The curious case of the legal complaint against Evolution

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It is now a full month since Bloomberg reported that live dealer supplier Evolution Gaming had been accused of operating illegally in certain markets as well as doing business in countries facing US sanctions. This news shocked the gambling world and led to a crash in Evolution’s share price. But what are the grounds for this complaint, who is behind the complaint, and what are the likely repercussions for Evolution and for the live casino market in the US and overseas? In this piece, we will reveal all we know so far.

Who is making the complaint?

Calcagni & Kanefsky LLP lodged the complaint at the New Jersey Division of Gaming Enforcement (NJDGE) on behalf of investigators retained by an anonymous, US-based competitor to Evolution (according to sources who wish to remain anonymous themselves). Its not apparently clear who that might be since few live dealer providers are based in the US. Could the complaint in fact come from a Wall Street hedge fund betting on the Evolution stock price responding negatively to the news? At this stage, we simply don’t know.

How has the Evolution stock price responded?

Within hours of the announcement, Evolution AB shares retreated from the 1500 level, falling some 40%, before bottoming around 900 by December 6th. Since then, it has rebounded up to 1150 – nut still, that would be a good return for any speculators who might have shorted the stock ahead of the news.

What are the details in the complaint?

The complaint states that investigators managed to sign up with online casinos where they could play Evolution’s live roulette, live blackjack, and other games while being physically located in jurisdictions under US sanctions. Such territories included the likes of Syria and Iran.

How has Evolution responded?

On the 18th of November, Evolution publicly responded to the complaint. The company stated that the investigators had been using Virtual Private Networks (VPNs) to bypass their geolocation systems. This was an unfair tactic, according to Evolution. It also stated that the company requires all operators which it works with to hold a license for markets in which they operate.

How are the NJDGE likely to respond?

We can see the NJDGE fining Evolution for allowing players from Syria and Iran to bypass their security controls. Plenty of smaller enterprises out there have the ability to detect and block VPNs, so why can’t multi-billion-dollar businesses? This is especially true for the US online gambling industry, which prides itself on stopping players from New York betting in New Jersey.

However, we don’t see any threat to Evolution’s near-monopoly in New Jersey. Evolution’s live dealer games are huge money-spinners, after all, and many online casinos rely on them for continued growth – as do the NJ state tax coffers.

What is the likely overall impact on online gambling in the future?

The biggest change is likely to see enhanced vigilance in terms of letting players gamble using VPN’s – in fact we can see casinos and software providers identifying and banning the use of any and all VPN’s when wagering at sites. Aside from that, we also see Evolution and other providers withdrawing from casinos licensed in certain jurisdictions – Curacao and Costa Rico being the most obvious – which have a reputation for licensing sites which operate in states where gambling is outright banned. The US market is just too lucrative to risk allowing the odd high roller in Kuwait to spin some Lightning Roulette.  It’s certainly going to be interesting to see how this story plays out in 2022.

Lisa T is part of our editorial staff and writes about the latest online gambling industry news and related articles from around the globe. https://www.casinoplayersreport.com.

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