Virtual Gaming Worlds, the online casino founded by billionaire Laurence Escalante, is expanding into lotteries after posting a 30 per cent jump in profits powered by a lucrative sweepstakes business in the United States.
The company, which pioneered the use of a regulatory loophole to offer casino-like games with cash prizes in US states where gambling is otherwise banned, is one of a small number of Australian firms making outsize profits from online betting overseas.
The success of Virtual Gaming Worlds (VGW), which runs the popular Chumba Casino platform and similar games, has made Mr Escalante wealthy. The Financial Review Rich List estimated that his fortune stood at $3.75 billion earlier this year.
VGW recorded a 27 per cent rise in revenues – to $6.13 billion – in the 12 months to June 30, according to accounts filed with the corporate regulator. Profits rose from $377.6 million to $491.6 million.
“It’s with great pride and a credit to our global team that we’ve again delivered another set of strong full-year results ... the future is bright,” Mr Escalante said in emailed comments.
The company, which rarely discusses the operation of its business, also disclosed in its accounts it had acquired a 13.9 per cent stake in lottery operator 99Dynamics, the British group that runs Jackpot.com. Founded by Israeli entrepreneurs Roi More and Yariv Ron, the online lottery group has expanded aggressively in the US.
Mr Escalante said the stake gave VGW “exposure to an attractive adjacent market, diversification and future optionality”.
“[We are considering] expanding our multi-brand strategy with the launch of new brands,” he said.
“We know our players enjoy several of our brands and believe expanding our ‘brand family’ will further boost engagement with our existing players and grow new players, plus assist us with entering new markets.”
As previously reported by The Australian Financial Review, VGW paid shareholders a $360 million dividend this year. Last year, the company paid out $318.9 million in dividends, with $222.2 million of that going to “key management personnel”.
The board has only three members: Mr Escalante, his father, Lorenzo, and Mats Johnson, a long-term marketing executive.
The bumper profits, however, come at a time when the company is under significant regulatory and legal scrutiny – in Australia and the US. Delaware has ordered VGW to stop offering its casino-like games. It has faced similar action in other US states, including Michigan, and legal claims from angry customers.
The Virtual Gaming Worlds accounts filed with the Australian Securities and Investments Commission also disclosed it had received inquiries from Australian tax officials and was reviewing its obligations in the US, Australia and Malta, where it holds a licence. It may be required to make additional tax payments, it added.
“It is possible that the review may identify that additional tax may be required to be paid on historical positions,” the accounts note, adding the company was also conducting a corporate governance review. There has long been disquiet among a handful of investors about the lack of independent directors on the company’s board.
The runaway success of VGW has spurred many others to copy the sweepstakes model. Research conducted by Eilers & Krejcik, a consulting firm specialising in the sector, suggested VGW’s market share will drop to about 50 per cent – from 90 per cent only a few years ago.
Melbourne billionaire Ed Craven and his business partner Bijan Tehrani operate Stake.us, a sweepstakes version of their Stake.com cryptocurrency wagering website.
The American Gaming Association, which represents major casinos, and ASX-listed poker machine maker Light & Wonder have urged regulators to scrutinise the use of loopholes. Gambling is regulated at a state level in the US.
https://www.afr.com/companies/games-and-wagering/laurence-escalante-s-gaming-empire-gets-into-lotto-as-profits-surge-20240918-p5kbhh