Competitor Accuses Evolution Of Allowing Illegal Use Of Its Products

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Evolution Gaming is among the largest B2B online gambling companies in the world, and has an effective monopoly on live dealer gaming in the US – for now. Two competitors are looking to enter that market segment in the near future. It’s interesting timing, then, that an unnamed “US-based competitor of Evolution” reportedly filed a complaint about the company’s business practices with the New Jersey Division of Gaming Enforcement (DGE).

On Tuesday, Bloomberg broke news that a law firm retained by this self-described, but unnamed, “US-based competitor” filed a complaint with DGE. The complaint alleges Evolution knowingly allows its games to be played in countries where gambling is illegal. That includes some, like Iran and Syria, that the US classifies as state sponsors of terrorism.

DGE didn’t return OPR‘s request for comment on this matter. It’s worth noting, however, that Evolution is a supplier, not an operator. The alleged wrongdoing is by customers using its games. The question is whether Evolution has willingly turned a blind eye to black market activities; and, if so, how US regulators view the responsibilities of suppliers in relation to the actions of their clients.

Evolution’s soon-to-be live dealer competitors

Market share is a precious commodity. When it comes to live dealer games in the US, Evolution and its subsidiary Ezugi currently have all of it. Evolution holds live dealer contracts with almost all of the major US online casinos, and although competition is on the way, it hasn’t arrived yet.

Of course, Evolution also produces other types of online casino games, such as slots. That market is much more competitive and full of long-standing rivalries. The mystery complainant could therefore be any number of companies, and its identity will remain secret for the time being, as it filed its complaint through the law firm Calcagni & Kanefsky, which has handled all communications.

If it does turn out to be one of the companies aiming to challenge Evolution in the live dealer casino space, there are really only two possibilities.

Playtech is working on opening a live dealer studio in Michigan, where it already serves as technology partner for Play Gun Lake.

The other upcoming arrival to the US live dealer space is Scientific Games. On Nov. 3, SG announced that it acquired Authentic Gaming partly in order to gain live dealer capability, with eyes on the US market. Its likely jumping off points would be either the Pennsylvania or New Jersey online casino markets.

Neither company returned requests for comment on Friday.

The complaint appears to be largely a PR move

Online Poker Report knew about these allegations beforehand, but we elected not to publicize them until seeing a complaint filed. On Nov. 9, OPR received an emailed “Confidential News Tip” from a public relations firm. It later supplied us with the study referenced in the complaint. OPR will honor the firm’s request for confidentiality and not name it.

In a Nov. 10 conference with three of the firm’s PR pros, OPR found out about the then-imminent allegations against Evolution. During that call, OPR asked about the identity of the accuser, but the firm’s representatives wouldn’t answer and ended the call shortly thereafter.

Bloomberg, which ultimately did break the story, presumably received its information from the same source. It likewise waited until the complaint was filed to report on it.

It’s not the first time that a supplier has faced heat in the US for its products’ use in black markets. As we speak, DraftKings shareholders are suing the company for allegedly covering up such dirt about SBTech during its acquisition of the latter.

Speaking of SBTech, it was Scientific Games that originally drew attention to the problem when the Oregon Lottery‘s named SBTech as its sports betting partner.

In April 2019, the Statesman Journal reported:

“Scientific Games Digital, headquartered in Las Vegas, finished second and filed the bid protest urging state officials to examine SBTech’s international ties and practices.”

‘Confidential’ allegations against Evolution

On Nov. 10, the PR firm emailed OPR a 122-page document primarily filled with screen grabs. The document, which the firm describes as a “study,” claims Evolution didn’t verify player location or perform Know-Your-Customer authentication. However, it’s generally the operators not the suppliers who are required to perform such checks.

The document concludes with a roundup of its highlights:

Complaint’s ‘summary of findings’

197. This diligent investigation unveiled that Evolution enables a myriad of illegal activities, as well as regulatory and contractual violations. Findings include: Evolution offering its games on multiple online gaming websites (operators), which enable prohibited gambling in jurisdictions where gambling is prohibited and considered as criminal offence.

Additionally, Evolution receives direct cash payments from these operators, who accept cash and bitcoin payments from end-users playing Evolution games – a heavy violation of Evolution’s official anti-money laundering policy, as well as money laundering laws and acts.

198. A crucial part of the investigation reveals that Evolution games are being offered in designated terror states, such as Iran, Syria and Sudan, as determined by the US Department of State and Office of Foreign Assets Control (US Department of the Treasury) – a direct violation of US sanctions on these terror states – another violation of Evolution’s Counter Terrorist Financing Policy.

199. Furthermore, many examples prove that Evolution does not carry out a KYC (“Know Your Customer”) process to implement its anti-money laundering policy; thus, in practice, it does nothing to track the source of funding used by its users. It is also exposed that live casino games produced by Evolution are being offered to end-users – those who ultimately use their product – in territories where gambling is illegal, including in Hong Kong, Singapore, France, and the UAE.

200. The investigation demonstrates that Evolution is fully aware of its end-users’ physical location within the illegal markets mentioned above, via its direct and indirect offerings in these territories. Evolution also receives revenues, yet continues to offer its games in these very same illegal markets.

201. It is evident that Evolution breaches local regulatory requirements in countries such as Italy, Spain and Sweden, by offering its games by means of unlicensed operators, or by using physical studios which aren’t local to the countries where they’re offered, as required by local laws.

Response from Evolution

Evolution replied to OPR‘s request for comment on Friday, as follows:

The following statement is made in relation to an article published November 16th referencing a complaint to the New Jersey Division of Gaming Enforcement. The article was based on information provided by a law firm on alleged assignment from an undisclosed competitor to Evolution.

Evolution strictly complies with all applicable laws and regulations. As a B2B supplier, Evolution has customer relationships with gaming operators; who, in turn, own the relationships with the end users. Evolution does not own or control any of the operators or aggregators it works with. We have no direct relationship with the underlying player and no involvement in handling of players’ money. We sell licensed and certified games to licensed operators and aggregators. It is the operator that decides which markets to market themselves, that handle the KYC process and finally decide what players to accept.

Generally, online gaming operators are licensed in a limited number of jurisdictions, while some operate in a global market and allow play from various geographic areas over the internet. We use all tools at our disposal to block play from certain countries, including all countries on sanction lists mentioned in the article.

In countries where a local license is available to operators, we require operators that market themselves directly to that country to have a local license. Evolution holds B2B supplier licenses in over 40 jurisdictions and we have long history of working with regulators all over the world.

The company’s shareholders seem to be of two minds about the allegations. When the news first broke on Nov. 17, shares tumbled from SEK 1483 (about $165) to SEK 1378 ($153) in early morning trading. They’d bounced partway back by the end of the day, and were back up to SEK 1455 ($162) on Thursday. However, the opening of the market on Monday brought a second sharp drop of 3% or so, suggesting some worries grew over the weekend.