UPDATE 02/03/23 - Story updated to clarify the relationship between Bally's and Breckenridge Curaçao.
A Bally’s Corp partner online gambling company has acquired Japan-facing website CasinoSecret, expanding its Japanese exposure to four brands, amid hardening government rhetoric against the industry.
Curaçao-registered CasinoSecret on February 7 announced its takeover by Breckenridge Curaçao, of whom Bally’s Corp is the primary beneficiary, according to a statement on CasinoSecrets’ affiliates website.
Japanese-language gaming websites reported the takeover as being completed on February 3.
“The acquisition further enhances Breckenridge’s presence within the Japanese online gaming space and will accelerate innovation through emerging synergies,” the statement said.
“We are proud to join the Breckenridge group, and excited by their role as a strategic partner to Bally’s,” CasinoSecret CEO and co-founder Nadir Ounissi said.
The CasinoSecret purchase is the fourth Japan-facing brand in the Breckenridge stable, joining traditional market leader Vera & John, InterCasino and Yuugado.
Bally’s Corp entered into a relationship with Breckenridge Curaçao as a variable interest entity (VIE) when it acquired Gamesys Group for $2.6bn in October 2021.
The CasinoSecret acquisition points to Bally’s and Gamesys’ confidence in the massive Japanese market, despite recent public warnings by the government and police against online gambling, as well as potential regulatory action snaring affiliate websites — the dominant way in which Japanese customers access foreign platforms.
In October last year, the police and the Consumer Affairs Agency, the regulator for affiliate operations in general, warned in an advertising campaign that gambling on offshore websites constitutes criminal activity, including casino games.
The warnings included a reminder of prison sentences for extensive gambling activity or the facilitation of gambling of other players, or fines of at least ¥500,000 ($3,700) for simple offences.
According to Bally’s 2021 prospectus for the Gamesys takeover, there “remains doubt over the applicability” of Japanese law outlawing gambling to the “remote supply model”, especially given an unclear legal status for remote gaming and a lack of extra-territorial enforcement.
However, “local counsel has further advised that, although the supplies are made from outside Japan, sufficient nexus may be created for Japanese law to apply if the effects of such supply are felt in Japan”.
In its earnings report for the third quarter of 2022, Bally’s Corp reiterated that it is “the primary beneficiary” of Breckenridge Curaçao and consolidates the latter’s financial earnings in view of it being a VIE.
The VIE relationship refers to Bally’s having the “power to direct” the most economically impactful activities of the company and the “obligation to absorb losses and the right to receive benefits” from Breckenridge’s operations, given that the latter has insufficient equity at risk.
However, Bally’s “does not control all decisions” of the company.
The VIE status for Breckenridge Curaçao is characterised in Bally’s various financial updates as Gamesys’ provision of platform and content services, as well as the “licensing of certain brands and the provision of ancillary services”.
The Bally’s third quarter report for 2022 noted that Breckenridge Curaçao’s assets in 2021 and 2022 outweighed its liabilities, and that revenue for the first three months and first nine months of 2022 were $68.9m and $229.7m, respectively.
The Bally’s prospectus also noted that Asia was then the Gamesys region with the highest revenue growth, making up 30 percent of Gamesys revenue in 2020.
CasinoSecret made headlines in December when it announced a promotional deal with football club AS Monaco.
CasinoSecret is now AS Monaco’s official online gaming partner in Japan, capitalising on the celebrity of the club’s Japanese national team player Takumi Minamino.
Gamesys did not respond to VIXIO GamblingCompliance questions on Monday (February 20) on the price and other details of the Breckenridge Curaçao acquisition of CasinoSecret.