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What changed in Rush Street Interactive, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Rush Street Interactive, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+495 added−461 removedSource: 10-K (2024-03-07) vs 10-K (2023-03-02)

Top changes in Rush Street Interactive, Inc.'s 2023 10-K

495 paragraphs added · 461 removed · 425 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

120 edited+8 added−4 removed119 unchanged
Biggest changeWe believe the sports betting industry will grow significantly over the next several years as more states authorize sports betting and as existing markets mature. 15 Share of Total Quarterly Sports Betting Handle by State (January 2023) Source: EKG United States Sports Betting Market Monitor – Released February 2023 As of the fourth quarter of 2022, the three largest sports betting markets in the U.S. by handle were New York, New Jersey and Illinois.
Biggest changeAs of the fourth quarter of 2023, the three largest sports betting markets in the U.S. by handle were New York, New Jersey and Illinois.
We believe our B2C model is flexible, permitting us to customize our operating structure based on applicable gaming regulations, market demands and, as applicable, our land-based partner’s operations. Through our B2B operations, we offer retail sports betting services to land-based businesses such as bricks-and-mortar casinos in exchange for a monthly commission.
We believe our B2C model is flexible, permitting us to customize our operating structure based on applicable gaming regulations, market demands and, as applicable, our partner’s operations. Through our B2B operations, we offer retail sports betting services to land-based businesses such as bricks-and-mortar casinos in exchange for a monthly commission.
On December 29, 2020, dMY completed the transactions contemplated by the business combination agreement dated as of July 27, 2020, as amended and amended and restated (the “Business Combination Agreement” and the transactions contemplated thereby, the “Business Combination”), and in connection therewith: (i) dMY acquired Rush Street Interactive, LP (“RSILP”) in an umbrella partnership–C corporation (“Up-C”) structure, in which substantially all of the Company’s assets are held by RSILP, and the Company’s only assets are its equity interests in RSILP; (ii) the holders of equity interests of RSILP (the “Sellers”) retained certain of their Class A common units of RSILP (the “RSILP Units”) and received an equal number of the Company’s Class V common stock, par value $0.0001 per share (the “Class V Voting Stock”); (iii) the Company issued and sold to subscribers in a private placement an aggregate of 16,043,002 shares of Class A common stock, $0.0001 par value per share (“Class A Common Stock”); and (iv) dMY changed its name to “Rush Street Interactive, Inc.” The Sellers have the right to exchange the RSILP Units retained by them (the “Retained RSILP Units”) for either one share of Class A Common Stock or, upon certain conditions, the cash equivalent of the market value of one share of Class A Common Stock.
On December 29, 2020, dMY completed the transactions contemplated by the business combination agreement dated as of July 27, 2020, as amended and amended and restated (the “Business Combination Agreement” and the transactions contemplated thereby, the “Business Combination”), and in connection therewith: (i) dMY acquired Rush Street Interactive, LP (“RSILP”) in an umbrella partnership–C corporation (“Up-C”) structure, in which substantially all of the Company’s assets are held by RSILP, and the Company’s only material assets are its equity interests in RSILP; (ii) the holders of equity interests of RSILP (the “Sellers”) retained certain of their Class A common units of RSILP (the “RSILP Units”) and received an equal number of the Company’s Class V common stock, par value $0.0001 per share (the “Class V Voting Stock”); (iii) the Company issued and sold to subscribers in a private placement an aggregate of 16,043,002 shares of Class A common stock, $0.0001 par value per share (“Class A Common Stock”); and (iv) dMY changed its name to “Rush Street Interactive, Inc.” The Sellers have the right to exchange the RSILP Units retained by them (the “Retained RSILP Units”) for either one share of Class A Common Stock or, upon certain conditions, the cash equivalent of the market value of one share of Class A Common Stock.
Among other things, gaming laws require gaming industry participants to: • ensure that unsuitable individuals and organizations have no role in gaming operations; • establish procedures designed to prevent cheating and fraudulent practices; 18 • establish and maintain anti-money laundering practices and procedures; • establish and maintain responsible accounting practices and procedures and systems for reliable record keeping; • maintain effective controls over their financial practices, including establishing minimum procedures for internal fiscal affairs and the safeguarding of assets and revenues; • file periodic reports with gaming regulators; • establish programs to promote responsible gaming; and • enforce minimum age and as applicable, location, requirements.
Among other things, gaming laws require gaming industry participants to: • ensure that unsuitable individuals and organizations have no role in gaming operations; • establish procedures designed to prevent cheating and fraudulent practices; • establish and maintain anti-money laundering practices and procedures; • establish and maintain responsible accounting practices and procedures and systems for reliable record keeping; • maintain effective controls over their financial practices, including establishing minimum procedures for internal fiscal affairs and the safeguarding of assets and revenues; • file periodic reports with gaming regulators; • establish programs to promote responsible gaming; and • enforce minimum age and as applicable, location requirements.
Furthermore, we may be subject to disciplinary action or our licenses may be in peril if, after we receive notice that a person is unsuitable to be a stockholder or to have any other relationship with us or any of our subsidiaries, we: (i) pay that person any dividend or interest upon our voting securities; (ii) allow that person to exercise, directly or indirectly, any voting right conferred through securities held by that person; (iii) pay remuneration in any form to that person for services rendered or otherwise; or (iv) fail to pursue all lawful efforts to require such unsuitable person to relinquish his or her voting securities.
Furthermore, we may be subject to disciplinary action or our licenses may be in peril if, after we receive notice that a person is unsuitable 19 to be a stockholder or to have any other relationship with us or any of our subsidiaries, we: (i) pay that person any dividend or interest upon our voting securities; (ii) allow that person to exercise, directly or indirectly, any voting right conferred through securities held by that person; (iii) pay remuneration in any form to that person for services rendered or otherwise; or (iv) fail to pursue all lawful efforts to require such unsuitable person to relinquish his or her voting securities.
When determining to grant a license to an applicant, gaming authorities generally consider: (i) the financial stability, good character, honesty, integrity and responsibility of the applicant (including verification of the applicant’s sources of funding); (ii) the quality and security of the applicant’s online real-money gaming platform, hardware and related software, including the platform’s ability to operate in compliance with local 19 regulation, as applicable; (iii) the applicant’s history; (iv) the applicant’s ability to operate its gaming business in a socially responsible manner; and (v) in certain circumstances, the effect on competition.
When determining to grant a license to an applicant, gaming authorities generally consider: (i) the financial stability, good character, honesty, integrity and responsibility of the applicant (including verification of the applicant’s sources of funding); (ii) the quality and security of the applicant’s online real-money gaming platform, hardware and related software, including the platform’s ability to operate in compliance with local regulation, as applicable; (iii) the applicant’s history; (iv) the applicant’s ability to operate its gaming business in a socially responsible manner; and (v) in certain circumstances, the effect on competition.
The industry has various operators and stakeholders in the private and public sectors, including traditional bricks-and-mortar casinos, state-run lottery operators, Native American tribes, legacy online gaming operators, non-traditional operators such as consumer goods or services brands that have entered or intend to enter the industry, racetracks/racinos/video lottery terminals, private equity or other investment funds, gaming content and data providers, gaming regulators, gaming technology companies, sports teams and leagues, and payment processors.
The industry has various operators and stakeholders in the private and public sectors, including traditional bricks-and-mortar casinos, state-run lotteries, Native American tribes, legacy online gaming operators, non-traditional operators such as consumer goods or services brands that have entered or intend to enter the industry, racetracks/racinos/video lottery terminals, private equity or other investment funds, gaming content and data providers, gaming regulators, gaming technology companies, sports teams and leagues, and payment processors.
We also operate retail sportsbooks in Connecticut, Illinois, Indiana, Maryland, Michigan (see “ Native American Gaming Regulation ”), New York, Pennsylvania and Virginia pursuant to applicable state and tribal licensing regimes. On May 14, 2018, the U.S. Supreme Court issued an opinion determining that PASPA was unconstitutional. PASPA prohibited a state from “authorizing by law” any form of sports betting.
We also operate retail sportsbooks in Illinois, Indiana, Maryland, Michigan (see “ Native American Gaming Regulation ”), New York, Pennsylvania and Virginia pursuant to applicable state and tribal licensing regimes. On May 14, 2018, the U.S. Supreme Court issued an opinion determining that PASPA was unconstitutional. PASPA prohibited a state from “authorizing by law” any form of sports betting.
In addition, we have currently secured potential market access to Missouri and if certain conditions are met, Texas, in each case subject to 5 certain legislative and/or regulatory developments or approvals, which have an aggregate population of approximately 36 million people. We have a proven ability to quickly enter markets as they are regulated.
In addition, we have currently secured potential market access to Missouri and if certain conditions are met, Texas, in each case subject to certain legislative and/or regulatory developments or approvals, which have an aggregate population of approximately 36 million people. We have a proven ability to quickly enter markets as they are regulated.
This intellectual property consists of, for example, software code, proprietary technology, trademarks, domain names, copyrights, patents, customer lists and databases and trade secrets that we use to develop and provide our offerings and related services, as well as online betting and gaming content (both proprietary and licensed) and proprietary data acquired from our customers’ use of our offerings and related services.
This intellectual property consists of, for example, software code, proprietary technology, trademarks, domain names, copyrights, patents, customer lists and databases and trade secrets that we use to develop and provide our offerings and 16 related services, as well as online betting and gaming content (both proprietary and licensed) and proprietary data acquired from our customers’ use of our offerings and related services.
Our Development Team Our development team is led by our Chief Information Officer, Einar Roosileht, and consists of a set of cross-functional product development teams comprised of talented individuals with expertise in system architecture, client and server-side product engineering, database architecture, product, engineering and project management, website and native app design and development, security and technical support.
Our Development Team Our development team is led by our Chief Information Officer, Einar Roosileht, and consists of a set of cross-functional product development teams comprised of talented individuals with expertise in system architecture, client and server-side product engineering, database architecture, product, engineering and project management, website and native 10 app design and development, security and technical support.
As an official partner to the Chicago Bears, we leveraged our relationship to create a combined in-stadium message to raise awareness of our partnership with the AGA and show our support for the Have a Game Plan responsible gaming tools. Available Information Our Internet address is www.RushStreetInteractive.com.
As an official partner to the Chicago Bears, we leveraged our relationship to create a combined in-stadium message to raise awareness of our partnership with the AGA and show our support for the Have a Game Plan responsible gaming tools. 22 Available Information Our Internet address is www.RushStreetInteractive.com.
Costs of revenue consist primarily of (i) revenue share and market access fees, (ii) platform and content fees, (iii) gaming taxes, (iv) payment processing fees and chargebacks and (v) salaries, bonuses, benefits and share-based compensation for dedicated personnel. These costs are primarily variable in nature and should typically correlate with the change in revenue.
Costs of revenue consist primarily of (i) revenue share and market access fees, (ii) platform and content fees, (iii) gaming taxes, (iv) payment processing fees and chargebacks and (v) salaries, bonuses, benefits and share- 9 based compensation for dedicated personnel. These costs are primarily variable in nature and should typically correlate with the change in revenue.
Despite this rapid growth, some of the most populous U.S. states such as California, Florida and Texas have not yet authorized online casino or online sports betting, and New York has not yet authorized online casino. Thus, we believe that the U.S. online gaming market remains a significant growth opportunity for us. U.S.
Despite this rapid growth, some of the most populous U.S. states such as California and Texas have not yet authorized online casino or online sports betting, and New York and Florida have not yet authorized online casino. Thus, we believe that the U.S. online gaming market remains a significant growth opportunity for us. U.S.
Since 2018, we have been operating online gaming in Colombia, which has a population of approximately 50 million, and since the second quarter of 2022, we have been operating in Mexico, which has a population of approximately 128 million. We believe this experience will enable us to expand further in Latin America and other countries when the opportunities arise.
Since 2018, we have been operating online gaming in Colombia, which has a population of approximately 50 million, and since the second quarter of 2022, we have been operating in Mexico, which has a population of approximately 128 million. We believe this experience will enable us to 15 expand further in Latin America and other countries when the opportunities arise.
Competitive Strengths As we continue to expand in existing and new jurisdictions, we believe we are well-positioned to maintain and build upon our accomplishments by virtue of our competitive strengths: Proprietary Online Gaming Platform. Owning a proprietary online gaming platform has allowed us to innovate quickly and introduce numerous unique, user-friendly features.
Competitive Strengths As we continue to expand in existing and new jurisdictions, we believe we are well-positioned to maintain and build upon our accomplishments by virtue of our competitive strengths: Proprietary Online Gaming Platform. Owning a proprietary online gaming platform has allowed us to innovate quickly and introduce unique, user-friendly features.
We incur payment processing costs on customer deposits and occasionally chargebacks (i.e., when a payment processor contractually disallows customer deposits in the normal course of business). Advertising and Promotions Costs. Advertising and promotion costs consist primarily of costs associated with marketing our offerings via different channels, promotional activities and related customer acquisition costs.
We incur payment processing costs on customer deposits and occasionally chargebacks (i.e., when a payment processor contractually disallows customer deposits in the normal course of business). Advertising and Promotions Costs. Advertising and promotions costs consist primarily of costs associated with marketing our offerings via different channels, promotional activities and related customer acquisition costs.
We may see opportunities to leverage those attractive economics to increase marketing spending in certain jurisdictions on a strategic basis and where we project acquiring incremental customers will generate gross margin that exceed our internal targets. Continue to invest in our offerings and our platform .
We may see opportunities to leverage those attractive economics to increase marketing spending in certain jurisdictions on a strategic basis and where we project acquiring incremental customers will generate gross margin that exceed our internal targets. 7 Continue to invest in our offerings and our platform .
We launched our first social gaming website in 2015 and began accepting real-money bets in the United States in 2016. Currently, we offer real-money online casino, online sports betting and/or retail sports betting in 15 U.S. states and the international markets as outlined in the table below.
We launched our first social gaming website in 2015 and began accepting real-money bets in the United States in 2016. Currently, we offer real-money online casino, online sports betting and/or retail sports betting in 15 U.S. states and the three international markets as outlined in the table below.
We strive to be the first online operator to launch in most new markets (or launch our online operations on the first day possible), and we have been successful in doing such in many markets such as Connecticut, Louisiana, Michigan, Maryland, New York, Ohio, Virginia and Ontario, Canada.
We strive to be the first online operator to launch in most new markets (or launch our online operations on the first day possible), and we have been successful in doing such in many markets such as Louisiana, Michigan, Maryland, New York, Ohio, Virginia and Ontario, Canada.
Gaming laws generally require us, and each of our direct and indirect subsidiaries engaged in gaming operations, certain of our directors, officers and employees, and in some cases, certain of our stockholders holding more than a specified percentage of our outstanding equity, or more of our outstanding equity, to obtain licenses from gaming authorities.
Gaming laws generally require us, and each of our direct and indirect subsidiaries engaged in gaming operations, certain of our directors, officers and employees, and in some cases, certain of our stockholders holding more than a specified percentage of our outstanding equity, to obtain licenses from gaming authorities.
These laws, rules and regulations generally concern the responsibility, financial stability, integrity, honesty and character of the owners, managers and persons with material financial interests in the gaming operations along with the integrity and security of the online casino and sports betting offerings.
These laws, rules and regulations generally concern the responsibility, financial stability, integrity, honesty and character of the owners, managers and persons with material financial interests in the gaming operations along with the integrity and 17 security of the online casino and sports betting offerings.
Gaming authorities may, subject to certain administrative procedural requirements: (i) deny an application, or limit, condition, revoke or suspend any license issued by them; (ii) impose fines, either on a mandatory basis or as a consensual settlement of a regulatory action; (iii) demand that named individuals or stockholders be disassociated from a gaming business; and (iv) in serious cases, liaise with local prosecutors to pursue legal action, which may result in civil or criminal penalties.
Gaming authorities may, subject to certain administrative procedural requirements: (i) deny an application, or limit, condition, revoke or suspend any license issued by them; (ii) impose fines, either on a mandatory basis or as a consensual settlement of a regulatory action; (iii) demand certain individuals or stockholders be disassociated from a gaming business; and (iv) in serious cases, liaise with local prosecutors to pursue legal action, which may result in civil or criminal penalties.
By owning our own online gaming platform, we can more easily improve and customize the user experience and incorporate key aspects of our operational services into our offerings: • Payments & Risk Management • Regulatory Online Reporting & Accounting / Online Gaming Compliance • Website Management / Games Management / Live Tech Ops / Security • Online Affiliate Management & Tracking • Retention / CRM / Business Intelligence & Analytics • Customer Service In addition, owning our online gaming platform enables us to prioritize speed to market for new offerings while providing an engaging and unique user experience.
By owning our own online gaming platform, we can more easily improve and customize the user experience and incorporate key aspects of our operational services into our offerings: • Payments & Risk Management • Regulatory Online Reporting & Accounting / Online Gaming Compliance • Website Management / Games Management / Live Tech Ops / Security • Online Affiliate Management & Tracking • Retention / CRM / Business Intelligence & Analytics • Customer Service Owning our online gaming platform enables us to prioritize speed to market for new offerings while providing an engaging and unique user experience.
The SEC maintains a website that contains reports, proxy statements and other information regarding issuers that file electronically with the SEC. These materials may be obtained electronically by accessing the SEC’s website at www.sec.gov. 23
The SEC maintains a website that contains reports, proxy statements and other information regarding issuers that file electronically with the SEC. These materials may be obtained electronically by accessing the SEC’s website at www.sec.gov.
See “ Risk Factors — Risk Related to 21 Government Regulation — Our business is subject to numerous U.S. and foreign laws, many of which are unsettled and still developing.
See “ Risk Factors — Risk Related to Government Regulation — Our business is subject to numerous U.S. and foreign laws, many of which are unsettled and still developing.
