Betway rails against Swedish Gambling Authority reprimand

Online gambling operator Betway has hit back against a reprimand handed out by the Swedish Gambling Authority (SGA) regarding historical negative equity failings.

The SGA said Betway’s financial situation “constitutes a significant risk in the company’s operations”, which the operator wholly denies, and the regulator has said a licence renewal would be rejected based on the operator’s current situation.

The SGA reprimanded Betway after the company’s Betway Limited division posted a financial loss of more than €50m and negative equity of €4.8m in its 2019 audit.

Super Group, Betway’s parent company, confirmed to EGR that it did post negative equity in 2019 but recovered in 2020 and 2021, and following its reverse merger with blank-cheque outfit Sports Entertainment Acquisition Corp. is now in a positive financial situation.

The firm also said it was confident that it could meet the requirements of any licence application and satisfy the SGA going forward. It also rejected the notion there was any risk to its operations due to its financial position.

Under Swedish gambling regulations, operators not on a sound financial footing would fail to meet the threshold to acquire a licence.

Betway was granted a Swedish licence on 1 January 2019, after going through the application process in 2018 which was based on its 2017 financial year, which according to the SGA put the company in a “strong financial position”.

However, on the basis of the company’s historical pre-SPAC merger 2019 results, the SGA issued a reprimand to the operator and has given the opportunity for the Betway Group parent company to submit a fresh capital guarantee for financial stability.

The SGA said: “For the financial year 2019, Betway has reported a large loss and a sharp deteriorating economy which means difficulties in maintaining [a] sound financial structure in the gaming business.

“The company lacks its own capital base and is completely dependent on support from the parent company in the group to be able to continue to conduct business. The issued capital guarantee compensates only partially for the negative equity.

“The Swedish Gaming Inspectorate assesses that Betway’s financial situation constitutes a significant risk in the company’s operations and emphasises that Betway would not be granted a renewed licence with a negative own capital regardless of an issued capital guarantee,” the body added.

In response, Betway argued the positive financial results posted by its parent company, Betway Group, ensured that its financial safety was guaranteed.

The parent company posted 2019 losses of €42.8m but recorded a positive equity of €49.9m.

Betway argued that the SGA had only conducted a “limited assessment of capital strength and financial position” by not taking into consideration the stance of its parent group.

Betway Limited is based in Malta, with the firm pointing towards the Malta Companies Act which allows negative capital as long as the company proves it can conduct ongoing business.

Responding to the SGA’s report, Betway noted: “The shareholders have committed to continue to finance their investments in the Betway brand.

In the meantime, the company intends to keep its capital at sufficient levels to cover all historical accumulated losses at the same time as the cost rationalisation is carried out.”

Super Group began trading on the New York Exchange on 28 January and has a market cap of $4.8bn as of 2 February.