need to honour the laws of the jurisdiction in which specific consumers using online services are based – with the failure to do so meaning it is engaged in facilitating illegal sports betting services. 

Unsurprisingly, the Maltese authorities have long disagreed with this definition of illegal betting, and insist that its own national laws and the Malta Gaming Authority’s sports integrity unit, in cooperation with international sporting and law enforcement organisations, are capable of addressing illegal sports betting and manipulation.

If Malta gets greylisted by the FATF, it will signal to the rest of the world that the country is an untrustworthy jurisdiction, and would spell disaster for the country’s financial services sector. Needless to say, this would make life very difficult for all Malta-based businesses and individuals trying to do business internationally. 

But, on the other hand, if Malta does ratify the Macolin Convention, any operators licensed by the MGA will be forced to scrupulously honour the laws of any other states they offer services in. Anyone familiar with the Maltese gambling industry will know this could cause big issues for many operators, and would likely significantly devalue an MGA license. 

AYO.NEWS says:

Once again, Malta finds itself stuck between a rock and a hard place. Clearly, on every level Malta can’t afford to get greylisted by the FATF, but on the other hand the online gaming and betting industry forms a massive chunk of its economy – even more so since the COVID triggered decimation of its tourism sector. 

With the MGA’s reputation in tatters following the charging of its former CEO, Heathcliff Farrugia, over his links to disgraced tycoon Yorgen Fenech, and the controversial appointment of a close associate of the country’s Prime Minister as Chairman, it’s hard to believe Moneyval or the FATF will put much faith in the regulator’s promises.