There was legal action as to whether the Wire Act applies beyond sports betting. A federal court of first instance has ruled that it does not and the U.S. Department of Justice (the “DOJ”) has not appealed. In Canada, all forms of gaming are generally prohibited by the Canadian federal criminal code.
There was legal action as to whether the Wire Act applies beyond sports betting. A federal court has ruled that it does not and the U.S. Department of Justice (the “DOJ”) has not appealed. In Canada, all forms of gaming are generally prohibited by the Canadian federal criminal code.
Similarly, if every U.S. state was to legalize online sports betting, based on state level projections from EKG, it is projected that the U.S. market would generate approximately $23 billion in revenue. Latin America Gaming Industry Latin America (including Mexico) is another area of focus for us.
Similarly, if every U.S. state was to legalize online sports betting, based on state level projections from EKG, it is projected that the U.S. market would generate approximately $29 billion in revenue. Latin America Gaming Industry Latin America (including Mexico) is another area of focus for us.
We have established a set of competencies that we believe position us at the forefront of the evolving online casino and sports betting industry. We will continue iterating on our core user experiences while reinforcing the data-driven, marketing and technological infrastructure that allows us to continue to scale our offerings.
We have developed a set of competencies that we believe position us at the forefront of the evolving online casino and sports betting industry. We will continue iterating on our core user experiences while reinforcing the data-driven marketing and technological infrastructure that allows us to continue to scale our offerings.
In most U.S. jurisdictions, the applicable gaming regulations require online gaming operators that offer real-money offerings to operate under the gaming license of, or partner with, a bricks-and-mortar casino or other type of local partner such as a professional sports team.
In most U.S. jurisdictions, applicable gaming regulations require online gaming operators that offer real-money offerings to operate under the gaming license of, or partner with, a bricks-and-mortar casino, lottery or other type of local partner such as a 4 professional sports team.
For example, the UK, Denmark, France, Spain, Italy, Ireland, Denmark, Poland, Sweden and Switzerland have legalized and regulated online casino and online sports betting. In addition, Mexico, and in recent years numerous U.S. states, Colombia and certain provinces in Argentina and Canada have legalized and/or regulated online gaming.
For example, the UK, Denmark, France, Spain, Italy, Ireland, Poland, Sweden and Switzerland have legalized and regulated online casino and online sports betting. In addition, Mexico, and in recent years numerous U.S. states, Peru, Brazil, Colombia and certain provinces in Argentina and Canada have legalized and/or regulated online gaming.
U.S. Online Gaming: Estimating the Total Addressable Industry Size If every U.S. state was to legalize online casino, based on state level projections from EKG, it is projected that the U.S. market would generate approximately $48 billion in revenue.
U.S. Online Gaming: Estimating the Total Addressable Industry Size If every U.S. state was to legalize online casino, based on state level projections from EKG, it is projected that the U.S. market would generate approximately $58 billion in revenue.
We have a license agreement, as may be amended from time to time, with Rivers IP Holdings, LLC (“Rivers IP”), an affiliated entity, pursuant to which Rivers IP granted to us a fully paid-up, exclusive license for the use of the trademarks “Rivers,” and “BetRivers,” “Bet Rivers” used alone or in combination with other words, and domain names incorporating any of the foregoing trademarks, in each case in connection with real-money gaming and fantasy sports (subject to obtaining certain gaming approvals) and play-for-fun or free-to-play offerings (anywhere in the world).
We have a license agreement, as may be amended from time to time, with Rivers IP Holdings, LLC, an affiliated entity, pursuant to which it granted to us a fully paid-up, exclusive license for the use of the trademarks “Rivers,” “BetRivers,” and “Bet Rivers” used alone or in combination with other words, and domain names incorporating any of these trademarks, in each case in connection with real-money gaming and fantasy sports (subject to obtaining certain gaming approvals) and play-for-fun or free-to-play offerings (anywhere in the world).
General administration and other expenses consist primarily of administrative personnel costs, including salaries, bonuses and benefits, share-based compensation expense for dedicated personnel, professional fees related to legal, compliance, audit and consulting services, rent and insurance costs. Depreciation and Amortization.
General and administrative expenses consist primarily of administrative personnel costs, including salaries, bonuses and benefits, share-based compensation expense for dedicated personnel, professional fees related to legal, compliance, audit and consulting services, rent and insurance costs. Depreciation and Amortization.
Our B2C operations contributed more than 98% of our total revenue for the years ended December 31, 2022 and 2021, and we expect that it will continue to be our primary operating model into the future.
Our B2C operations contributed more than 98% of our total revenue for the years ended December 31, 2023 and 2022, and we expect that it will continue to be our primary operating model into the future.
In 2022, we partnered with the AGA by participating in its “Have a Game Plan®” public service campaign, which brought together organizations across the gaming and sports industries to advance responsible sports wagering.
In 2023, we partnered with the AGA by participating in its “Have a Game Plan®” public service campaign, which brought together organizations across the gaming and sports industries to advance responsible sports wagering.
In addition, many Native American tribes have established tribal gaming commissions to regulate gaming-related activity on tribal lands. Through our subsidiaries, we provide play-for-fun sports betting and online casino services on behalf of certain Native American tribes that have negotiated compacts with their respective states and have received federal approval.
Many Native American tribes have also established tribal gaming commissions to regulate gaming-related activity on tribal lands. Through our subsidiaries, we provide play-for-fun sports betting and online casino services on behalf of certain Native American tribes that have negotiated compacts with their respective states and have received federal approval.
Often in advance of markets legalizing online gaming, we build relationships with local bricks-and-mortar casino operators and other potential land-based partners who are looking for online gaming and sports betting partners.
Often in advance of markets legalizing online gaming, we build relationships with local bricks-and-mortar casino operators and other potential partners who are looking for online gaming and sports betting partners.
Regulations in jurisdictions in which we operate, such as the Virginia Consumer Data Protection Act, the Colorado Privacy Act, the Connecticut Data Privacy Act, the Freedom of Information and Protection of Privacy Act (Ontario), the Mexican Federal Law on the Protection of Personal Data held by Private Parties, and Colombian Statutory Laws 1266 of 2008 and 1581 of 2012, as amended, and regulations in other jurisdictions where we do not operate but that could otherwise impact our operations, such as the California Consumer Privacy Act (the “CCPA”) and the California Privacy Rights Act, may be new or are relatively untested laws (some of which may not yet be effective) that could affect our business, and the potential impact is unknown.
Regulations in jurisdictions in which we operate, such as the Virginia Consumer Data Protection Act, the Colorado Privacy Act, the Delaware Personal Data Privacy Act, the Freedom of Information and Protection of Privacy Act (Ontario), the Mexican Federal Law on the Protection of Personal Data held by Private Parties and Colombian Statutory Laws 1266 of 2008 and 1581 of 2012, as amended, and regulations in other jurisdictions where we do not operate but that could otherwise impact our operations, such as the California Consumer Privacy Act (the “CCPA”) (as amended by the California Privacy Rights Act together with the CCPA Regulations), may be new or are relatively untested laws (some of which may not yet be effective) that could affect our business, and the potential impact is unknown.
Customers may also “bank” awarded bonuses in our proprietary “bonus bank”, which they can draw from whenever they wish under our industry-leading 1x wager playthrough requirement, meaning that they need only place one bet with the bonus dollars before cashing out any winnings.
Customers may also “bank” certain awarded bonuses in our proprietary “bonus bank”, which they can draw from whenever they wish under our 1x wager playthrough requirement, meaning that they need only place one bet with the bonus dollars before cashing out any winnings.
We collect, use, store, receive, transmit, share or disclose, and otherwise process certain personal information of our customers, employees or job applicants, and third-party vendors and, thus, we are also subject to federal, state and foreign laws related to the privacy and protection of such data.
We collect, use, store, receive, transmit, share or disclose, and otherwise process certain personal information of our customers, personnel or job applicants, and third-party vendors and, thus, we are subject to federal, state and foreign laws related to the privacy and protection of such data.
We also collect, use, store, receive, transmit, share or disclose, and otherwise process certain personal information of job applicants and employees in Estonia or the European Union (the “EU”), thus we are also subject to the European Union’s General Data Protection Regulation (the “GDPR”) for such data.
We also collect, use, store, receive, transmit, share or disclose, and otherwise process certain 21 personal information of job applicants and personnel in Estonia or the European Union (the “EU”), thus we are also subject to the European Union’s General Data Protection Regulation (the “GDPR”) for such data.
Jurisdiction Online Casino Online Sports Betting Retail Sports Betting Domestic: Arizona ü Colorado ü Connecticut ü ü Illinois ü ü Indiana ü ü Iowa ü Louisiana ü Maryland ü ü Michigan ü ü ü New Jersey ü ü New York ü ü Ohio ü Pennsylvania ü ü ü Virginia ü ü West Virginia ü ü International: Colombia ü ü Ontario (Canada) ü ü Mexico ü ü Our real-money online casino and online sports betting offerings are currently provided under our BetRivers and PlaySugarHouse brands in the United States and Canada and under our RushBet brand in Latin America (which includes Mexico).
Jurisdiction Online Casino Online Sports Betting Retail Sports Betting Domestic: Arizona ü Colorado ü Delaware ü ü Illinois ü ü Indiana ü ü Iowa ü Louisiana ü Maryland ü ü Michigan ü ü ü New Jersey ü ü New York ü ü Ohio ü Pennsylvania ü ü ü Virginia ü ü West Virginia ü ü International: Colombia ü ü Ontario (Canada) ü ü Mexico ü ü Our real-money online casino and online sports betting offerings are generally provided under our BetRivers and PlaySugarHouse brands in the United States and Canada and under our RushBet brand in Latin America (which includes Mexico).
Our marketing spend is based on a return-on-investment model that considers a variety of factors, including the product offerings in the jurisdiction, the performance of different marketing channels, predicted lifetime value, marginal costs and expenses and behavior of customers across various product offerings.
Our marketing spend is based on a return-on-investment model that considers a variety of factors, including the product offerings in the jurisdiction, local advertising rules, the performance of different marketing channels, predicted lifetime value, marginal costs and expenses and behavior of customers across various product offerings.
Furthermore, land-based casino revenue in both New Jersey and Pennsylvania grew during from 2021 to 2022 according to data from the New Jersey Division of Gaming Enforcement and the Pennsylvania Gaming Control Board, showing that land-based casino revenue can grow at the same time that online casino revenue grows.
Furthermore, land-based casino revenue in both New Jersey and Pennsylvania grew from 2022 to 2023 according to data from the New Jersey Division of Gaming Enforcement and the Pennsylvania Gaming Control Board, showing that land-based casino revenue can grow at the same time that online casino revenue grows.
We generally pay much lower fees on revenue generated through our in-house developed casino games such as our multi-bet blackjack (with side bets: 21+3, Lucky Ladies, Lucky Lucky) and single-deck blackjack, which primarily relate to hosting/remote gaming server fees and certain intellectual property license fees.
We generally pay much lower fees on revenue generated through our proprietary casino games such as our multi-bet blackjack (with side bets: 21+3, Lucky Ladies, Lucky Lucky) and single-deck blackjack, which primarily relate to hosting/remote gaming server fees and certain intellectual property license fees.
These efforts are primarily concentrated within the specific jurisdictions where we operate or intend to operate. 9 We believe there is significant benefit to having a flexible approach to advertising spending as we can quickly redirect our advertising spending based on dynamic testing of our advertising methods and channels. General Administration and Other.
These efforts are primarily concentrated within the specific jurisdictions where we operate or intend to operate. We believe there is significant benefit to having a flexible approach to advertising spending as we can quickly redirect our advertising spending based on dynamic testing of our advertising methods and channels. General and Administrative.
Continued growth is expected as more states regulate and markets mature, with EKG projecting revenue to grow by more than $14 billion from 2022 to 2027, or a CAGR of 17%. 11 We believe the following trends are potential drivers of growth in this industry: • New U.S. and international jurisdictions authorizing and/or privatizing their online casino and online sports betting industries; • Increasing consumer adoption of digital and online activities, including casino and sports betting.
Continued growth is expected as more states regulate and markets mature, with EKG projecting revenue to grow by more than $16 billion from 2023 to 2028, or a CAGR of 14%. 11 We believe the following trends are potential drivers of growth in this industry: • New U.S. and international jurisdictions authorizing and/or privatizing their online casino and online sports betting industries; • Increasing consumer adoption of digital and online activities, including casino and sports betting.
While the overall industry is still nascent, growth to date has been strong. Online sports betting revenue grew at a 141% CAGR from 2019 to 2022 according to EKG, driven mainly by an increasing number of states regulating and the immaturity of the market.
While the overall industry is still nascent, growth to date has been strong. Online sports betting revenue grew at a 115% CAGR from 2019 to 2023 according to EKG, driven mainly by an increasing number of states regulating and the immaturity of the market.
Depreciation and amortization expense consists of depreciation on our property and equipment and amortization of intangible assets (including market access licenses, gaming jurisdictional licenses, internally developed software, trademark and developed technology) and finance lease right-of-use assets over their useful lives. See Notes 2, 5 and 6 to our consolidated financial statements, included elsewhere in this Annual Report.
Depreciation and amortization expense consists of depreciation on our property and equipment and amortization of intangible assets (including market access licenses, gaming jurisdictional licenses, internally developed software, trademarks, developed technology and content) and finance lease right-of-use assets over their useful lives. See Notes 2, 4 and 5 to our consolidated financial statements, included elsewhere in this Annual Report.
Recognizing our people’s accomplishments, both professionally and personally, is also crucial to our corporate culture. Furthermore, we believe that developing a diverse, inclusive and safe workplace for our people will enable our people to be more productive and ultimately will result in our long-term success.
Recognizing our people’s accomplishments, both professionally and personally, is also crucial to our corporate culture. Furthermore, we believe that developing a diverse, inclusive and safe workplace for workforce will enable our people to be more productive and ultimately will contribute to our long-term success.
Latin America We operate our online casino offering in Colombia under the RushBet brand via a web-based solution, pursuant to a concession contract with the Colombian gaming regulatory agency, Coljuegos Empresa Industrial Comercial Del Estado Administradora Del Monopolio Rentistico De Los Juegos De Suerte y Azar Linea Gratuita (the “Coljeugos”).
Latin America We operate our online casino offering in Colombia under the RushBet brand, pursuant to a concession contract with the Colombian gaming regulatory agency, Coljuegos Empresa Industrial Comercial Del Estado Administradora Del Monopolio Rentistico De Los Juegos De Suerte y Azar Linea Gratuita.
EKG projects continued growth as more states regulate and markets mature, with forecasts for online sports betting revenue to exceed $14 billion by 2027. 14 U.S. Sports Betting Policy Landscape Source: EKG United States Sports Betting Policy Monitor – Released January 2023 We believe the U.S. sports betting market still has significant opportunity for growth.
EKG projects continued growth as more states regulate and markets mature, with forecasts for online sports betting revenue to exceed $21 billion by 2028. 14 U.S. Sports Betting Policy Landscape Source: EKG United States Sports Betting Policy Monitor – Released January 2024 We believe the U.S. sports betting market still has significant opportunity for growth.
We believe that more states either have and will consider authorizing online casino for the following reasons, among others: • We believe that COVID-19 and/or an economic slowdown has resulted in increased expenses and/or reduced tax revenue in many states, increasing the need for new sources of tax revenue. • We believe that COVID-19 caused increased general consumer adoption of digital activity, including online gaming. 12 • Online casino generated more tax revenue compared to online sports betting in New Jersey and Pennsylvania in 2022, meaning authorizing online sports betting alone may not optimize tax revenue. • Land-based casino revenue grew as online casino revenue grew in New Jersey from 2021 to 2022, demonstrating that land-based casino revenue can grow with online casino revenue. • We believe that the land-based casino industry, an important stakeholder in many states, generally has shown a wider acceptance of online casino.
We believe that more states either have and will consider authorizing online casino for the following reasons, among others: • We believe that macroeconomic factors such as inflation and/or an economic slowdown has resulted in increased expenses and/or reduced tax revenue in many states, increasing the need for new sources of tax revenue. • We believe that COVID-19 caused increased general consumer adoption of digital activity, including online gaming. 12 • Online casino generated more tax revenue compared to online sports betting in Connecticut, Michigan, New Jersey, Pennsylvania and West Virginia in 2023, meaning authorizing online sports betting alone may not optimize tax revenue. • Land-based casino revenue grew as online casino revenue grew in New Jersey from 2022 to 2023, demonstrating that land-based casino revenue can grow with online casino revenue. • We believe that the land-based casino industry, an important stakeholder in many states, generally has shown a wider acceptance of online casino.
Events that may trigger revocation of a gaming license or another form of sanction vary by jurisdiction.
Events that may trigger revocation of a gaming license or other form of sanction vary by jurisdiction.
Product-Specific Licensing Online Casino North America We currently offer online casino in Michigan, New Jersey, Ontario (Canada), Pennsylvania and West Virginia, pursuant to licenses granted by the Michigan Gaming Control Board, New Jersey Division of Gaming Enforcement, the 20 Alcohol a Gaming Commission of Ontario (the “AGCO”), the Pennsylvania Gaming Control Board and the West Virginia Lottery.
Product-Specific Licensing Online Casino North America We currently offer online casino in Delaware, Michigan, New Jersey, Ontario (Canada), Pennsylvania and West Virginia, pursuant to licenses granted by the Delaware State Lottery Office, Michigan Gaming Control Board, New Jersey Division of Gaming Enforcement, the Alcohol a Gaming Commission of Ontario (the “AGCO”), the Pennsylvania Gaming Control Board and the West Virginia Lottery, respectively.
