New Jersey DGE Shuts Down PlayUp Amid Compliance Issues

Australian sportsbook PlayUp announced Thursday that it is temporarily shutting down operations in New Jersey, suffering another setback as it struggles to remain afloat in the U.S. market.

The company made the announcement one day after the New Jersey Division of Gaming Enforcement (DGE) issued an order revoking the transactional waivers that allowed PlayUp to conduct sports wagering across the state. Under the order, PlayUp is obligated to pay out any pending wagers to New Jersey customers, a spokesperson from the New Jersey Attorney General’s Office told Sports Handle.

Although PlayUp had been authorized by the division to launch an online casino platform, the company has not gone live with that product in the Garden State. The order issued Wednesday terminates PlayUp’s contract to offer iGaming in the state.

PlayUp’s inability to comply with New Jersey laws demonstrates that it is unable to offer real-money wagers at the standards required by statewide regulations and statutes, the DGE wrote in the order.

Beset by a faulty investment from cryptocurrency exchange FTX, PlayUp disclosed plans last week to sell its U.S. assets to an unnamed public company. PlayUp was dealt its latest setback days after sources told the Australian Financial Review that the company is seeking $10 million in financing after a failed bid to go public in the U.S.

Timeline of events

The Australian operator released a statement on its New Jersey website on Thursday afternoon, hours after shutting down its website for a supposed maintenance issue on Wednesday night.

Speculation mounted on Thursday after New Jersey customers could not access the site. Prior to Wednesday’s order, PlayUp operated in only two U.S. states: New Jersey and Colorado.

In June, the DGE sent a letter to then-PlayUp Chief Financial Officer Glenn MacPherson requesting assorted financial information related to its New Jersey operations. As part of the request, New Jersey regulators sought information on PlayUp New Jersey’s year-to-date remittance of employee withholding tax, certain bank statements between January and June 2023, and payroll registers over that period. The DGE did not receive a response from PlayUp by a July 6, 2023, deadline imposed by the division.

One day later, PlayUp CEO Daniel Simic informed the DGE during a phone call that MacPherson no longer served in that capacity. The DGE forwarded the request to Simic following the call. Per the request, the DGE set a new deadline of July 14, adding that failure to comply “may result in a finding of non-cooperation against PlayUp.”

“This can lead to disciplinary action, up to and including revocation of your transactional waiver, and denial of your license,” DGE Director David Rebuck wrote in the order.

While PlayUp provided a payroll summary and a payroll statement for January 2023, the company did not provide bank statements as requested by the DGE, according to the order. PlayUp did submit a tax filing for the first quarter of 2023, but it failed to submit the requested financial information for February through June, according to the DGE.

Simic told Legal Sports Report last week that the U.S. division will likely lower its employee headcount to fewer than 10, down from a staff of nearly 40 six months ago.

Other concerns noted by New Jersey regulators in the order:

• PlayUp has outstanding invoices owed to the state’s Division of Gaming Enforcement.
• After significantly reducing headcount in the state, the company does not currently have an executive in charge of the New Jersey division, according to the DGE. Simic advised the DGE that he is filling the role, despite being out of state. Other staff members that filled key positions such as chief operations officer, head of product, head of sportsbook, and head of compliance are no longer employed by PlayUp, according to the DGE.
• PlayUp has not explained a delay in finalizing an investigation into a potential fraud charge against a customer, according to the DGE. The bettor requested a withdrawal in March, Rebuck wrote in the order.

FTX complications

PlayUp announced in January 2022 that it received a $35 million investment from FTX during the previous quarter. The investment, according to the Sydney Morning Herald, helped FTX secure exclusive negotiations for a potential $450 million takeover of the online gaming company. The negotiations reportedly led to a messy divorce between PlayUp and former U.S. CEO Laila Mintas.

Under the financing agreement with FTX, a potential capital raise above $10 million may be beneficial to former clients of the now-defunct crypto exchange. As part of the FTX agreement, its stake in PlayUp will increase if the sportsbook operator receives financing from a separate transaction above the threshold. Once valued at approximately $32 billion, FTX entered Chapter 11 bankruptcy protection in November 2022 amid a liquidity crisis.

Numerous Australian creditors are looking to claw back about $240 million in lost funds from FTX, the Australian Financial Review reported.

“PlayUp may now abandon the US market after it received approaches from a US-listed business to buy those operations, people familiar with the company said.”

PlayUp searches for $10m as it untangles itself from FTX dealhttps://t.co/nzDqUbYiSM

— Alfonso Straffon 🇨🇷🇺🇸🇲🇽 (@astraffon) July 17, 2023

Would a potential shutdown of PlayUp’s operations in the U.S. have ripple effects Down Under? As one Australian financial expert told Sports Handle Thursday night, “Nobody covers that company [here].”

At the same time, the departure of PlayUp from the U.S. market could deliver a sharp blow for a company once backed by the family of former Australian prime minister Malcolm Turnbull.

PlayUp is not the only Australian-based operator to struggle in the U.S. Last month, PointsBet shareholders approved the sale of its U.S. assets to Fanatics for $225 million.

Over the last 12 months, other mid-sized operators, including Fubo Sportsbook and Maxim Bet, have shuttered operations.

According to the New Jersey DGE, the order does not prevent PlayUp from reapplying for a transactional waiver in the future.

As of Thursday evening, PlayUp’s Colorado website remained operational. A Colorado Division of Gaming spokesman did not immediately respond to Sports Handle‘s request for comment on Thursday.

Jeff Edelstein contributed to this story.