Evolution’s Compliance Checks Faulty, Unsealed Report Says

Evolution AB had “ineffective” compliance procedures for checking if its casino games were accessible in markets where gambling is illegal, according to a 2022 report made public in a Tuesday court filing.

While there was no evidence that the company engaged in any illegal practices, Evolution had a “complete absence of any ongoing examination” to ensure its casino-operator clients blocked gamblers from playing in restricted markets, the report from gambling research firm Spectrum Gaming Group states. That potentially exposed the company to heightened regulatory risk and attention from law enforcement, it said.

The report is at the center of a long-running defamation lawsuit between Evolution and Black Cube, an Israeli intelligence firm that accused the gambling company of allowing its casino customers to supply games in prohibited markets. Evolution, which denies wrongdoing, had commissioned Spectrum to independently investigate the allegations. A US regulator investigated Evolution over the Black Cube allegations, but declined to take action and closed its probe in 2024.

“Based on our investigation, we have no reason to believe that Evolution knowingly and intentionally allowed for its games to be played in territories prohibited by its contracts,” the Spectrum report said. “However, by virtue of its compliance deficiencies, as detailed in Spectrum’s investigative report, Evolution has certainly allowed for such gaming activity to occur.”

Evolution specializes in live online gambling, providing video feeds of games like blackjack and roulette to casino operators around the world, taking a cut of players’ bets. Evolution has argued that the casinos are responsible for compliance, and it has never terminated any contracts for breaching the rules, the Spectrum report adds.

Evolution declined to comment on the Spectrum report, but has previously said it has “no interest” in having its games accessible in sanctioned markets and uses “industry-leading solutions” to stop that from happening.

Rival gaming tech company PlayTech Plc had hired Black Cube and anonymously sent the intelligence firm’s findings to the New Jersey gambling regulator via a law firm in 2021. When the Black Cube report leaked, investors sold Evolution’s shares and wiped more than $10 billion from its market value. Evolution initially sued the law firm, Calcagni & Kanefsky LLP, for defamation, later adding Black Cube. That litigation is ongoing at the New Jersey Superior Court.

The New Jersey gaming regulator investigated the Black Cube report’s allegations, but closed the probe in February 2024 without taking action. At the time, Evolution said it had conducted an internal review and had enhanced its processes even though it concluded its “due diligence and compliance processes were sufficient.”

Still, the defendants in the defamation case have argued that Spectrum’s report corroborates their own findings. They successfully fought to get the document unsealed in the case. Evolution has claimed the report, which was also reviewed by the New Jersey regulator, is exculpatory, but wanted it to remain sealed on the basis that it contains commercially sensitive and confidential information. “Spectrum found Defendants’ false claims to be just that – false,” Evolution said in an April court filing.

Read More: Evolution Games Ran in Banned Markets, Execs Say in Secret Tapes

Spectrum’s investigators found Evolution’s games were accessible in Hong Kong, Singapore, United Arab Emirates and Saudi Arabia, where gambling is illegal.

However, it found that Black Cube’s claims that Evolution games were available in US-sanctioned markets including Iran, Sudan and Syria were not credible. Evolution declined to provide additional requested evidence that would have helped Spectrum confirm or refute that the sessions described by Black Cube occurred, according to the report.

Spectrum also said it found no evidence that Evolution received direct cash payments from its customers, as alleged in Black Cube’s report, after reviewing bank statements.

Still, Evolution’s “ineffective compliance procedures allowed these situations to develop and need prompt reevaluation,” the report said. The company is ultimately receiving income from unauthorized use of its platform, even if it isn’t directly responsible for the breaches, presenting an “untenable situation.”

The ongoing litigation has been punctuated by a series of bombshells, including Black Cube’s covert recording of current and former Evolution executives discussing alleged black market activity. Later, Evolution unmasked rival PlayTech as the firm that commissioned Black Cube’s 2021 research, causing the British gambling tech firm’s shares to fall almost 40%.

Licensed gambling operators and games providers have been under increasing pressure from regulators to better track and block their services in illegal markets.

In July, the UK Gambling Commission reached a £4.75 million ($6.4 million) settlement with Evolution after finding the Swedish company’s games were available to British consumers on black market casinos in 2023 and 2024.