Latin America In Colombia, we operate our online sports betting offering under the RushBet brand via a web-based solution. We also operate 25 retail shops or sports bar locations where customers can use provided terminals to place bets and make deposits and withdrawals. We operate pursuant to a concession contract with the Colombian gaming regulatory agency, Coljuegos.
Latin America In Colombia, we operate our online sports betting offering under the RushBet brand. We also operate 21 retail shops or sports bar locations where customers can use provided terminals to place bets and make deposits and withdrawals. We operate pursuant to a concession contract with the Colombian gaming regulatory agency, Coljuegos.
In recent years, online gaming has seen outsized growth and increased penetration. Based on data from EKG, online sports and casino revenue grew at a 131% compound annual growth rate (“CAGR”) from 2019 to 2022.
In recent years, online gaming has seen outsized growth and increased penetration. Based on data from EKG, online sports and casino revenue grew at a 103% compound annual growth rate (“CAGR”) from 2019 to 2023.
Distribution We distribute our online offerings through various channels, including websites (traditional and mobile), direct application downloads and global direct-to-consumer digital platforms such as the Apple App Store and the Google Play store. We distribute our retail offerings primarily through self-service betting terminals and stand-alone computer terminals.
Distribution We distribute our online offerings through various channels, including websites (traditional and mobile), direct application downloads and global direct-to-consumer digital platforms such as the Apple App Store and the Google Play store. We distribute our retail offerings primarily through self-service and over-the-counter betting terminals.
We own the copyrights in the software code we author. From time to time, we may seek patent protection covering inventions we conceive and pursue the registration of our domain names, trademarks and service marks in the United States and in certain foreign jurisdictions.
We own the copyrights in the software code we author. In the past we have filed patent applications, and from time to time, we may seek patent protection covering inventions we conceive, and we generally pursue the registration of our domain names, trademarks and service marks in the United States and in certain foreign jurisdictions.
For instance, in the last 24 months, we have been “first to market” or among the “first to market” where multiple operators were granted approval to launch at the same time, in Connecticut, Louisiana, Michigan, Maryland, New York, Ohio, Virginia and Ontario, Canada for online sports betting and/or casino, as applicable. Flexible Business Model.
For instance, in the last 24 months, we have been “first to market” or among the “first to market” where multiple operators were granted approval to launch at the same time, in Maryland, Ohio and Ontario, Canada for online sports betting and/or casino, as applicable. Flexible Business Model.
These projections imply a CAGR from 2022 to 2027 of 16%. In the latter half of 2013, New Jersey became the first U.S. state to legally permit online casino. That market got off to a slow start; however, online casino revenue in New Jersey has risen steadily over the last several years.
These projections imply a CAGR from 2023 to 2028 of 13%. In the latter half of 2013, New Jersey became the first U.S. state to legally permit online casino. That market got off to a slow start; however, online casino revenue in New Jersey has risen steadily over the last several years.
As demonstrated in the image below, in addition to developing a robust online gaming platform, we have developed and are continuing to improve proprietary modules for our online casino and sports betting product verticals to offer a unique and differentiated experience to our customers.
In addition to developing a robust online gaming platform, we have developed and are continuing to improve proprietary modules for our online casino and sports betting product verticals to offer a unique and differentiated experience to our customers.
We provide, among other things, on-the-job training and access to professional and technical coaches to support the development, advancement and engagement of our employees. Our corporate culture focuses heavily on valuing employees and enabling them to grow, succeed and take on roles and projects that utilize their strengths.
We look to empower our people and encourage creativity, collaboration and entrepreneurship. We provide, among other things, on-the-job training and access to professional and technical coaches to support the development, advancement and engagement of our employees. Our corporate culture focuses heavily on valuing employees and enabling them to grow, succeed and take on roles and projects that utilize their strengths.
We also believe that our brands, offerings and marketing strategies appeal to both female and male customers, as evidenced by an approximately 53-47 female/male split in our active North American online casino-only customers during calendar year 2022.
We also believe that our brands, offerings and marketing strategies appeal to both female and male customers, as evidenced by an approximately 54-46 female/male split in our active North American online casino-only customers during calendar year 2023.
From 2019 to 2022, online casino revenue grew at a 119% CAGR based on data from EKG, largely driven by an increasing number of U.S. states regulating and immaturity of the market. EKG expects continued growth in the U.S. online casino market as more states regulate and markets mature, with projected revenue to exceed $12 billion by 2027.
From 2019 to 2023, online casino revenue grew at a 90% CAGR based on data from EKG, largely driven by an increasing number of U.S. states regulating and immaturity of the market. EKG expects continued growth in the U.S. online casino market as more states regulate and markets mature, with projected revenue to approach $12 billion by 2028.
We currently operate online casino and/or online sports betting in 18 jurisdictions, including 15 states (Arizona, Colorado, Connecticut, Illinois, Indiana, Iowa, Louisiana, Maryland, Michigan, New Jersey, New York, Ohio, Pennsylvania, Virginia and West Virginia) and three international markets (Colombia, Ontario, Canada and Mexico) with an aggregate population of approximately 316 million people.
Market Access and Speed to Market. We currently operate online casino and/or online sports betting in 18 jurisdictions, including 15 states (Arizona, Colorado, Delaware, Illinois, Indiana, Iowa, Louisiana, Maryland, Michigan, New Jersey, New York, Ohio, Pennsylvania, Virginia and West Virginia) and three international markets (Colombia, 5 Ontario, Canada and Mexico) with an aggregate population of approximately 315 million people.
On a targeted basis, we will seek out acquisition targets that enable us to accelerate our technology plans, obtain exclusive content, expand our customer reach or add efficiencies that potentially bring third-party costs in-house. Human Capital Resources We strongly believe that our people are key to our success.
On a targeted basis, we will seek out strategic transactions such as acquisitions and partnerships that enable us to accelerate our technology plans, obtain exclusive content, expand our customer reach or add efficiencies that potentially bring third-party costs in-house. Human Capital Resources We strongly believe that our people are key to our success.
A description of the material terms of the Business Combination and ancillary agreements entered into in connection therewith is set forth in the Current Report on Form 8-K filed with the SEC on January 5, 2021 and the Registration Statement on Form S-1, Registration No. 333-252810, filed with the SEC on February 5, 2021, and as amended from time to time, which are incorporated herein by reference.
A description of the material terms of the Business Combination and ancillary agreements entered into in connection therewith is set forth in the Current Report on Form 8-K filed with the SEC on January 5, 2021, primarily in the Introductory Note thereto and Item 1.01 therein, and the Registration Statement on Form S-1, Registration No. 333-252810, filed with the SEC on February 5, 2021, and as amended from time to time, primarily in the section titled “Business Combination”, which are incorporated herein by reference.
In states that permit online and retail sports betting, online sports betting handle is generally higher than retail handle; however, some states have legalized retail sports betting only (e.g., New Mexico and Arkansas) while other states have legalized restricted forms of online sports betting (e.g., in-person registration required in Nevada and for a period of time in Iowa, Illinois and Rhode Island).
In states that permit online and retail sports betting, online sports betting handle is generally higher than retail handle; however, some states have legalized retail sports betting only (e.g., Mississippi, Montana, Nebraska, New Mexico, North Dakota, South Dakota, Washington and Wisconsin) while other states have legalized restricted forms of online sports betting (e.g., in-person registration required in Nevada and for a period of time in Iowa, Illinois and Rhode Island).
We believe there is great potential for revenue growth as new markets open in the United States. Per EKG, online casino revenue in the U.S. grew by 38% from $3.9 billion to $5.31 billion.
We believe there is great potential for revenue growth as new markets open in the United States. Per EKG, online casino revenue in the U.S. grew by 23% from $5.3 billion to $6.5 billion from 2022 to 2023.
Supreme Court’s decision, as of the date hereof, 35 states and the District of Columbia have authorized sports betting. Of those 36 jurisdictions, 26 states have authorized statewide online sports betting while 10 remain authorized for retail-only at casinos or retail locations. According to EKG, the United States generated approximately $6.9 billion in online sports betting revenue in 2022.
Supreme Court’s decision, as of the date hereof, 39 states and the District of Columbia have authorized sports betting. Of those 40 jurisdictions, 31 states have authorized statewide online sports betting while 9 remain authorized for retail-only at casinos or retail locations. According to EKG, the United States generated approximately $10.4 billion in online sports betting revenue in 2023.
Only approximately 47% of the United States currently has access (or is expected to have access) to online sports betting, per EKG. This fact is significant when one considers that according to the New Jersey Division of Gaming Enforcement, more than 94% of the sports betting revenue in 2022 came via online betting.
Only approximately 59% of the United States currently has access to online sports betting, per EKG. This fact is significant when one considers that according to the New Jersey Division of Gaming Enforcement, more than 95% of the sports betting revenue in 2023 came via online betting.
As demonstrated in the chart below, the average lifetime value of our North American customer cohorts since January 2017 generally trends higher as the cohorts mature, with our oldest player cohorts having an average lifetime value of over $6,000.
As demonstrated in the chart below, the average lifetime value of our North American customer cohorts since inception (late 2016) generally trends higher as the cohorts mature, with our oldest player cohorts having an average lifetime value of approximately $6,000.
To attract, engage, retain and/or reactivate customers, we offer a loyalty program that rewards customers in exciting, fair and transparent ways. We recognize and reward customer loyalty by, among other things, ensuring that there are exciting benefits at each of the customer loyalty levels we currently offer.
To attract, engage, retain and/or reactivate customers, we offer a loyalty program that rewards customers in exciting, fair and transparent ways. We recognize and reward customer loyalty by, among other things, ensuring that there are exciting benefits at every customer loyalty level we offer. Each of our online gaming customers is a member of our customer loyalty program.
Further internet penetration in these Latin American countries would allow us to grow our revenues from online gaming there to the extent we make our offerings available in those countries. The highest populated country in Latin America, Brazil, legalized sports betting in December 2018.
Further internet penetration in these Latin American countries would allow us to grow our revenues from online gaming there to the extent we make our offerings available in those countries. The highest populated country in Latin America, Brazil, recently approved a bill to legalize sports betting and online casino in December 2023.
All these countries are in the “high income” income group according to the World Bank. We expect this trend to continue into the future, most notably in the United States. U.S. Gaming Industry We see tremendous opportunity in the U.S. online gaming market. As U.S. jurisdictions become regulated and mature, online gaming penetration may approach that of other developed nations.
We expect this trend to continue into the future, most notably in the United States. U.S. Gaming Industry We see tremendous opportunity in the U.S. online gaming market. As U.S. jurisdictions become regulated and mature, online gaming penetration may approach that of other developed nations.
While we believe that we comply in all material respects with applicable sports betting and online casino laws, licenses and regulatory requirements, we cannot provide assurance that our activities or the activities of our customers, partners or suppliers will not become the subject of any regulatory or law enforcement investigation, proceeding or other governmental action or that any such proceeding or action, as the case may be, would not have a material adverse impact on us or our business, financial condition or results of operations.
While we believe that we comply in all material respects with applicable sports betting and online casino laws, licenses and regulatory requirements, we cannot provide assurance that our activities or the activities of our customers, partners or suppliers will not become the subject of any regulatory or law enforcement investigation, proceeding or other governmental action or that any such proceeding or action, as the case may be, would not have a material adverse impact on us or our business, financial condition or results of operations. 18 Licensing and Suitability Determinations To operate in certain jurisdictions we must first obtain either a temporary or permanent license or determination of suitability from the responsible authorities.
In furtherance of accessing new jurisdictions, we have been and plan to continue to grow our operational, technology and corporate services teams to broaden product development capabilities, innovation and efficiency, reduce reliance on third parties and scale digital user capabilities. Acquisitions .
We have been and plan to continue to grow our operational, technology and corporate services teams to broaden product development capabilities, innovation and efficiency, reduce reliance on third parties and scale digital user capabilities. Strategic Transactions .
Each of our online gaming customers is a member of our customer loyalty program. We grant bonus store points to our customers based upon completed bets. Once earned, these points can be redeemed to unlock bonus incentives and to play our proprietary bonus games, providing further opportunities to win prizes and bonus dollars.
We grant bonus store points to our customers based upon completed bets. Once earned, these points can be redeemed to unlock bonus incentives and to play our proprietary bonus games, providing further opportunities to win prizes and bonus dollars.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFines of up to 2% of annual worldwide revenues can be levied for other specified violations; and • Various state privacy laws, such as the California Consumer Privacy Act of 2018 (effective January 2020), which was amended by the California Privacy Rights Act (effective January 2023); the Virginia Consumer Data Protection Act (effective January 2023); the Colorado Privacy Act (to be effective July 2023); the Utah Consumer Privacy Act (to be effective December 2023); and Connecticut’s “An Act Concerning Personal Data Privacy and Online Monitoring” (to be effective July 2023); all of which give new data privacy rights to their respective residents (including, in California, a private right of action in the event of a data breach resulting from our failure to implement and maintain reasonable security procedures and practices) and impose significant obligations on controllers and processors of consumer data. 36 Further, we are subject to evolving laws and regulations that dictate whether, how and under what circumstances we can transfer, process and/or receive personal data.
Biggest changeFines of up to 2% of annual worldwide revenues can be levied for other specified violations; and • Various state privacy laws, such as the California Consumer Privacy Act of 2018 (effective January 2020), which was amended by the California Privacy Rights Act (effective January 2023); the Virginia Consumer Data Protection Act (effective January 2023); the Colorado Privacy Act (effective July 2023); the Utah Consumer Privacy Act (effective December 2023); Connecticut’s “An Act Concerning Personal Data Privacy and Online Monitoring” (effective July 2023); the Delaware Personal Data Privacy Act (to be effective January 2025); the New Jersey Data Privacy Act (to be effective January 2025); and the New Hampshire Privacy Act (to be effective January 2025); all of which give new data privacy rights to their respective residents (including, in California, a private right of action in the event of a data breach resulting from our failure to implement and maintain reasonable security procedures and practices) and impose significant obligations on controllers and processors of consumer data.
Summary of the Material Risks Associated with Our Business These risks include, but are not limited to, the following: • Competition in the retail and online sports betting and online gaming industry is intense and, as a result, we may fail to attract and retain customers, which may negatively impact our operations and growth prospects. • Our projections, including for revenues, market share, expenses and profitability, are subject to significant risks, assumptions, estimates and uncertainties and may therefore differ materially from our expectations. • Our operating results may vary, which may make future results difficult to predict with certainty. • Recruitment and retention of our employees, including certain key employees, is vital to growing our business and meeting our business plans.
Summary of the Material Risks Associated with Our Business These risks include, but are not limited to, the following: • Competition in the online and retail sports betting and online gaming industry is intense and, as a result, we may fail to attract and retain customers, which may negatively impact our operations and growth prospects. • Our projections, including for revenues, market share, expenses and profitability, are subject to significant risks, assumptions, estimates and uncertainties and may therefore differ materially from our expectations. • Our operating results may vary, which may make future results difficult to predict with certainty. • Recruitment and retention of our employees, including certain key employees, is vital to growing our business and meeting our business plans.
Losing any of our executives or other key employees could harm our business. • Clear errors in the posting of sports betting odds or event information have occurred occasionally, resulting in large liabilities. To date, general industry practice has been to void bets associated with such clear errors or to correct the odds.
Losing any of our executives or other key employees could harm our business. • Clear errors in posting sports betting odds or event information have occurred occasionally, resulting in large liabilities. To date, general industry practice has been to void bets associated with such clear errors or to correct the odds.
To retain employees, we also may need to increase our employee compensation levels in response to competition. We use equity awards to attract key personnel. If the value of our Class A Common Stock declines significantly and remains depressed, that may inhibit our efforts to recruit and retain key personnel.
To retain employees, we also may need to increase our employee compensation levels in response to competition. We use equity awards to attract and retain key personnel. If the value of our Class A Common Stock declines significantly and remains depressed, that may inhibit our efforts to recruit and retain key personnel.
When such errors occur, it is currently commonly accepted in nearly all jurisdictions for operators to void bets associated with such clear errors. In mature jurisdictions, bets based upon clear error can be voided without prior regulatory approval. However, there can be no guarantee that this voiding of bets practice will continue.
When such errors occur, it is currently commonly accepted in nearly all jurisdictions for operators to void bets associated with such clear errors. In mature jurisdictions, bets based upon clear error can be voided without prior regulatory approval. However, there can be no guarantee that this practice of voiding bets practice will continue.
We cannot assure you that absolute security will be provided by the measures we take to: detect, prevent, stop or respond to cyber-attacks and protect our systems, data and customer information; prevent outages, data or information loss; and prevent or detect security breaches or fraud.
We cannot assure you that absolute security will be provided by the measures we take to: detect, prevent, stop or respond to cyber attacks and protect our systems, data and customer information; prevent outages, or data or information loss; and prevent or detect security breaches or fraud.
Our business also may be subject to interruptions, delays or failures resulting from adverse weather conditions, other natural disasters, power loss, terrorism, cyber-attacks, public health emergencies or other catastrophic events, any of which could have a material adverse impact on our business and operations.
Our business also may be subject to interruptions, delays or failures resulting from weather conditions, natural disasters, power loss, terrorism, cyber attacks, public health emergencies or other catastrophic events, any of which could have a material adverse impact on our business and operations.
The collection and use of personal data is governed by U.S. and foreign privacy laws and regulations, which continue to evolve and may occasionally be inconsistent (or conflict) across jurisdictions. Various U.S. federal, state and foreign legislative or regulatory bodies may enact new or additional laws and regulations concerning privacy, data retention, data transfer and data protection.
The collection and use of personal data is governed by U.S. and foreign privacy laws and regulations, which continue to evolve and may occasionally be inconsistent (or conflict) across jurisdictions. Various U.S. federal, state and foreign legislative or regulatory bodies may enact new or additional laws and regulations concerning privacy and data retention, transfer and protection.
