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(Light &) Wondering just how big US iGaming could be?

VIXIO GamblingCompliance released a report this week, commissioned by industry supplier Light & Wonder, which estimated that the US could generate $6.35bn in annual tax revenue from an expanded legal iGaming market.

The estimate is based on the assumed development of legalised iGaming markets in all 42 states which currently have either legal land-based casino gaming or online sports betting.

Such regulatory development could lead to the creation of a US iGaming market worth more than $30bn annually, the report states, leading to tax revenue in excess of $6bn based on a tax rate of 20%.

“VIXIO’s report demonstrates that states are leaving billions of dollars in tax revenue on the table which could fund a variety of public programs and services without resorting to broad based taxes,” said Howard Glaser, global head of government affairs at Light & Wonder. 

“The dozens of states that already have land-based casino gaming merely have to turn on the digital channel to realise tax revenues which are otherwise being syphoned off by the prevalence of illegal off-shore internet gaming.”

Although limited to a handful of states at the moment, the report points out that iGaming tax revenue has rapidly begun to make significant contributions to tax revenue in those regions.

“According to the American Gaming Association (AGA), the six states in which iGaming is currently legal generated $970m in gaming tax revenue in 2021, compared with $560m generated in the 30 states with sports betting,” it said.

UK exchange officials urge listing firms to stay at home

The Financial Times published a piece this week which claimed that bankers and exchange officials in the UK are boosting their efforts to promote London listings, in order to prevent firms from looking overseas when seeking to go public.

It lists examples including Luxury fashion website Farfetch and Soho House owner Membership Collective Group, which would be large enough to join the UK’s FTSE 250 index. Both are considered small-cap groups in the US however, where both firms opted to list.

The promise of higher valuations has tempted an increasing number of non-US firms to list in America recently, it said – as witnessed in the iGaming industry with the likes of Gambling.com Group, Super Group and NeoGames, among others. 

Interestingly, however, the article pointed out that such firms have historically underperformed when compared to those opting to list closer to home.

“European companies that raised more than $100m in the US since the start of 2020 have fallen an average of 47% from their offer price, compared with a 29% decline among domestic US listings and a 19% fall for domestic European deals,” it said.

“Observers point to several possible reasons for the underperformance, including a lack of support from passive investors because foreign companies are excluded from big indices such as the S&P 500, and a belief that domestically focused US investors are more likely to sell “non-core” foreign stocks during periods of volatility.”

Despite this trend, perceptions of listing in London are thought to be experiencing something of a low, based on the City’s investor base and attitude, according to the article.

Efforts to reverse that could amount to little more than window dressing. “A lot of the people who want to champion London seem to be more interested in flag-waving,” one London-based adviser told the author. 

“If the discussion was ‘come to London, you’ll get less volatility and a better valuation and a good platform to build the business’, it would be different, but we don’t help ourselves.”

Robinhood not so Merry now

The Wall Street Journal reported this week that the cryptocurrency trading unit of investment platform Robinhood was fined $30m by the New York State Department of Financial Services (NYDFS) for alleged violations of AML and cybersecurity regulations.

The case marks the financial regulator’s first crypto-related enforcement action, and in addition to the fine, required Robinhood to retain an independent consultant to evaluate its compliance with the relevant regulations.

According to the article, NYDFS said it found significant failures resulting from management shortcomings through a supervisory exam and a subsequent enforcement investigation. 

The identified shortcomings included “failures to foster and maintain a culture of compliance and to allocate adequate resources to the programmes, particularly as the company grew quickly, which exacerbated the issues.”

The business also failed to comply with consumer protection requirements, by not providing a dedicated customer complaint phone number on its website.

“We have made significant progress building industry-leading legal, compliance, and cybersecurity programmes, and will continue to prioritise this work to best serve our customers,” said Robinhood associate general counsel of litigation and regulatory enforcement Cheryl Crumpton.

The settlement comes as NYDFS welcomes new superintendent Adrienne A. Harris, who now aims to provide further guidance to the crypto industry and expand the department’s team dealing with digital currency.

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