Leading iCasino gallery Evolution–already at war with rivals and hackers on multiple fronts–has now been further blunted by a double-whammy – the collapse of a much-touted tie-in with Galaxy Gaming and a massive £4.75 million fine from UK regulators for serious compliance breaches.
Although Evolution CEO Martin Carlesund has asserted that walking away from the Galaxy Gaming acquisition will have “no material impact”, after spending two-years pursuing the deal and paying a whopping US$5.23 million (£3.89m) to terminate, many gambling industry watchers believe it indicates yet more trouble ahead for the Swedish-origin, Malta-headquartered software giant.
And it begs the question: Where do Evolution go from here? And what really nixed Evolution’s Galaxy Gaming deal?
But first a lightning recap of Evolution’s recent travails, with the proverbial “S”, “H”, One, “T” hitting the Stockholm Nasdaq-listed US$19.92 billion (£14.94m) company seemingly in every corner of the globe, from Georgia in the Caucasus, where it had a long-running labour dispute with workers at its online casino studio, to Asia, where it’s still beating-off cyberpunks, and, most notoriously in the United States, where it’s embroiled in a frenzied New Jersey court case against arch rivals Playtech, involving alleged industrial spying and former Israeli intelligence officers now working as the Black Cube agency.
Massive Blow
On Monday, at the start of this post-World Cup week, Evolution announced it had terminated its merger with Galaxy Gaming, who specialise in “omnichannel table games and state-of-the-art electronic wagering”.
But the Sweden-origin gamers, founded in 2006, remained tight-lipped about the reasons for the sudden split, saying only that it expected to continue working with Galaxy under the companies’ existing commercial relationship.
Galaxy’s CEO Matt Reback stuck to the playbook, adding that while the company was “disappointed” by the outcome, it valued Evolution’s partnership and there would be no public fallout.
Then yesterday (July 23), the UK’s regulatory Gambling Commission (UKGC) delivered another massive blow to Evolution’s credibility.
Referring to a £4.75 million fine (US$6.32m) they had imposed on Evolution on July 15, for allowing two operators to offer their games on six unlicensed UK gambling websites, the UKGC issued a clarification statement which said the breaches, first detected at the end of 2024, were “so serious” that they had even “considered suspending Evolution’s licence”.
Serious AML Weaknesses
The UKGC detailed “serious weaknesses in Evolution’s anti-money laundering risk assessment”, said that the company’s risk assessment was out of date and that there “was a significant gap between the controls on paper and their effectiveness in practice”.
Reeling from this flurry of social, legal and regulatory blows, many iGaming insiders are now questioning if Carlesund can survive the onslaught.
Returning to Evolution’s Galaxy Gaming car crash, the putative acquisition was announced as an all-cash buy in July 2024, valuing the Vegas-based games designer and supplier at US$3.20-a-share, an equity value of around US$85 million (£63.2m) or US$124 million (£92.2m) including net debt.
Evolution expected to complete the acquisition by mid-2025.
But that date was extended to earlier this month after the company failed to secure full regulatory approval before the deadline.
Nevada Louisiana Holdouts
Because Galaxy Gaming holds licences across 28 U.S. states and more than 130 jurisdictions globally, the transaction required clearance from the key states where Galaxy maintains its largest presence.
Seven U.S. regulators needed to sign off on the deal. But by May this year Evolution had secured approval from only five, with Nevada and Louisiana holding out.
Evolution’s compliance issues–highlighted by its current UKGC sanction–seem to have sustained the regulatory block.
At the beginning of this year, Nevada’s regulator quietly raised the bar for licensees operating in markets where online gambling is prohibited or where it is available without a licence.
According to Earnings+More, investment bank Rothschild & Co Redburn believed Evolution faced a clear choice: Increase its geo-blocking to Nevada’s satisfaction or accept that the Galaxy takeover could unravel.
Wither Carlesund?
The analysts also suggested regulators might prefer to see the outcome of the UKGC investigation before making their decision.
And, as outlined in this report, this dropped last week.
According to Earnings+More, following reporting by Investigate Europe concerning Soft2Bet, Rothschild analysts tested whether Red Tiger games (owned by Evolution) could be played on Fat Pirate–one of the best-known Soft2Bet-linked unlicensed casino sites identified in the investigation–using a standard home broadband connection and a 5G mobile hotspot without a VPN.
Both times the analysts were successful, leaving them to conclude on July 10: “Holes have consistently been found in Evolution’s technical ring-fencing implementation.”
Nevertheless, and perhaps key to Carlesund’s continued survival, bad continues to make financial good for Evolution, with Q2 revenue rising 9.5 percent, year-on-year, to €81 million (£68.8m) and its U.S. operation flourishing as it opened it seventh live iCasino studio, this one in Michigan, in June.
Watch this space as Martin Carlesund and Evolution continue to roll the dice.