As part of our technology transformation strategy, we are continuously trying to transition and migrate our data systems from traditional data centers to cloud-based platforms and technologies optimized for cloud usage. This initiative places significant strain on our management, personnel, operations, systems, technical performance and financial resources and internal financial control and reporting function.
As part of our technology transformation strategy, we are continuously trying to transition and migrate our data systems from traditional data centers to cloud-based platforms and technologies optimized for cloud usage. This initiative places significant strain on our management, personnel, operations, systems, technical performance, financial resources and internal financial control and reporting function.
Such transactions may expose us to operational challenges and risks, including: • profitably managing acquired businesses, investments or partnerships or, if applicable, successfully integrating their operations, personnel, financial reporting, accounting and internal controls, technologies and products into our business; 48 • increased indebtedness and integration expenses, including significant administrative, operational, technological, economic, geographic or cultural challenges in managing and integrating the expanded or combined operations; • entering into jurisdictions or acquiring products or technologies with which we have limited or no prior experience, and potential increased competition with new or existing competitors as a result of such transactions; • diverting management’s attention and the over-extending our operating infrastructure and management systems, information technology systems, and internal controls, which may be inadequate to support growth; • funding our capital needs and any cash flow shortages that may occur if anticipated revenue is not realized or is delayed, whether by general economic or market conditions, or unforeseen internal difficulties; • obtaining and/or maintaining relevant licenses, permits or approvals from applicable regulators; and • retaining or hiring qualified personnel required for expanded operations.
Such transactions may expose us to operational challenges and risks, including: • profitably managing acquired businesses, investments or partnerships or, if applicable, successfully integrating their operations, personnel, financial reporting, accounting and internal controls, technologies and products into our business; • increased indebtedness and integration expenses, including significant administrative, operational, technological, economic, geographic or cultural challenges in managing and integrating the expanded or combined operations; • entering into jurisdictions or acquiring products or technologies with which we have limited or no prior experience, and potential increased competition with new or existing competitors as a result of such transactions; • diverting management’s attention and the over-extending our operating infrastructure and management systems, information technology systems, and internal controls, which may be inadequate to support growth; • funding our capital needs and any cash flow shortages that may occur if anticipated revenue is not realized or is delayed, whether by general economic or market conditions, or unforeseen internal difficulties; • obtaining and/or maintaining relevant licenses, permits or approvals from applicable regulators; and • retaining or hiring qualified personnel required for expanded operations.
Factors affecting the trading price of our securities may include: • success of our competitors, and actual or anticipated fluctuations in our financial results or those of companies perceived to be similar to us; • changes in the market’s expectations about our operating results, changes in securities analysts’ financial estimates and recommendations concerning us or the industries in which we operate in general, or our operating results failing to meet the expectation of securities analysts or investors in a particular period; • lack of adjacent competitors; • operating and stock price performance of other companies that investors deem comparable to us; • our ability to market new and enhanced products on a timely basis; • changes in laws and regulations affecting our business; • commencement of, or involvement in, litigation involving us; • changes in our capital structure, such as future issuances of securities or the incurrence of debt; • the volume of shares of our Class A Common Stock available for public sale; • any major change in our Board or management; • sales of substantial amounts of Class A Common Stock by our directors, executive officers or significant stockholders or the perception that such sales could occur; and • general economic and political conditions such as recessions, interest rates, currency fluctuations, pandemics and acts of war or terrorism.
Factors affecting the trading price of our securities may include: • success of our competitors, and actual or anticipated fluctuations in our financial results or those of companies perceived to be similar to us; • changes in the market’s expectations about our operating results, changes in securities analysts’ financial estimates and recommendations concerning us or the industries in which we operate in general, or our operating results failing to meet the expectation of securities analysts or investors in a particular period; • lack of adjacent competitors; • operating and stock price performance of other companies that investors deem comparable to us; • our ability to market new and enhanced products on a timely basis; • changes in laws and regulations affecting our business; • commencement of, or involvement in, litigation involving us; • changes in our capital structure, such as future issuances of securities or the incurrence of debt; • the volume of shares of our Class A Common Stock available for public sale; • any major change in our Board or management; 53 • sales of substantial amounts of Class A Common Stock by our directors, executive officers or significant stockholders or the perception that such sales could occur; and • general economic and political conditions such as recessions, interest rates, currency fluctuations, pandemics and acts of war or terrorism.
Any further restrictions in laws such as the CAN-SPAM Act, the Telephone Consumer Protection Act, the Do-Not-Call-Implementation Act, applicable Federal Communications Commission telemarketing rules (including the declaratory ruling affirming the blocking of unwanted robocalls), the FTC Privacy Rule, Safeguards Rule, Consumer Report Information Disposal Rule, Telemarketing Sales Rule, Canada’s Anti-Spam Law and various U.S. state laws, or new federal or state laws and regulations (including gaming laws and regulations) on marketing and solicitation or international privacy, e-privacy, and anti-spam laws that govern these activities could adversely affect the continuing effectiveness of email, online advertising and direct mailing techniques and could force further changes in our marketing strategy.
Any further restrictions in laws such as the CAN-SPAM Act, the Telephone Consumer Protection Act, the Do-Not-Call-Implementation Act, applicable Federal Communications Commission telemarketing rules (including the declaratory ruling affirming the blocking of unwanted robocalls), the FTC Privacy Rule, Safeguards Rule, Consumer Report Information Disposal Rule, Telemarketing Sales Rule, Canada’s Anti-Spam Law and various U.S. state laws, or new U.S federal, state or foreign laws and regulations (including gaming laws and regulations) on marketing and solicitation or international privacy, e-privacy, and anti-spam laws that govern these activities could adversely affect the continuing effectiveness of email, online advertising and direct mailing techniques and could force further changes in our marketing strategy.
Breaches of our security measures or those of our third-party providers, or cybersecurity incidents could result in: unauthorized access to our sites, apps, networks and systems; unauthorized access to and misappropriation of customer or personnel data, including personally identifiable information, or our or third parties’ other confidential or proprietary information; viruses, worms, spyware or other malware being served from our sites, apps, networks or systems; deletion or modification of content or the display of unauthorized content on our sites or apps; interruption, disruption or malfunction of operations; costs relating to breach remediation, deployment of additional 40 personnel and protection technologies, response to governmental investigations and media inquiries and coverage; engagement of third-party experts and consultants; or litigation, regulatory action and other potential liabilities.
Breaches of our security measures or those of our third-party providers, or cybersecurity incidents could result in: unauthorized access to our sites, apps, networks and systems; unauthorized access to and misappropriation of customer or personnel data, including personally identifiable information, or our or third parties’ other confidential or proprietary information; viruses, worms, spyware or other malware being served from our sites, apps, networks or systems; deletion or modification of content or the display of unauthorized content on our sites or apps; interruption, disruption or malfunction of operations; costs relating to breach remediation, deployment of additional personnel and protection technologies, response to governmental investigations and media inquiries and coverage; engagement of third-party experts and consultants; or litigation, regulatory action and other potential liabilities.
If we are held to have breached or failed to comply with the terms of an Open-Source Software license, we could face infringement or other liability, or be required to seek costly licenses to continue providing our platform and offerings on terms that are not economically feasible, to re-engineer our platform, to discontinue or delay the provision of our offerings if re-engineering cannot be accomplished on a timely basis or to make generally available, in source code form, our proprietary software, any of which could adversely affect our business, financial condition, results of operations and prospects.
If we are held to have breached or failed to comply with the terms of an Open-Source Software license or if an Open-Source Software license ceases to be open source, we could face infringement or other liability, or be required to seek costly licenses to continue providing our platform and offerings on terms that are not economically feasible, to re-engineer our platform, to discontinue or delay the provision of our offerings if re-engineering cannot be accomplished on a timely basis or to make generally available, in source code form, our proprietary software, any of which could adversely affect our business, financial condition, results of operations and prospects.
Under these rules, a company of which more than 50% of the voting power for the election of directors is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including: • having a majority of our Board consist of independent directors; • having a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; 46 • having a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and • conducting an annual performance evaluation of the nominating and corporate governance and compensation committees.
Under these rules, a company of which more than 50% of the voting power for the election of directors is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including: • having a majority of our Board consist of independent directors; • having a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; • having a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and • conducting an annual performance evaluation of the nominating and corporate governance and compensation committees.
It cannot be assured that in every case of such clear error regulators will continue to approve the voiding of such errors. • The success of existing or future online offerings, including win or hold rates, depends on a variety of factors and is not completely controlled by us. • We rely on strategic relationships with local partners such as casinos or professional sports teams to be able to provide our offerings in certain jurisdictions.
It cannot be assured that in every case of such clear error regulators will continue to approve the voiding of such errors. • The success of existing or future online offerings, including win or hold rates, depends on a variety of factors and is not completely controlled by us. • We rely on strategic relationships with local partners such as casinos, lotteries or professional sports teams to be able to provide our offerings in certain jurisdictions.
Unfavorable changes in general economic conditions, 53 including recessions, declines in consumer confidence in the economy, economic slowdowns, sustained high levels of unemployment or inflation, increased interest rates, and rising prices, in particular of food and energy, fears of war and acts of terrorism or perceived weak or weakening economic conditions, may reduce our customers’ disposable income or result in fewer individuals engaging in entertainment and leisure activities, such as online casino and sports betting.
Unfavorable changes in general economic conditions, including recessions, declines in consumer confidence in the economy, economic slowdowns, sustained high levels of unemployment or inflation, increased interest rates, and rising prices, in particular of food and energy, fears of war and acts of terrorism or perceived weak or weakening economic conditions, may reduce our customers’ disposable income or result in fewer individuals engaging in entertainment and leisure activities, such as online casino and sports betting.
In the event the Company is no longer a “controlled company” under the applicable NYSE rules, the Sponsor will have the right to nominate up to two directors and the Sellers’ Representative will have the right to nominate a number of directors equal to the greater of the number of directors permitted by NYSE or a number equal to the total number of directors multiplied by the percentage of the Company’s issued and outstanding voting securities held by the Sellers and their permitted transferees at such time, in each case subject to certain independence and holdings requirements.
In the event the Company is no longer a “controlled company” under the applicable NYSE rules, the Sponsor will have the right to nominate up to two directors and the Sellers’ Representative will have the right to nominate a number of directors equal to the greater of the number of directors permitted by NYSE or a 48 number equal to the total number of directors multiplied by the percentage of the Company’s issued and outstanding voting securities held by the Sellers and their permitted transferees at such time, in each case subject to certain independence and holdings requirements.
Disruptions in the availability of these may negatively impact our business, financial conditions, results of operations and prospects. • Due to the nature of our business, we are subject to taxation in numerous jurisdictions and changes in, or new interpretation of, tax laws, tax rulings or their application by tax authorities could result in additional tax liabilities and could materially affect our business, financial condition, results of operations and prospects. • Our business is subject to numerous U.S. and foreign laws, many of which are unsettled and still developing.
Disruptions in the availability of these may negatively impact our business, financial conditions, results of operations and prospects. • Due to the nature of our business, we are subject to taxation in numerous jurisdictions and changes in, or new interpretation of, tax laws, tax rulings or their application by tax authorities could result in additional tax liabilities and could materially affect our business, financial condition, results of operations and prospects. 23 • Our business is subject to numerous U.S. and foreign laws, many of which are unsettled and still developing.
We also rely on third parties for content delivery (such as online slots and live dealer games), load balancing and certain cybersecurity protections such as against distributed denial-of-service attacks. If those providers do not perform adequately, our customers may experience issues or interruptions with our offerings, and gaming regulators may hold us responsible for those providers’ errors.
We also rely on third parties for content delivery such as online slots, table games, and live dealer games, load balancing and certain cybersecurity protections such as against distributed denial-of-service attacks. If those providers do not perform adequately, our customers may experience issues or interruptions with our offerings, and gaming regulators may hold us responsible for those providers’ errors.
If we are unable to maintain our bank accounts or our customers are unable to use their credit cards, bank accounts or e-wallets to make deposits and withdrawals 54 from our platform, it would make it difficult for us to operate our business, increase our operating costs and pose additional operational, logistical and security challenges, which could result in an inability to implement our business plan.
If we are unable to maintain our bank accounts or our customers are unable to use their credit cards, bank accounts or e-wallets to make deposits and withdrawals from our platform, it would make it difficult for us to operate our business, increase our operating costs and pose additional operational, logistical and security challenges, which could result in an inability to implement our business plan.
Under current credit card practices, we could be liable for funds used on our platform with fraudulent credit card data, even if the associated financial institution approved the credit card transaction. 28 Customer fraud or other forms of cheating may involve tactics such as collusion with our employees and exploiting loopholes in our promotions or offerings.
Under current credit card practices, we could be liable for funds used on our platform with fraudulent credit card data, even if the associated financial institution approved the credit card transaction. Customer fraud or other forms of cheating may involve tactics such as collusion with our employees and exploiting loopholes in our promotions or offerings.
In addition, non-compliance with applicable privacy laws and regulations by us (or in some instances, non-compliance by third parties engaged by us), including accidental loss, inadvertent disclosure, unapproved dissemination or a breach of security on systems storing our data, may result in damage to our reputation and subject us to fines, payment of damages, lawsuits or restrictions on our use or transfer of data.
In addition, non-compliance with applicable privacy laws and regulations by us (or in some instances, non-compliance by third parties engaged by us), including accidental loss, inadvertent disclosure, unapproved dissemination or a breach of security on systems storing our data, may result in damage to our reputation and subject us to fines, damages, lawsuits or restrictions on our use or transfer of data.
To date, general industry practice has been to void bets associated with such clear errors or to correct the odds. It cannot be assured that in every case of such clear error regulators will continue to approve the voiding of such errors. 27 Our sports betting offerings allow our customers to bet across thousands of sports and sports-related events.
To date, general industry practice has been to void bets associated with such clear errors or to correct the odds. It cannot be assured that in every case of such clear error regulators will continue to approve the voiding of such errors. Our sports betting offerings allow our customers to bet across thousands of sports and sports-related events.
In addition, RSILP is generally prohibited under Delaware law from making distributions to partners to the extent that, at the time of the distribution, after giving effect to the distribution, RSILP’s liabilities (with certain exceptions) exceed the fair value of its assets. RSILP’s subsidiaries are generally subject to similar legal limitations on their ability to make distributions to RSILP.
In addition, RSILP is generally prohibited under Delaware law from making distributions to partners to the extent that, at the time of the distribution, after giving effect to the distribution, RSILP’s liabilities (with certain exceptions) exceed the fair value of its assets. RSILP’s subsidiaries are generally subject to similar legal limitations on their ability to make distributions to 51 RSILP.
The lump-sum payment could be substantial and could exceed the actual tax benefits that we and our consolidated subsidiaries (including the Special Limited Partner) realize subsequent to such payment because it would be calculated assuming, among other things, that we and our consolidated subsidiaries (including the Special 51 Limited Partner) would have certain assumed tax benefits available to us and that we and our consolidated subsidiaries (including the Special Limited Partner) would be able to use the assumed and potential tax benefits in future years.
The lump-sum payment could be substantial and could exceed the actual tax benefits that we and our consolidated subsidiaries (including the Special Limited Partner) realize subsequent to such payment because it would be calculated assuming, among other things, that we and our consolidated subsidiaries (including the Special Limited Partner) would have certain assumed tax benefits available to us and that we and our consolidated subsidiaries (including the Special Limited Partner) would be able to use the assumed and potential tax benefits in future years.
We may make changes to our existing technology and offerings or develop and introduce new and unproven products and services, with which we have little or no prior development or operating experience. Developing new offerings and systems is inherently complex, costly and uncertain, and customers may not engage with new offerings, even if well-reviewed and of high quality.
We may make changes to our existing technology and offerings or develop and introduce new and unproven products, services and features, with which we have little or no prior development or operating experience. Developing new offerings and systems is inherently complex, costly and uncertain, and customers may not engage with new offerings, even if well-reviewed and of high quality.
Among others, we are, or may become, subject to the following laws and regulations: • The General Data Protection Regulation, which may apply to our activities to the extent conducted from an establishment in the European Union (the “EU”) or related to products and services that we offer to EU users or customers, or the monitoring of their behavior in the EU.
Among others, we are, or may become, subject to the following laws and regulations: 36 • The General Data Protection Regulation, which may apply to our activities to the extent conducted from an establishment in the European Union (the “EU”) or related to products and services that we offer to EU users or customers, or the monitoring of their behavior in the EU.
As part of our strategy, we have engaged and may continue to engage in transactions such as acquisitions, investments or partnerships as opportunities arise to add new or complementary businesses, products, brands or technologies. In some cases, the costs of such transactions may be substantial, including as a result of professional fees and due diligence efforts.
As part of our strategy, we have engaged and may continue to engage in transactions such as acquisitions, investments or partnerships as opportunities arise to add new or complementary businesses, products, brands or technologies. In some 49 cases, the costs of such transactions may be substantial, including as a result of professional fees and due diligence efforts.
We rely on strategic relationships with local partners such as land-based casinos or professional sports teams to be able to provide our offerings in certain jurisdictions. If we cannot establish and manage relationships with these partners, our business, financial condition, results of operations and prospects could be adversely affected.
We rely on strategic relationships with local partners such as land-based casinos, lotteries or professional sports teams to be able to provide our offerings in certain jurisdictions. If we cannot establish and manage relationships with these partners, our business, financial condition, results of operations and prospects could be adversely affected.
In addition, the Inflation Reduction Act (the “IRA”) was enacted in August 2022, the provisions of which include a minimum tax equal to 15% of the adjusted financial statement income of certain large corporations, as well as a 1% excise 32 tax on certain share buybacks by public corporations that would be imposed on such corporations.
In addition, the Inflation Reduction Act (the “IRA”) was enacted in August 2022, the provisions of which include a minimum tax equal to 15% of the adjusted financial statement income of certain large corporations, as well as a 1% excise tax on certain share buybacks by public corporations that would be imposed on such corporations.
In the United States and certain foreign jurisdictions, we have filed applications to protect aspects of our intellectual property. We currently hold several patent applications in multiple jurisdictions, and in the future we may acquire additional patents, which could require significant cash expenditures. Third parties may knowingly or unknowingly infringe our rights in intellectual property.
In the United States and certain foreign jurisdictions, we have filed applications to protect aspects of our intellectual property. We currently hold several patent applications in multiple jurisdictions, and in the future we may 41 acquire additional patents, which could require significant cash expenditures. Third parties may knowingly or unknowingly infringe our intellectual property rights.
The Sellers may in the future exchange their RSILP Units, together with the cancellation of an equal number of shares of Class V Voting Stock, for shares of Class A Common Stock (or cash) pursuant to the RSILP A&R LPA, subject to certain conditions and transfer restrictions as set forth therein and in the Investor Rights Agreement.
The Sellers may exchange their RSILP Units, together with the cancellation of an equal number of shares of Class V Voting Stock, for shares of Class A Common Stock (or cash) pursuant to the RSILP A&R LPA, subject to certain conditions and transfer restrictions as set forth therein and in the Investor Rights Agreement.
Our operating results and financial performance may fluctuate due to seasonal trends and other factors such as customer engagement levels, online casino and sports betting results and other factors that are outside of our control or that we cannot reasonably predict. Our financial performance depends on, among other things, our ability to attract and retain 26 customers.
Our operating results and financial performance may fluctuate due to seasonal trends and other factors such as customer engagement levels, online casino and sports betting results and other factors that are outside of our control or that we cannot reasonably predict. Our financial performance depends on, among other things, our ability to attract and retain customers.
If we are unable to access and leverage any such customer database or if it becomes uneconomical to do such, our ability to effectively market and promote our offerings in certain jurisdictions could be impacted, which could materially adversely affect our business, reputation, financial condition, operating results and cash flows.
If we are unable to access and leverage any such customer database or if it becomes uneconomical to do such, our ability to effectively market and promote our offerings in certain 29 jurisdictions could be impacted, which could materially adversely affect our business, reputation, financial condition, operating results and cash flows.
This would 45 limit and delay our ability to provide new or competitive offerings and increase our costs. If alternate technology cannot be obtained or developed, we may be unable to offer certain functionality as part of our offerings, which could adversely affect our business, financial condition, results of operations and prospects.
This would limit and delay our ability to provide new or competitive offerings and increase our costs. If alternate technology cannot be obtained or developed, we may be unable to offer certain functionality as part of our offerings, which could adversely affect our business, financial condition, results of operations and prospects.
See “ We depend on RSG and certain of its affiliates to provide us with certain services, which may not be sufficient to meet our needs, and we may have difficulty finding replacement services or be required to pay increased costs to replace these services to the extent that our services agreement with RSG terminates or expires”.
See “ We depend on RSG and certain of its affiliates to provide us with certain limited services, which may not be sufficient to meet our needs, and we may have difficulty finding replacement services or be required to pay increased costs to replace these services to the extent that our services agreement with RSG terminates or expires”.
Litigation and other claims and regulatory proceedings against us could result in unexpected disciplinary actions, expenses and liabilities, which could have a material adverse effect on our business, financial condition, results of operations and prospects. We could be subject to future governmental investigations and inquiries, legal proceedings and enforcement actions.
Litigation and other claims and regulatory proceedings against us could result in unexpected disciplinary actions, expenses and liabilities, which could have a material adverse effect on our business, financial condition, results of operations and prospects. 55 We could be subject to future governmental investigations and inquiries, legal proceedings and enforcement actions.
For example, in response to the conflict between Russia and Ukraine, the U.S. government and other governments have imposed a series of sanctions against certain Russian government, government-related, and other entities and individuals, together with enhanced export controls on certain 33 products and financial and economic sanctions on certain industry sectors and parties in Russia.
For example, in response to the conflict between Russia and Ukraine, the U.S. government and other governments have imposed a series of sanctions against certain Russian government, government-related, and other entities and individuals, together with enhanced export controls on certain products and financial and economic sanctions on certain industry sectors and parties in Russia.
To date, these attacks have not had a material impact on our operations or financial results, but we cannot assure you that they will not have a material impact in the future, including by overloading our systems and network and preventing our offerings from being accessed by legitimate customers.
To date, these attacks have not had a material impact on our operations or financial results, but we cannot assure you that they will not have a material impact in the future, 39 including by overloading our systems and network and preventing our offerings from being accessed by legitimate customers.
If actual results differ from our estimates, analysts may negatively react, and our stock price could be materially impacted. We have a history of losses and we may continue to incur losses in the future. Since our formation in 2012, we have experienced net losses and negative cash flows from operations.
If actual results differ from our estimates, analysts may negatively react, and our stock price could be materially impacted. 25 We have a history of losses and we may continue to incur losses in the future. Since our formation in 2012, we have experienced net losses and negative cash flows from operations.
We depend on RSG and certain of its affiliates to provide us with certain services, which may not be sufficient to meet our needs, and we may have difficulty finding replacement services or be required to pay increased costs to replace these services to the extent that our services agreement with RSG terminates or expires.
We depend on RSG and certain of its affiliates to provide us with certain limited services, which may not be sufficient to meet our needs, and we may have difficulty finding replacement services or be required to pay increased costs to replace these services to the extent that our services agreement with RSG terminates or expires.
Further, our offerings, online gaming platform and other software applications and systems, and certain third-party platforms that we use could contain undetected errors. Our technology infrastructure is critical to the performance of our platform and offerings and to customer satisfaction. We devote significant resources to network and data security to protect our systems and data.
Further, our offerings, online 40 gaming platform and other software applications and systems, and certain third-party platforms that we use could contain undetected errors. Our technology infrastructure is critical to the performance of our platform and offerings and to customer satisfaction. We devote significant resources to network and data security to protect our systems and data.
We have also entered into a services agreement with RSG, under which RSG and its affiliates provide certain corporate and shared services related to functions such as government affairs, business development, insurance and other services, and entered into license agreements with affiliated entities, pursuant to which we license the BetRivers and PlaySugarHouse brands.
We have also entered into a services agreement with RSG, under which RSG and its affiliates provide certain limited corporate and shared services related to functions such as government affairs, business development, insurance and other services, and entered into license agreements with affiliated entities, pursuant to which we license the BetRivers and PlaySugarHouse brands.
Additionally, incorrect or misleading geolocation and identity verification data with respect to current or potential customers received from third-party providers may result in us inadvertently allowing access to our offerings to individuals who should not be permitted to access them, or otherwise inadvertently deny access to individuals who should be able to access them.
Additionally, incorrect or misleading geolocation and identity verification data with respect to current or potential customers received from third-party providers may result in us inadvertently allowing access to our offerings to individuals who should not be permitted to access them or inadvertently deny access to individuals who should be able to access them.
These increases in tax basis may increase (for income tax purposes) depreciation and amortization 50 deductions and therefore reduce the amount of income or franchise tax that we and the Special Limited Partner would otherwise be required to pay in the future had such exchanges never occurred.
These increases in tax basis may increase (for income tax purposes) depreciation and amortization deductions and therefore reduce the amount of income or franchise tax that we and the Special Limited Partner would otherwise be required to pay in the future had such exchanges never occurred.
Customer engagement in our offerings may vary due to numerous factors, including customers satisfaction with our platform, the number, timing and type of sporting events, the length of sports seasons, our offerings and those of our competitors, our marketing efforts, climate and weather conditions, public sentiment or macroeconomic conditions.
Customer engagement in our offerings may vary due to numerous factors, including customers satisfaction with our platform, the number, timing and type of sporting events, the length of sports seasons, our offerings and those of our competitors, our marketing efforts, weather conditions, public sentiment or macroeconomic conditions.
Some jurisdictions’ betting and gaming laws limit online casino, online sports betting and retail sports betting to a finite number of local entities, such as land-based casinos, tribes, tracks or professional sports teams, which own one or more “skins” under that jurisdiction’s law.
Some jurisdictions’ betting and gaming laws limit online casino, online sports betting and retail sports betting tethered to a finite number of local entities, such as land-based casinos, tribes, tracks or professional sports teams, which own one or more “skins” under that jurisdiction’s law.
As of the date of this Annual Report, the Sponsor has the right to designate one director. Mr. Bluhm, one of the Controlling Holders and his affiliates engage in a broad array of activities, including investing in the gaming and casino industries generally. In the ordinary course of their business activities, Mr.
As of the date of this Annual Report, the Sponsor has the right to designate only one director. Mr. Bluhm, one of the Controlling Holders, and his affiliates engage in a broad array of activities, including investing in the gaming and casino industries generally. In the ordinary course of their business activities, Mr.
A decline in the market price of our securities also could adversely affect its ability to issue additional securities and its ability to obtain additional financing in the future. 52 There can be no assurance that we will be able to comply with the NYSE’s continued listing standards.
A decline in the market price of our securities also could adversely affect its ability to issue additional securities and its ability to obtain additional financing in the future. There can be no assurance that we will be able to comply with the NYSE’s continued listing standards.
Any delays in obtaining or difficulty in maintaining regulatory approvals needed for expansion within existing jurisdictions or into new jurisdictions can negatively affect our opportunities for growth, including the growth of our customer base, or delay our ability to recognize revenue from our offerings in any such jurisdictions.
Any delays in obtaining or difficulty in maintaining regulatory approvals needed for expansion 35 within existing jurisdictions or into new jurisdictions can negatively affect our opportunities for growth, including the growth of our customer base, or delay our ability to recognize revenue from our offerings in any such jurisdictions.
To date, we believe we have obtained all governmental licenses, findings of suitability, registrations, permits and approvals necessary for our operations. However, we cannot guarantee that additional licenses, permits and approvals that may be required will be given or that existing ones will be renewed or will not be revoked.
To date, we believe we have obtained all governmental licenses, findings of 38 suitability, registrations, permits and approvals necessary for our operations. However, we cannot guarantee that additional licenses, permits and approvals that may be required will be given or that existing ones will be renewed or will not be revoked.
The online gaming industry continuously experiences social engineering, phishing, malware and similar attacks and threats of denial-of-service attacks, none of which to date have been material to our business; however, such attacks could in the future have a material adverse effect on our operations.
The online gaming industry continuously experiences social engineering, phishing, malware, ransomware and similar attacks and threats of denial-of-service attacks, none of which to date have been material to our business; however, such attacks could in the future have a material adverse effect on our operations.
Our success depends in part on our relationships with third-party service providers. For example, we receive sports betting odds and streaming data, risk management and trading services from third parties, and in some jurisdictions we are required to obtain official league data.
Our success depends in part on our relationships with third-party service providers. For example, we receive sports betting odds and streaming data, and certain risk management and trading services from third parties, and in some jurisdictions we are required to obtain official league data.
In addition, the Controlling Holders may have an interest in pursuing acquisitions, divestitures and other transactions that, in their judgment, could enhance their investment, even though such transactions might involve risks to you. 47 We have arrangements with our affiliates that impact our operations.
In addition, the Controlling Holders may have an interest in pursuing acquisitions, divestitures and other transactions that, in their judgment, could enhance their investment, even though such transactions might involve risks to you. We have arrangements with our affiliates that impact our operations.
If we fail to detect fraud or theft, including by our customers and employees, our reputation may suffer, which could harm our brand and reputation and negatively impact our business, financial condition, results of operations and prospects, and can subject us to investigations and litigation.
If we fail to detect fraud or theft, including by our customers, employees or vendors, our reputation may suffer, which could harm our brand and reputation and negatively impact our business, financial condition, results of operations and prospects, and can subject us to investigations and litigation.
In addition, if an offering is unavailable when customers attempt to access it or navigation or other functionality in our platform is slower than expected, customers may be unable to use our offerings as desired and may be less likely to return to our platform as often, if at all.
If an offering is unavailable when customers attempt to access it or navigation or other functionality in our platform is slower than expected, customers may be unable to use our offerings as desired and may be less likely to return to our platform as often, if at all.
We entered into a license agreement with RSG, pursuant to which we granted to it and its affiliates a perpetual, royalty-free license to use in specific fields of use certain trademarks and domain names that RSG and certain of its 41 affiliates assigned to us in connection with the Business Combination.
We entered into a license agreement with RSG, pursuant to which we granted to it and its affiliates a perpetual, royalty-free license to use in specific fields of use certain trademarks and domain names that RSG and certain of its affiliates assigned to us in connection with the Business Combination.
The Board’s ability to issue preferred stock without stockholder approval could have the effect of delaying, deferring or preventing a change of control of us or the removal of existing management. The issuance of any such securities may adversely affect the market price of our securities.
The Board’s ability to issue preferred stock without 50 stockholder approval could have the effect of delaying, deferring or preventing a change of control of us or the removal of existing management. The issuance of any such securities may adversely affect the market price of our securities.
Further, many jurisdictions and intergovernmental organizations have been discussing or are in the process of implementing proposals that may change various aspects of the existing framework under which our tax obligations are determined in many of the jurisdictions in which we do business and in which our users are located.
Many jurisdictions and intergovernmental organizations have been discussing or are in the process of implementing proposals that may change various aspects of the existing framework under which our tax obligations are determined in many of the jurisdictions in which we do business and in which our users are located.
From time to time, there have been claims challenging the ownership of Open-Source Software against companies that incorporate Open-Source Software into their solutions. As a result, we could be subject to lawsuits by parties claiming ownership of what we believe to be Open-Source Software.
From time to time, there have been claims challenging the ownership of Open-Source Software against companies that incorporate it into their solutions. As a result, we could be subject to lawsuits by parties claiming ownership of what we believe to be Open-Source Software.
If a payment processor terminates its relationship with us or refuses to renew its agreement with us on commercially reasonable terms, we may need to find an alternate payment processor, and may be unable to secure similar terms or replace such payment processor in a reasonable time frame.
If a payment processor terminates its relationship with us or refuses to renew its agreement with us on commercially reasonable terms, we may 45 need to find an alternate payment processor, and may be unable to secure similar terms or replace such payment processor in a reasonable time frame.
Additionally, protecting our intellectual property rights is costly and time-consuming. Any unauthorized use of our intellectual property or disclosure of our confidential information or trade secrets could make it more expensive to do business, thus harming our operating results.
Protecting our intellectual property rights is costly and time-consuming. Any unauthorized use of our intellectual property or disclosure of our confidential information or trade secrets could make it more expensive to do business, thus harming our operating results.
Thus, based on their combined voting power, the Controlling Holders together will control the vote of nearly all matters submitted to a vote of our stockholders, which will enable them to control the election of our Board members and nearly all other corporate decisions.
Based on their combined voting power, the Controlling Holders together will control the vote of nearly all matters submitted to a vote of our stockholders, which will enable them to control the election of our Board members and nearly all other corporate decisions.
Each time a customer plays a progressive jackpot game, we contribute a portion of the amount bet to the jackpot for that game or group of games. When a progressive jackpot is won, the jackpot is paid out and reset to a predetermined base amount.
Each time a customer plays a progressive jackpot game, we contribute a portion of the amount bet to the jackpot for that game or group of games. When a progressive jackpot is won, it is paid out and reset to a predetermined base amount.
Moreover, we could incur additional 31 compensation costs if we decide to pay cash compensation closer to that of other public companies, which would increase our general and administrative expenses and could materially and adversely affect our profitability.
Moreover, we could incur additional compensation costs if we decide to pay cash compensation closer to that of other public companies, which would increase our general and administrative expenses and could materially and adversely affect our profitability.
Historically, RSG and certain of its affiliates have provided, and in certain cases continue to provide, under a services agreement between us and RSG, certain corporate and shared services such as government affairs, certain business development, insurance and other services.
Historically, RSG and certain of its affiliates have provided, and in certain cases continue to provide, under a services agreement between us and RSG, certain limited corporate and shared services such as government affairs, certain business development, insurance and other services.
We became a public company in December 2020, and as a public company (and particularly after we are no longer an “emerging growth company”) we incur significant legal, accounting and other expenses that we did not incur as a private company.
We became a public company in December 2020, and as a public company (and particularly after we are no longer an “emerging growth company”) we incur significant legal, accounting and other expenses that we did not incur as a private 31 company.
Should our agreements with any third-party cloud service provider terminate or we add new cloud infrastructure service providers, we may experience additional costs and platform performance downtime in adding or transitioning to new or additional providers.
Should our agreements with any third-party cloud service provider terminate or we add new cloud infrastructure service providers, we may experience additional costs and platform 44 performance downtime in adding or transitioning to new or additional providers.
Geopolitical instability may lead to sanctions or impact our ability to do business in some markets. Any of these changes may negatively impact our revenues. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
Geopolitical instability may lead to sanctions or impact our ability to do business in some markets. Any of these changes may negatively impact our revenues. 56 ITEM 1B. UNRESOLVED STAFF COMMENTS None.
To date, such disruptions, individually and in the aggregate, have not had a material impact on us; however, future disruptions from unauthorized access to, fraudulent manipulation of, or tampering with our systems, technological infrastructure and data, or those of third parties, could result in a wide range of negative outcomes, each of which could materially adversely affect our business, financial condition, results of operations and prospects.
To date, such disruptions, individually and in the aggregate, have not had a material impact on us; however, future disruptions from the foregoing factors or unauthorized access to, fraudulent manipulation of, or tampering with our systems, technological infrastructure and data, or those of third parties, could result in a wide range of negative outcomes, each of which could materially adversely affect our business, financial condition, results of operations and prospects.
From time to time, various government bodies or officials have proposed and adopted changes in tax laws, or in administration, interpretation or enforcement of such laws, affecting the gaming industry.
From time to time, various government bodies or officials have proposed and/or adopted changes in tax rates, tax laws, or in administration, interpretation or enforcement of such laws, affecting the gaming industry.
Because our platform and offerings are complex and incorporate a variety of hardware, proprietary software and third-party software, they may contain errors, bugs, flaws or corrupted data, which may become apparent only after their launch and could result in unanticipated downtime or vulnerabilities that could compromise our systems’ security, including inadvertently permitting access to protected customer data.
Because our platform and offerings are complex and incorporate a variety of hardware and proprietary and third-party software, they may contain errors, bugs, flaws or corrupted data, which may become apparent only after their launch and could result in unanticipated downtime or vulnerabilities that could compromise our systems’ security, including inadvertently permitting access to protected customer, vendor or personnel data.
As a result, our business, financial condition, results of operations and prospects could be adversely affected. In certain jurisdictions we leverage customer databases provided to us by our local partners, including affiliated land-based casinos, in furtherance of our offerings such as for marketing and promotional activities. In some instances, we do not own the information in these databases.
As a result, our business, financial condition, results of operations and prospects could be adversely affected. In certain jurisdictions we leverage customer databases provided to us by our local partners, including affiliated land-based casinos, in furtherance of our offerings such as for marketing and promotional activities. In some instances, we do not own the data in these databases.
Some gaming authorities require gaming manufacturers to obtain approval before engaging in certain transactions, such as acquisitions, mergers, reorganizations, financings, stock offerings and share repurchases.
Some gaming authorities require gaming manufacturers to obtain approval before engaging in certain transactions, such as acquisitions, mergers, reorganizations, financings, stock offerings and share 42 repurchases.
Additionally, if a large number of additional states or the federal government enact real-money gaming legislation and we are unable to obtain or are otherwise delayed in obtaining the necessary licenses to operate online sports betting or online gaming in U.S. jurisdictions where such games are legalized, our future growth could be materially impaired.
Additionally, if a large number of additional jurisdictions or the U.S. federal government enact real-money gaming legislation and we are unable to obtain or are otherwise delayed in obtaining 37 the necessary licenses to operate online sports betting or online gaming in jurisdictions where such games are legalized, our future growth could be materially impaired.
In addition, many of our existing personnel do not have experience with native cloud-based technologies and as a result, we have and will continue to hire personnel with such experience. This effort is time consuming and costly. Our technology transformation strategy requires management time and resources to educate employees and implement new ways of conducting business.
In addition, many of our existing personnel do not have experience with native cloud-based technologies and as a result, we have and intend to continue to hire personnel with such experience. This effort is time consuming and costly. Our technology transformation strategy requires management time and resources to educate employees and implement new ways of conducting business.
The local partner owner could restrict or terminate our right to use all or part of these databases or increase the price for us to use the same.
The local partner could restrict or terminate our right to use all or part of these databases or increase the price for us to use the same.
The competition for skilled engineers and developers is so intense in the United States that we now also recruit for these roles internationally, and to help attract such talent we have expended significant time and resources to establish local development hubs in foreign jurisdictions such as Estonia, Canada, Colombia and Serbia.
Competition for skilled engineers and developers is so intense in the United States that we recruit for these roles internationally, and to help attract such talent we have expended significant time and resources to establish local development hubs in foreign jurisdictions such as Estonia, Canada, Colombia and Serbia.
These laws and regulations are dynamic and subject to potentially differing interpretations, and various legislative and regulatory bodies may expand current laws or regulations or enact new ones regarding these matters, in particular with respect to marketing, advertising and promotional activities. We strive to comply with all applicable laws and regulations relating to our business.
These laws and regulations are dynamic and subject to potentially differing interpretations, and various legislative and regulatory bodies may expand current laws or regulations or enact new ones regarding these matters, in particular with respect to marketing, advertising, promotional activities and responsible gaming. We strive to comply with all applicable laws and regulations relating to our business.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThis lease is set to expire on April 30, 2024, subject to our option to extend the term for two successive terms of two years each. We also lease office space in the United States (New Jersey), Colombia (Bogota, and Medellin), Estonia (Tartu and Tallin), and Canada (Toronto).
Biggest changeThis lease is set to expire on April 30, 2025, subject to our option to extend the term for two successive years. We also lease office space in the United States (New Jersey), Colombia (Bogota, and Medellin), Estonia (Tartu and Tallinn), and Canada (Toronto). We anticipate obtaining additional space as we continue to grow globally and increase headcount.
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We anticipate obtaining additional space as we continue to grow globally and increase headcount.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeIn our opinion, the amount of ultimate liability with respect to any of these actions is unlikely to materially affect our financial condition, results of operations or liquidity, though the outcomes could be material to our operating results for any particular period, depending, in part, upon the operating results for such period. 55 ITEM 4. MINE SAFETY DISCLOSURES Not applicable.
Biggest changeIn our opinion, the amount of ultimate liability with respect to any of these actions is unlikely to materially affect our financial condition, results of operations or liquidity, though the outcomes could be material to our operating results for any particular period, depending, in part, upon the operating results for such period. ITEM 4. MINE SAFETY DISCLOSURES Not applicable.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAs of March 1, 2023, there were 64 holders of record of our Class A Common Stock and 20 holders of record of our Class V Voting Stock.
Biggest changeAs of March 6, 2024, there were 61 holders of record of our Class A Common Stock and 19 holders of record of our Class V Voting Stock.
The graph assumes an initial investment of $100 in our Class A Common Stock at the market close on February 21, 2020, 56 which was our initial trading day. Data for the S&P 500 Consumer Discretionary Index and the NYSE Composite Index assume reinvestment of dividends. Total return equals stock price appreciation plus reinvestment of dividends.
The graph assumes an initial investment of $100 in our Class A Common Stock at the market close on February 21, 2020, which was our initial trading day. Data for the S&P 500 Consumer Discretionary Index and the NYSE Composite Index assume reinvestment of dividends. Total return equals stock price appreciation plus reinvestment of dividends.
Recent Sales of Unregistered Securities None. Securities Authorized for Issuance Under Equity Compensation Plans See Part III, Item 12 of this Form 10-K and Note 11 to our consolidated financial statements, included elsewhere in this Annual Report, for additional information. Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. ITEM 6. RESERVED
Recent Sales of Unregistered Securities None. Securities Authorized for Issuance Under Equity Compensation Plans See Part III, Item 12 of this Form 10-K and Note 10 to our consolidated financial statements, included elsewhere in this Annual Report, for additional information. Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. ITEM 6. RESERVED
The payment of any cash dividends will be within the discretion of the Board at such time. Stock Price Performance The graph above compares the cumulative total stockholder return on our Class A Common Stock with the cumulative total return on the Standard & Poor’s (“S&P”) 500 Consumer Discretionary Index and the NYSE Composite Index.
The payment of any cash dividends will be within the discretion of the Board at such time. 58 Stock Price Performance The graph above compares the cumulative total stockholder return on our Class A Common Stock with the cumulative total return on the Standard & Poor’s (“S&P”) 500 Consumer Discretionary Index and the NYSE Composite Index.
Dividend Policy We have not paid any cash dividends on our shares of common stock to date and do not anticipate paying any cash dividends for the foreseeable future. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition as well as general business conditions.
Dividend Policy We have not paid any cash dividends on our shares of common stock to date and do not anticipate paying any cash dividends for the foreseeable future. The payment of cash dividends in the future will depend upon our revenues and earnings, if any, capital requirements and general financial condition as well as general business conditions.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe decrease reflects lower period-over-period costs including decreased gaming license acquisition purchases of $18.0 million, investment in equity of $1.5 million, investment in long-term deposits of $0.1 million and acquisition of developed technology intangible assets of $3.3 million, offset by an increase in cash paid for internally developed software costs of $12.7 million, property and equipment costs of $0.3 million and acquisition of trademark intangible assets of $1.9 million.
Biggest changeThe increase reflects higher period-over-period cash paid for internally developed software costs totaling $5.8 million, an increase in cash paid for the acquisition of gaming licenses totaling $1.8 million, an increase in cash paid for the development of media content totaling $0.8 million and an increase in investment in equity securities of $0.5 million, which was partially offset by a reduction of property and equipment purchases totaling $2.9 million, reduction of cash paid for trademark intangible asset totaling $1.9 million and the maturity of long-term deposits resulting in a net reduction in investment in long-term deposits totaling $2.4 million.
With respect to paid marketing, we use a broad array of advertising channels, including television, radio, social media platforms, sponsorships, affiliates and paid search, and other digital channels. We also use other forms of marketing and outreach, such as our social media channels, first-party websites, media interviews and other media spots and organic searches.
With respect to paid marketing, we use a broad array of advertising channels, including television, radio, social media platforms, sponsorships, affiliates and paid search, and other digital channels. We also use other forms of marketing and outreach, such as our social media channels, first-party websites, media interviews and other media spots and organic searches.
Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under the sections of this Annual Report captioned “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors.” This Management’s Discussion and Analysis of Financial Condition and Results of Operations (this “MD&A”) contains certain financial measures, in particular the presentation of Adjusted EBITDA, which are not presented in accordance with generally accepted accounting principles of the United States (“GAAP”).
Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of 59 many factors, including those discussed under the sections of this Annual Report captioned “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors.” This Management’s Discussion and Analysis of Financial Condition and Results of Operations (this “MD&A”) contains certain financial measures, in particular the presentation of Adjusted EBITDA, which are not presented in accordance with generally accepted accounting principles of the United States (“GAAP”).
Tax Receivable Agreement Pursuant to the Tax Receivable Agreement, the Special Limited Partner is required to pay to the Sellers and/or the exchanging holders of RSILP Units, as applicable, 85% of the net income tax savings that we and our consolidated subsidiaries (including the Special Limited Partner) realize as a result of increases in tax basis in RSILP’s assets related to the transactions contemplated under the Business Combination Agreement and the future exchange of the Retained RSILP Units (for shares of Class A Common Stock (or cash) pursuant to the RSILP A&R LPA and tax benefits related to entering into the Tax Receivable Agreement, including tax benefits attributable to payments under the Tax Receivable Agreement, and those payments may be substantial.
Tax Receivable Agreement Pursuant to the TRA, the Special Limited Partner is required to pay to the Sellers and/or the exchanging holders of RSILP Units, as applicable, 85% of the net income tax savings that we and our consolidated subsidiaries (including the Special Limited Partner) realize as a result of increases in tax basis in RSILP’s assets related to the transactions contemplated under the Business Combination Agreement and the future exchange of the Retained RSILP Units for shares of Class A Common Stock (or cash) pursuant to the RSILP A&R LPA and tax benefits related to entering into the TRA, including tax benefits attributable to payments under the TRA, and those payments may be substantial.
While real-money B2C transactions represent a majority of our revenue, our social gaming offerings generally increase customer engagement and build online databases in key markets both before and after legalization and regulation. We believe our B2C model is flexible, permitting us to customize our operating structure based on applicable gaming regulations, market demands and, as applicable, our land-based partner’s operations.
While real-money B2C transactions represent a majority of our revenue, our social gaming offerings generally increase customer engagement and build online databases in key markets both before and after legalization and regulation. We believe our B2C model is flexible, permitting us to customize our operating structure based on applicable gaming regulations, market demands and, as applicable, our partner’s operations.
In this scenario, revenue is generated based on total customer bets less amounts paid to customers for winning bets, less other incentives awarded to customers, plus or minus the change in unsettled retail sports bets. Social Gaming We provide social gaming (where permitted) where users can earn or purchase virtual credits to enjoy free-to-play games.
In this scenario, revenue is generated based on total customer bets less amounts paid to customers for winning bets, less other incentives awarded to customers, plus or minus the change in unsettled retail sports bets. 68 Social Gaming We provide social gaming (where permitted) where users can earn or purchase virtual credits to enjoy free-to-play games.
By leveraging our dynamic proprietary online gaming platform, we generally aim to be 58 “first to market” where real-money online gaming has been newly legalized and where our management determines that it is desirable to enter such market. We currently generate revenue through two operating models: (i) B2C and (ii) B2B.
By leveraging our dynamic proprietary online gaming platform, we generally aim to be “first to market” where real-money online gaming has been newly legalized and where our management determines that it is desirable to enter such market. We currently generate revenue through two operating models: (i) B2C and (ii) B2B.
The variability of win rates (hold rates) also has the potential to adversely affect our business, financial condition, results of operations, prospects and cash flows. 63 Mix of Revenue Based on Time Period in Markets Our profitability generally depends on how long we have been operating in each jurisdiction.
The variability of win rates (hold rates) also has the potential to adversely affect our business, financial condition, results of operations, prospects and cash flows. Mix of Revenue Based on Time Period in Markets Our profitability generally depends on how long we have been operating in each jurisdiction.
This may make it difficult or impossible to compare the Company financial results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions for emerging growth companies because of the potential differences in accounting standards used. 73
This may make it difficult or impossible to compare the Company financial results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions for emerging growth companies because of the potential differences in accounting standards used.
For online casino games, a random number generator outcome or game could malfunction and award errant prizes. For retail and online sports betting, our platform could erroneously posts odds or otherwise be misprogrammed to pay out odds that are highly favorable to bettors, and bettors place bets before the odds are corrected.
For online casino games, a random number generator outcome or game could malfunction and award errant prizes. For sports betting, our platform could erroneously posts odds or otherwise be misprogrammed to pay out odds that are highly favorable to bettors, and bettors place bets before the odds are corrected.
We evaluate the realizability of the deferred tax assets resulting from the exchange of RSILP Units for Class A Common Stock. If the deferred tax assets are determined to be realizable, we then assess whether payment of amounts under the TRA have become probable. If so, we record a TRA liability equal to 85% of such deferred tax assets.
We evaluate the realizability of the deferred tax assets resulting from the exchange of RSILP Units for Class A Common Stock. If the deferred tax assets are determined to be realizable, we then assess whether payment of amounts 76 under the TRA have become probable. If so, we record a TRA liability equal to 85% of such deferred tax assets.
In most U.S. jurisdictions, the applicable gaming regulations require online gaming operators that offer real-money offerings to operate under the gaming license of, or partner with, a bricks-and-mortar casino or other type of local partner such as a professional sports team.
In most U.S. jurisdictions, the applicable gaming regulations require online gaming operators that offer real-money offerings to operate under the gaming license of, or partner with, a bricks-and-mortar casino, lottery or other type of local partner such as a professional sports team.
The average of all 500,000 trials yields the overall valuation conclusion. The assumptions, inputs and methodologies we use in determining fair value result in inherent uncertainty due to the application of judgment. As of December 31, 2022, none of the earnout interests remained outstanding.
The average of all 500,000 trials yields the overall valuation conclusion. The assumptions, inputs and methodologies we use in determining fair value result in inherent uncertainty due to the application of judgment. As of December 31, 2023 and 2022, none of the earnout interests remained outstanding.
The term/maturity was the duration between each valuation date and the maturity date, which was five years following the Closing date, or December 29, 2025. As of December 31, 2022, none of the warrants remained outstanding. Income Taxes We account for income taxes using the asset and liability method.
The term/maturity was the duration between each valuation date and the maturity date, which was five years following the Closing date, or December 29, 2025. As of December 31, 2023 and 2022, none of the Warrants remained outstanding. Income Taxes We account for income taxes using the asset and liability method.
Adjusted EBITDA excludes certain expenses that are required in accordance with GAAP because certain expenses are 61 either non-cash (i.e., depreciation and amortization, and share-based compensation) or are not related to our underlying business performance (i.e., interest income or expense).
Adjusted EBITDA excludes certain expenses that are required in accordance with GAAP because certain expenses are either non-cash (i.e., depreciation and amortization, and share-based compensation) or are not related to our underlying business performance (i.e., interest income or expense).
In assessing the need for a valuation allowance, we make estimates and 72 assumptions regarding projected future taxable income, our ability to carry back operating losses to prior periods, the reversal of deferred tax liabilities and the implementation of tax planning strategies.
In assessing the need for a valuation allowance, we make estimates and assumptions regarding projected future taxable income, our ability to carry back operating losses to prior periods, the reversal of deferred tax liabilities and the implementation of tax planning strategies.
The volatility in the analysis was determined using the Guideline Public Companies’ daily trading activity. Daily volatilities were calculated based on the daily trading activity using a historical lookback period 71 commensurate with the maturity. The selected volatility was the average of the Guideline Public Companies’ volatility for the period, which was calculated to be 54.58%.
The volatility in the analysis was determined using the Guideline Public Companies’ daily trading activity. Daily volatilities were calculated based on the daily trading activity using a historical lookback period commensurate with the maturity. The selected volatility was the average of the Guideline Public Companies’ volatility for the period, which was calculated to be 54.58%.
To date, no material payments under the TRA have been made, and no material payments or accrued payments thereunder are 68 expected in the near future as payments under the TRA are not owed until the tax benefits generated thereunder are more-likely-than-not to be realized.
To date, no material payments under the TRA have been made, and no material payments or accrued payments thereunder are expected in the near future as payments under the TRA are not owed until the tax benefits generated thereunder are more-likely-than-not to be realized.
Specifically, the exercise of these warrants could have been settled in cash upon the occurrence of a tender offer or exchange that involves 50% or more of our stockholders holding Class A Common Stock.
Specifically, the exercise of the Warrants could have been settled in cash upon the occurrence of a tender offer or exchange that involves 50% or more of our stockholders holding Class A Common Stock.
Unless the context requires otherwise, all references in this MD&A to the “Company,” “we,” “us,” or “our” refer to the Rush Street Interactive, Inc. and its subsidiaries. Our Business We are a leading online gaming and entertainment company that focuses primarily on online casino and online sports betting in the U.S., Canada and Latin American markets.
Unless the context requires otherwise, all references in this MD&A to the “Company,” “we,” “us,” or “our” refer to the Rush Street Interactive, Inc. and its subsidiaries. Our Business We are a leading online gaming and entertainment company that focuses primarily on online casino and online sports betting in the U.S., Canadian and Latin American markets.
Our historical and outstanding share-based compensation awards are described in Note 11 to our consolidated financial statements, included elsewhere in this Annual Report. Share-based compensation expense is measured based on the grant-date fair value of the stock-based awards and is recognized over the requisite service period of the awards.
Our historical and outstanding share-based compensation awards are described in Note 10 to our consolidated financial statements, included elsewhere in this Annual Report. Share-based compensation expense is measured based on the grant-date fair value of the stock-based awards and is recognized over the requisite service period of the awards.
However, given the tax generation success of online casino in markets where it has been legalized, we are also continuing to see strong momentum for online casino in several jurisdictions in the Americas that are looking for additional revenue sources to fund expanding budgets.
However, given the tax generation success of online casino in markets where it has been legalized, we also continue to see strong momentum for online casino in several jurisdictions in the Americas that are looking for additional revenue sources to fund expanding budgets.
General administration and other expenses consist primarily of administrative personnel costs, including salaries, bonuses and benefits, share-based compensation expense for dedicated personnel, professional fees related to legal, compliance, audit and consulting services, rent and insurance costs. Depreciation and Amortization.
General and administrative expenses consist primarily of administrative personnel costs, including salaries, bonuses and benefits, share-based compensation expense for dedicated personnel, professional fees related to legal, compliance, audit and consulting services, rent and insurance costs. Depreciation and Amortization.
Our B2C operations contributed more than 98% of our total revenue for the years ended December 31, 2022 and 2021, and we expect that it will continue to be our primary operating model into the future.
Our B2C operations contributed more than 98% of our total revenue for the years ended December 31, 2023 and 2022, and we expect that it will continue to be our primary operating model into the future.
Additionally, we continued to achieve a positive response from our strategic advertising and marketing efforts. Average Revenue Per Monthly Active User ARPMAU for an applicable period is average revenue divided by average MAUs.
Additionally, we continue to achieve a positive response from our strategic advertising and marketing efforts. Average Revenue Per Monthly Active User ARPMAU for an applicable period is monthly revenue divided by average MAUs.
In connection with the Business Combination, we executed the TRA, by and among the Special Limited Partner, RSILP, the Sellers and the Sellers’ representative, which generally provides that the Special Limited Partner pay an amount equal to 85% of certain net tax benefits, if any, that the Company and its consolidated subsidiaries, including the Special Limited Partner, realize (or in certain cases is deemed to realize) as a result of the increases in tax basis and tax benefits related to the transactions contemplated under the Business Combination Agreement and the exchange of Retained RSILP Units for Class A Common Stock (or cash) and tax benefits related to entering into the TRA, including tax benefits attributable to payments under the TRA.
In connection with the Business Combination, we executed the TRA, which generally provides that the Special Limited Partner pay an amount equal to 85% of certain net tax benefits, if any, that the Company and its consolidated subsidiaries, including the Special Limited Partner, realize (or in certain cases is deemed to realize) as a result of the increases in tax basis and tax benefits related to the transactions contemplated under the Business Combination Agreement and the exchange of Retained RSILP Units for Class A Common Stock (or cash) and tax benefits related to entering into the TRA, including tax benefits attributable to payments under the TRA.
We have an outstanding letter of credit for $1.7 million in connection with our operations in Colombia, for which no amounts have been drawn as of December 31, 2022.
As of December 31, 2022, we had an outstanding letter of credit for $1.7 million in connection with our operations in Colombia for which no amounts had been drawn.
A discussion of changes in cash flows in 2021 compared to 2020 has been omitted from this Form 10-K, but it may be found in “Item 7.
A discussion of changes in cash flows in 2022 compared to 2021 has been omitted from this Form 10-K, but it may be found in “Item 7.
Our marketing spend is based on a return-on-investment model that considers a variety of factors, including the product offerings in the jurisdiction, the performance of different marketing channels, predicted lifetime value, marginal costs and expenses and behavior of customers across various product offerings.
Our marketing spend is based on a return-on-investment model that considers a variety of factors, including the product offerings in the jurisdiction, local advertising rules, the performance of different marketing channels, predicted lifetime value, marginal costs and expenses and behavior of customers across various product offerings.
Our marketing spend is based on a return-on-investment model that considers a variety of factors, including the product offerings in the jurisdiction, the performance of different marketing channels, predicted lifetime value, marginal costs and expenses and behavior of customers across various product offerings.
Our marketing spend is based on a return-on-investment model that considers a variety of factors, including the product offerings in the jurisdiction, local advertising rules, the performance of different marketing channels, predicted lifetime value, marginal costs and expenses and behavior of customers across various product offerings.
In addition, we will continue to pursue expansion into new markets, which is expected to require significant capital investments. We have $65.3 million of additional non-cancellable purchase obligations including obligations for license and market access fees, arrangements with marketing vendors and lease payments subsequent to the upcoming 12-month period.
In addition, we will continue to pursue expansion into new markets, which is expected to require significant capital investments. We have $49.5 million of additional non-cancellable purchase obligations including obligations for license and market access fees, arrangements with marketing vendors and lease payments subsequent to the upcoming 12-month period.
Currently, we offer real-money online casino, online sports betting and/or retail sports betting in 15 U.S. states and the international markets as outlined in the table below. 57 Jurisdiction Online Casino Online Sports Betting Retail Sports Betting Domestic: Arizona ü Colorado ü Connecticut ü ü Illinois ü ü Indiana ü ü Iowa ü Louisiana ü Maryland ü ü Michigan ü ü ü New Jersey ü ü New York ü ü Ohio ü Pennsylvania ü ü ü Virginia ü ü West Virginia ü ü International: Colombia ü ü Ontario (Canada) ü ü Mexico ü ü Our real-money online casino and online sports betting offerings are currently provided under our BetRivers and PlaySugarHouse brands in the United States and Canada and under our RushBet brand in Latin America (which includes Mexico).
Currently, we offer real-money online casino, online sports betting and/or retail sports betting in 15 U.S. states and the three international markets as outlined in the table below. 60 Jurisdiction Online Casino Online Sports Betting Retail Sports Betting Domestic: Arizona ü Colorado ü Delaware ü ü Illinois ü ü Indiana ü ü Iowa ü Louisiana ü Maryland ü ü Michigan ü ü ü New Jersey ü ü New York ü ü Ohio ü Pennsylvania ü ü ü Virginia ü ü West Virginia ü ü International: Colombia ü ü Ontario (Canada) ü ü Mexico ü ü Our real-money online casino and online sports betting offerings are generally provided under our BetRivers and PlaySugarHouse brands in the United States and Canada and under our RushBet brand in Latin America (which includes Mexico).
We generally pay much lower fees on revenue generated through our in-house developed casino games such as our multi-bet blackjack (with side bets: 21+3, Lucky Ladies, Lucky Lucky), and single-deck blackjack, which primarily relate to hosting/remote gaming server fees and certain intellectual property license fees.
We generally pay much lower fees on revenue generated through our proprietary casino games such as our multi-bet blackjack (with side bets: 21+3, Lucky Ladies, Lucky Lucky), and single-deck blackjack, which primarily relate to hosting/remote gaming server fees and certain intellectual property license fees.
These efforts are primarily concentrated within the specific jurisdictions where we operate or intend to operate. 65 We believe there is significant benefit to having a flexible approach to advertising spending as we can quickly redirect our advertising spending based on dynamic testing of our advertising methods and channels. General Administration and Other.
These efforts are primarily concentrated within the specific jurisdictions where we operate or intend to operate. We believe there is significant benefit to having a flexible approach to advertising spending as we can quickly redirect our advertising spending based on dynamic testing of our advertising methods and channels. General and Administrative.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on March 7, 2022, which is available free of charge on the SEC's website at www.sec.gov and at www.RushStreetInteractive.com.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 2, 2023, which is available free of charge on the SEC's website at www.sec.gov and at www.RushStreetInteractive.com.
We account for uncertainty in income taxes using a recognition and measurement threshold for tax positions taken or expected to be taken in a tax return, which are subject to examination by federal and state taxing authorities.
We account for uncertainty in income taxes using a recognition and measurement threshold for tax positions taken or expected to be taken in a tax return, which are subject to examination by applicable taxing authorities.
See Note 2 to our consolidated financial statements, included elsewhere in this Annual Report for further information on our critical and other significant accounting policies. Share-based Compensation (subsequent to the Business Combination) We have issued stock-based awards with service-based conditions or market-based conditions.
See Note 2 to our consolidated financial statements, included elsewhere in this Annual Report for further information on our critical and other significant accounting policies. Share-based Compensation We have issued stock-based awards with service-based conditions or market-based conditions.
Revenue is impacted by variations in the hold percentage (the ratio of winnings to total amount bet) of the gaming offerings we make available to our customers. We use the hold percentage as an indicator of an online casino game or retail or online sports bet’s performance against its expected outcome.
Revenue is impacted by variations in the hold percentage (the ratio of our winnings to total amount bet) of our offerings. We use the hold percentage as an indicator of an online casino game or retail or online sports bet’s performance against its expected outcome.
See Note 1 to our consolidated financial statements, included elsewhere in this Annual Report. We expect our material cash requirements during the upcoming 12-month period to include $21.6 million of non-cancellable purchase obligations with marketing vendors, $7.9 million of license and market access fees and $1.1 million of lease payments.
See Note 1 to our consolidated financial statements, included elsewhere in this Annual Report. We expect our material cash requirements during the upcoming 12-month period to include $9.1 million of non-cancellable purchase obligations with marketing vendors, $3.5 million of license and market access fees and $1.9 million of lease payments.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K for the fiscal year ended 69 December 31, 2021, filed with the SEC on March 7, 2022, which is available free of charge on the SEC's website at www.sec.gov and at www.RushStreetInteractive.com. Operating activities.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 2, 2023, which is available free of charge on the SEC's website at www.sec.gov and at www.RushStreetInteractive.com. Operating activities.
From a legislative perspective, we are continuing to see strong momentum to legalize and regulate online sports betting in new jurisdictions in the Americas. As expected, in many cases these new jurisdictions are first trying to legalize and regulate online sports betting before considering whether to legalize and regulate online casino.
From a legislative perspective, we continue to see strong momentum to legalize and regulate online sports betting in new jurisdictions in the Americas. As expected, many of these new jurisdictions are first trying to legalize and regulate online sports betting before considering whether to legalize and regulate online casino.
Because not all of the stockholders needed to participate in such tender offer or exchange to trigger the potential cash settlement and we did not control the occurrence of such an event, we concluded that the Public Warrants, Private Placement Warrants and Working Capital Warrants did not meet the conditions to be classified in equity.
Because not all of the stockholders needed to participate in such tender offer or exchange to trigger the potential cash settlement and we did not control the occurrence of such an event, we concluded that the Warrants did not meet the conditions to be classified in equity.
Both the Black-Scholes model and the Monte Carlo simulation require management to make a number of key assumptions, including expected volatility, expected term, risk-free interest rate and expected dividends. The risk-free interest rate is estimated using the rate of return on U.S. treasury notes with a life that approximates the expected term.
Both the Black-Scholes model and the Monte Carlo simulation require management to make a number of key assumptions, including expected volatility, expected term, fair value of our Class A Common Stock, risk-free interest rate and expected dividends. The risk-free interest rate is estimated using the rate of return on U.S. treasury notes with a life that approximates the expected term.
Because the Public Warrants, Private Placement Warrants and Working Capital Warrants met the definition of a derivative under ASC 815-40, we recorded these warrants as liabilities on our consolidated balance sheet at fair value as of each reporting date, with subsequent changes in their respective fair values recognized in our consolidated statement of operations.
Because the Warrants met the definition of a derivative under ASC 815-40, we recorded the Warrants as liabilities on our consolidated balance sheet at 75 fair value as of each reporting date, with subsequent changes in their respective fair values recognized in our consolidated statement of operations.
Results of Operations The following table sets forth a summary of our consolidated results of operations for the years indicated, and the changes between periods. We have derived this data from our consolidated financial statements included elsewhere in this Annual Report.
See Notes 2, 4 and 5 to our consolidated financial statements, included elsewhere in this Annual Report. 69 Results of Operations The following table sets forth a summary of our consolidated results of operations for the years indicated, and the changes between periods. We have derived this data from our consolidated financial statements included elsewhere in this Annual Report.
Each time a customer plays a progressive jackpot game, we contribute a portion of the amount bet to the jackpot for that game or group of games. When a progressive jackpot is won, the jackpot is paid out and reset to a predetermined base amount.
We offer progressive jackpot games in our online casino offerings. Each time a customer plays a progressive jackpot game, we contribute a portion of the amount bet to the jackpot for that game or group of games. When a progressive jackpot is won, it is paid out and reset to a predetermined base amount.
Using experience, dynamic learnings and analytics, we leverage marketing to acquire, convert, retain and/or re-engage customers. We use a variety of earned media and paid marketing channels, in combination with compelling offers, brand ambassadors, proprietary content, and unique game and site features, to attract and engage customers. Furthermore, we continuously optimize our marketing spend using data collected from our operations.
We use a variety of earned media and paid marketing channels, in combination with compelling offers, brand ambassadors, proprietary content, and unique game and site features, to attract and engage customers. Furthermore, we continuously optimize our marketing spend using data collected from our operations.
Income tax as a percentage of revenue increased to 2% in 2022 as compared to 1% in 2021. Comparison of the Years Ended December 31, 2021 and 2020 A discussion of changes in our results of operations in 2021 compared to 2020 has been omitted from this Form 10-K, but it may be found in “Item 7.
Comparison of the Years Ended December 31, 2022 and 2021 A discussion of changes in our results of operations in 2022 compared to 2021 has been omitted from this Form 10-K, but it may be found in “Item 7.
Our decision about what brand or brands to use is market- and partner-specific, and is based on brand awareness, market research, marketing efficiency and applicable gaming rules and regulations. Impact of COVID-19 COVID-19 significantly impacted our business.
Our decision about what brand or brands to use is market- and partner-specific, and is based on brand awareness, market research, marketing efficiency and applicable gaming rules and regulations.
Our online casino offering consists of a combination of licensed content from leading industry suppliers, customized third-party games and a small number of proprietary games that we developed in-house.
Our online casino offering consists of a combination of licensed content from leading industry suppliers, customized third-party games and a small number of proprietary games that were developed exclusively for us.
Cash Flows The following table shows our cash flows from operating activities, investing activities and financing activities for the stated periods: Years Ended December 31, ($ in thousands) 2022 2021 2020 Net cash (used in) provided by operating activities $ (60,321) $ (48,186) $ 16,179 Net cash used in investing activities (28,990) (37,002) (6,243) Net cash (used in) provided by financing activities (1,216) 125,584 241,071 Effect of exchange rate changes on cash, cash equivalents and restricted cash (3,721) (2,132) 515 Net change in cash, cash equivalents and restricted cash $ (94,248) $ 38,264 $ 251,522 A discussion of changes in cash flows in 2022 compared to 2021 is included below.
Cash Flows The following table shows our cash flows from operating activities, investing activities and financing activities for the stated periods: Years Ended December 31, ($ in thousands) 2023 2022 2021 Net cash used in operating activities $ (5,932) $ (60,321) $ (48,186) Net cash used in investing activities (33,780) (28,990) (37,002) Net cash (used in) provided by financing activities (518) (1,216) 125,584 Effect of exchange rate changes on cash, cash equivalents and restricted cash 5,126 (3,721) (2,132) Net change in cash, cash equivalents and restricted cash $ (35,104) $ (94,248) $ 38,264 A discussion of changes in cash flows in 2023 compared to 2022 is included below.
Net cash used in operating activities was $60.3 million for the year ended December 31, 2022 as compared to $48.2 million used in operating activities for the year ended December 31, 2021.
Net cash used in operating activities was $5.9 million for the year ended December 31, 2023 as compared to $60.3 million used in operating activities for the year ended December 31, 2022.
Financial liabilities subject to fair value measurements on a recurring basis included the Earnout Interests Liability and Warrant Liabilities. Earnout Interests Liabilities The earnout interests, as described in Note 9 to our consolidated financial statements, included elsewhere in this Annual Report, were subject to certain restrictions on transfer and voting and potential forfeiture pending the achievement of certain earnout targets.
Earnout Interests Liabilities The earnout interests, as described in Note 8 to our consolidated financial statements, included elsewhere in this Annual Report, were subject to certain restrictions on transfer and voting and potential forfeiture pending the achievement of certain earnout targets.
The number and amount of betting losses and jackpot payouts we experience may also impact our quarterly or annual financial results. Although our losses are limited per wager to a maximum payout, when looking at bets across a period of time, these losses can be significant. We offer progressive jackpot games in our online casino offerings.
As customer engagement varies, so may our financial performance. The number and amount of betting losses and jackpot payouts we experience may also negatively impact our quarterly or annual financial results. Although our losses are limited per wager to a maximum payout, when looking at bets across a period of time, these losses can be significant.
Warrant Liabilities As described in Note 8 to our consolidated financial statements, included elsewhere in this Annual Report, we evaluated the warrants that entitled the holder thereof to purchase one share of Class A Common Stock at an exercise price of $11.50 per share (the “Public Warrants”), Private Placement Warrants and Working Capital Warrants under ASC 815-40, and concluded that they did not meet the criteria to be classified in stockholders’ equity.
Warrant Liabilities As described in Note 7 to our consolidated financial statements, included elsewhere in this Annual Report, we evaluated the warrants that entitled the holder thereof to purchase one share of Class A Common Stock at an exercise price of $11.50 per share (the “Public Warrants”), 6,600,000 private placement warrants sold to the Sponsor (the “Private Placement Warrants”) and an additional 75,000 warrants issued to the Sponsor upon the Closing in connection with converting certain working capital loans into warrants (the “Working Capital Warrants” and together with the Private Placement Warrants, the “Private Warrants” and the Private Warrants together with the Public Warrants, the “Warrants”) under ASC 815-40, and concluded that they did not meet the criteria to be classified in stockholders’ equity.
Online casino may expand further due to many factors, including that many U.S. states are seeking ways to increase revenues. Online sports betting’s prospects were made possible after the U.S. Supreme Court struck down PASPA in May 2018. Our strategy is to enter new jurisdictions that we believe are financially prudent for us to enter.
Online casino may expand further due to many factors, including that many U.S. states and foreign jurisdictions are seeking ways to increase revenues. In the United States, online sports betting’s prospects were made possible after the U.S. Supreme Court struck down PASPA in May 2018.
To attract, engage, retain and/or reactivate customers, we offer a loyalty program that rewards customers in exciting, fair and transparent ways. We recognize and reward customer loyalty by, among other things, ensuring there are exciting benefits at each of the customer loyalty levels we currently offer. The Business Combination On December 29, 2020, we completed the Business Combination.
To attract, engage, retain and/or reactivate customers, we offer a loyalty program that rewards customers in exciting, fair and transparent ways. We recognize and reward customer loyalty by, among other things, ensuring there are exciting benefits at every customer loyalty level we offer.
Following the Business Combination, the fair value of our Class A Common Stock is determined based on the quoted market price. To estimate the fair value of stock option awards, we used the Black-Scholes model, and we used a Monte Carlo simulation to determine the fair value of grants with market-based conditions.
To estimate the fair value of stock option awards, we used the Black-Scholes model, and we used a Monte Carlo simulation to determine the fair value of grants with market-based conditions.
Volatility for each comparable was calculated as the annualized standard deviation of daily continuously compounded returns. The Black-Scholes analysis was performed in a risk-neutral framework, which required a risk-free rate assumption based upon constant-maturity treasury yields, which were interpolated based on the remaining term of the Private Placement Warrants and Working Capital Warrants as of each valuation date.
The Black-Scholes analysis was performed in a risk-neutral framework, which required a risk-free rate assumption based upon constant-maturity treasury yields, which were interpolated based on the remaining term of the Private Warrants as of each valuation date.
Gaming taxes, operating expenses, payment processing costs, and market access costs contributed $39.8 million, $23.0 million, $10.8 million and $5.4 million, respectively, to the year-over-year increase in costs of revenue, with personnel costs contributing to the remaining $3.5 million of the year-over-year increase.
Gaming taxes, market access costs, payment processing costs, and operating expenses contributed $26.7 million, $9.6 million, $8.9 million and $2.1 million, respectively, to the year-over-year increase in costs of revenue, with personnel costs contributing to the remaining $3.1 million of the year-over-year increase.
We determined the fair value of our Public Warrants based on the publicly listed trading price of such warrants on the valuation date. We determined the fair value of the Private Placement Warrants and Working Capital Warrants using Level 3 inputs within a Black-Scholes model.
We determined the fair value of our Public Warrants based on the publicly listed trading price of such warrants on the valuation date. We determined the fair value of the Private Warrants using Level 3 inputs within a Black-Scholes model. The Private Warrants were valued as of December 29, 2020 (i.e., the Closing date) and December 31, 2020.
Our online sports betting and retail sports betting operations experience seasonality based on the relative popularity and frequency of certain sporting events. Although sporting events occur throughout the year, our online sports betting customers are most active during the NFL, NBA and college football and basketball seasons.
Although sporting events occur throughout the year, our online sports betting customers are most active during the NFL, NBA, college football and basketball seasons.
The year-over-year increase in MAUs for 2021 compared to 2020 was mainly due to our continued growth and strong customer retention rates in existing markets such as Pennsylvania, Illinois, New Jersey, Indiana and Colorado, as well as our expansion into new markets such as Michigan, Virginia, Connecticut, West Virginia and Arizona.
The year-over-year increase in MAUs in the United States and Canada for 2022 compared to 2021 was mainly due to our continued growth and strong customer retention rates in existing markets such as Pennsylvania, Illinois, Michigan and 62 New Jersey, as well as our expansion into new markets such as New York, Ontario (Canada), Louisiana and Maryland.
This key metric represents our ability to drive usage and monetization of our online offerings. 60 The chart below presents our ARPMAU for the years ended 2022, 2021 and 2020: The year-over-year decrease in ARPMAU for 2022 compared to 2021 was mainly due to an increase in the number of sports betting-only markets such as New York, Louisiana and Maryland, which, when combined with our increased promotional and advertising activities in those markets, resulted in an increase in the number of customers in sports betting-only markets.
The year-over-year decrease in ARPMAU in the United States and Canada for 2022 compared to 2021 was mainly due to an increase in the number of sports betting-only markets such as New York, Louisiana and Maryland, which, when combined with our increased promotional and advertising activities in those markets, resulted in an increase in the number of customers in sports betting-only markets.
The table below presents our Adjusted EBITDA reconciled from our Net loss, the most directly comparable GAAP measure, for the periods indicated: Years Ended December 31, ($ in thousands) 2022 2021 2020 Net loss $ (134,332) $ (71,092) $ (131,645) Interest expense, net 573 187 135 Income tax expense 8,961 4,688 2,919 Depreciation and amortization 14,325 4,245 2,082 Change in fair value of earnout interests liability — 13,740 2,338 Change in fair value of warrant liabilities — (41,802) (7,166) One-time payment from Affiliated casino — — (9,000) Share-based compensation 18,691 24,912 144,733 Adjusted EBITDA $ (91,782) $ (65,122) $ 4,396 Key Factors Affecting Our Results Our financial position and results of operations depend, to a significant extent on the following factors: Industry Opportunity and Competitive Landscape We operate within the global gaming and entertainment industry, which is comprised of diverse products and offerings that compete for consumers’ time and disposable income.
Management also believes that Adjusted EBITDA is useful in evaluating our operating performance compared to that of other companies in our industry, as this metric generally eliminates the effects of certain items that may vary from company to company for reasons unrelated to overall operating performance. 65 The table below presents our Adjusted EBITDA reconciled from our Net loss, the most directly comparable GAAP measure, for the periods indicated: Years Ended December 31, ($ in thousands) 2023 2022 2021 Net loss $ (60,055) $ (134,332) $ (71,092) Interest (income) expense, net (2,765) 573 187 Income tax expense 11,209 8,961 4,688 Depreciation and amortization 29,759 14,325 4,245 Change in fair value of earnout interests liability — — 13,740 Change in fair value of warrant liabilities — — (41,802) Share-based compensation 30,020 18,691 24,912 Adjusted EBITDA $ 8,168 $ (91,782) $ (65,122) Key Factors Affecting Our Results Our financial position and results of operations depend, to a significant extent on the following factors: Industry Opportunity and Competitive Landscape We operate within the global gaming and entertainment industry, which is comprised of diverse products and offerings that compete for consumers’ time and disposable income.
The increase reflects higher period-over-period online casino and sports betting revenue of $96.5 million and retail sports betting revenue of $7.9 million, offset by a decrease in social gaming revenue of $0.3 million. Costs of Revenue. Costs of revenue increased by $82.5 million, or 25%, to $414.6 million in 2022 as compared to $332.1 million in 2021.
The increase reflects higher period-over-period online casino and sports betting revenue of $97.5 million, retail sports betting revenue of $1.1 million and social gaming revenue of $0.3 million. Costs of Revenue. Costs of revenue increased by $50.4 million, or 12%, to $465.0 million in 2023 as compared to $414.6 million in 2022.
Depreciation and amortization expense consists of depreciation on our property and equipment and amortization of intangible assets (including market access licenses, gaming jurisdictional licenses, internally developed software, trademark and developed technology) and finance lease right-of-use assets over their useful lives. See Notes 2, 5 and 6 to our consolidated financial statements, included elsewhere in this Annual Report.
Depreciation and amortization expense consists of depreciation on our property and equipment and amortization of intangible assets (including market access licenses, gaming jurisdictional licenses, internally developed software, trademark, developed technology and content) and finance lease right-of-use assets over their useful lives.
Income tax expense increased by $4.3 million, or 91%, to $9.0 million in 2022 as compared to $4.7 million in 2021. The increase in income tax expense is attributable to the profitability of our foreign operations for which both current and deferred taxes are recorded.
Income tax expense increased by $2.2 million, or 25%, to $11.2 million in 2023 as compared to $9.0 million in 2022. Income tax expense is attributable to the profitability of our foreign operations for which both current and deferred taxes are recorded. Income tax expense as a percentage of revenue remained flat at 2% in 2023 and 2022.
Customer engagement in our online offerings may vary due to, among other things, customer satisfaction with our platform, the number, timing and type of sporting events, the length of professional sports seasons, our offerings and those of our competitors, our marketing efforts, climate and weather conditions, public sentiment or macroeconomic conditions. As customer engagement varies, so may our financial performance.
Customer engagement in our online offerings may vary due to, among other things, customer satisfaction with our platform, the number, timing and type of sporting events, the length of professional sports seasons, our offerings and marketing efforts and those of our competitors (including those not just in the online gaming industry but also in the entertainment industry broadly), weather conditions, public sentiment, an economic downturn or other economic factors such as inflation, economic uncertainty or macroeconomic conditions.
See “ Business — Business Combination ” for a description of the Business Combination and the agreements entered into in connection therewith. Trends in Key Metrics Monthly Active Users MAUs is the number of unique users per month who have placed at least one real-money bet across one or more of our online casino or online sports betting offerings.
Trends in Key Metrics Monthly Active Users MAUs is the number of unique users per month who have placed at least one real-money bet across one or more of our online casino or online sports betting offerings. For periods longer than one month, we average the MAUs for the months in the relevant period.
As a result, if factors or expected outcomes change and our management uses significantly different assumptions or estimates, our share-based compensation expense for future periods could be materially different, including as a result of adjustments to share-based compensation expense recorded for prior periods. 70 Share-based Compensation (prior to the Business Combination) A discussion of Share-based Compensation (prior to the Business Combination) has been omitted from this Form 10-K, but it may be found in “Item 7.
As a result, if factors or expected outcomes change and our management uses significantly different assumptions or estimates, our share-based compensation expense for future periods could be materially different, including as a result of adjustments to share-based compensation expense recorded for prior periods.
The increased use of cash reflects a higher period-over-period net loss totaling $63.2 million, which offset by higher non-cash expenses totaling $32.2 million and an increase in working capital changes of $18.8 million.
The decrease reflects a lower period-over-period net loss totaling $74.3 million and increased non-cash expenses of $27.3 million, which was partially offset by an increase in working capital totaling $45.8 million.
For periods longer than one month, we average the MAUs for the months in the relevant period. We exclude users who have made a deposit but have not yet placed a real-money bet on at least one of our online offerings. We also exclude users who have placed a real-money bet but only with promotional incentives.
We exclude users who have made a deposit but have not yet placed a real-money bet on at least one of our online offerings. We also exclude users who have placed a real-money bet but only with promotional incentives. MAUs is a key indicator of the scale of our user base and awareness of our brands.
Our revenue is predominantly generated from our U.S. and Canada operations, with the remaining revenue being generated from our Latin America (including Mexico) operations. See Note 4 to our consolidated financial statements, included elsewhere in this Annual Report.
We also provide social gaming (where permitted), where users can earn or purchase virtual credits to enjoy free-to-play games. Our revenue is predominantly generated from our U.S. and Canada operations, with the remaining revenue being generated from our Latin America (including Mexico) operations. See Note 3 to our consolidated financial statements, included elsewhere in this Annual Report.
We are starting to see some other online gaming operators rationalize their marketing spend in North American jurisdictions, although their marketing spend may vary by quarter depending on, among other things, sports calendars, new market launches and prior commitments.
We are starting to see some other online gaming operators rationalize their marketing spend in North American jurisdictions, although their marketing spend may vary by quarter depending on, among other things, sports calendars, new market launches and prior commitments. 71 Liquidity and Capital Resources We measure liquidity in terms of our ability to fund the cash requirements of our business operations, including working capital and capital expenditure needs, contractual obligations and other commitments, with cash flows from operations.
Through our B2B operations, we offer retail sports betting services to land-based businesses, such as bricks-and-mortar casinos, in exchange for a monthly commission. B2C and B2B products can be launched under one of our existing brands or customized to be incorporated into a local or third-party brand.
Through our B2B operations, we offer retail sports betting services to land-based businesses, such as bricks-and-mortar casinos, in exchange for a monthly commission.
Jurisdictions that have established state or government-run monopolies may limit opportunities for private operators such as us. States and some local governments impose tax rates on online casino and sports betting, which may vary substantially between states. We are also subject to a federal excise tax of 0.25% on the amount of each sports bet placed.
Jurisdictions that have established state or government-run monopolies may limit opportunities for private operators such as us. States, foreign jurisdictions and some local governments impose tax rates on online casino and sports betting, which may vary substantially between jurisdictions and may change from time to time, usually because on factors outside our 66 control.
Mix of Revenue From Our Different Operating Models Because we operate using two different operating models, each of which has its own unique range of profitability, the relative proportion of revenue that is derived from each operating model in a given time period could impact our overall level of profitability.
Mix of Revenue From Our Different Operating Models Because we operate using two different operating models, each with its own unique range of profitability, the relative proportion of revenue that is derived from each operating model in a given time period could impact our overall level of profitability. 67 Key Components of Revenue and Expenses Revenue We currently offer real-money online casino, online sports betting and/or retail sports betting in 15 U.S. states, Colombia, Ontario, Canada and Mexico.
Online sports revenue is generated based on total customer bets less amounts paid to customers for winning bets, less incentives awarded to customers, plus or minus the change in unsettled sports bets. 64 Retail Sports Betting We provide retail sports betting services to certain land-based partners in exchange for a monthly commission that is calculated based on the land-based retail sportsbook revenue.
Retail Sports Betting We provide retail sports betting services to certain land-based partners in exchange for a monthly commission that is calculated based on the land-based retail sportsbook revenue.
Costs of revenue as a percentage of revenue increased to 70% in 2022 as compared to 68% in 2021. Advertising and Promotions. Advertising and promotions expense increased by $30.0 million, or 16%, to $220.5 million in 2022 as compared to $190.5 million in 2021.
Costs of revenue as a percentage of revenue decreased to 67% in 2023 as compared to 70% in 2022. Advertising and Promotions. Advertising and promotions expense decreased by $59.8 million, or 27%, to $160.7 million in 2023 as compared to $220.5 million in 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+1 added−0 removed3 unchanged
Biggest changeOur inability or failure to do so could harm our business, financial condition and operating results. In addition, our customers may experience inflationary pressures and rising costs. This could result in our customers having less disposable income, and thus they may reduce their spending on discretionary entertainment activities such as our products and services.
Biggest changeThis could result in our customers having less disposable income, and thus they may reduce their spending on discretionary entertainment activities such as our products and services. Such a reduction in spending by our customers could harm our business, financial condition, revenues and operating results. ITEM 8.
A 10% increase or decrease in the interest rates of these interest-earning instruments would not have a material effect on our consolidated financial statements for the year ended December 31, 2022. Foreign Currency Exchange Rate Risk We have been exposed to foreign currency exchange risk related to our transactions in currencies other than the U.S.
A 10% increase or decrease in the interest rates of these interest-earning instruments would not have a material effect on our consolidated financial statements for the year ended December 31, 2023. Foreign Currency Exchange Rate Risk We have been exposed to foreign currency exchange risk related to our transactions in currencies other than the U.S.
Our foreign currency exposure is primarily with respect to the Colombian Peso, the Canadian Dollar and the Mexican Peso. Markets with a functional currency other than the U.S. Dollar accounted for less than 15% and 10% of our revenue for the fiscal years ended December 31, 2022 and 2021, respectively.
Our foreign currency exposure is primarily with respect to the Colombian Peso, the Canadian Dollar and the Mexican Peso. Markets with a functional currency other than the U.S. Dollar accounted for less than 20% and 15% of our revenue for the fiscal years ended December 31, 2023 and 2022, respectively.
Currently, these risks are not material to our financial condition or results of operations, but they may be in the future. Interest Rate Risk As of December 31, 2022, we had cash, cash equivalents and restricted cash of $206.1 million, which consisted primarily of bank deposits and money market funds.
Currently, these risks are not material to our financial condition or results of operations, but they may be in the future. Interest Rate Risk As of December 31, 2023, we had cash, cash equivalents and restricted cash of $171.0 million, which consisted primarily of bank deposits, certificates of deposits and money market funds.
Such a reduction in spending by our customers could harm our business, financial condition, revenues and operating results. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See financial statements included in Item 15 “ Exhibits, Financial Statement Schedules ” of this Annual Report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See financial statements included in Item 15 “ Exhibits, Financial Statement Schedules ” of this Annual Report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.
Inflation Risk We do not believe that inflation has had a material effect on our business, financial condition or results of operations as of and for the fiscal year ended December 31, 2022. If our costs become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases.
Dollar would not have a material effect on our consolidated financial statements for the year ended December 31, 2023. 77 Inflation Risk We do not believe that inflation has had a material effect on our business, financial condition or results of operations as of and for the fiscal year ended December 31, 2023.
A 10% increase or decrease in the value of these currencies compared to the U.S. Dollar would not have a material effect on our consolidated financial statements for the year ended December 31, 2022.
A 10% increase or decrease in the value of these currencies compared to the U.S.
Added
If our costs become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and operating results. In addition, our customers may experience inflationary pressures and rising costs.

Other RSI 10-K year-over-year comparisons