Chumba Casino, Global Poker Founder Owns 120 Supercars, Numerous Yachts

Smart Company's Jason Andrew has an excellent piece out this week profiling the founder of Chumba Casino and Global Poker.  The brands come under the umbrella of Laurence Escalante's sprawling gambling empire Virtual Gaming Worlds (VGW) Holdings.

Some of Andrew's findings:

• In 2023, VGW was the sixth largest private company in Australia by turnover with 1200 employees globally.
• Escalante owns numerous Lamborghini yachts and 120 supercars.
• Before founding VGW, Laurence started as a devout Christian and ran a religious-focused gaming company straight out of university, White Knight Games.
• VGW group comprises three businesses: Chumba Casino, Luckyland Slots, and Global Poker.

The History of Sweepstakes Casinos

The idea of ‘sweepstakes’ goes back to the 1940’s, as explained by Andrew.

A ‘sweepstake’ is just a lottery with a prize where there is “no purchase necessary to enter” and “purchases will not increase the chance of winning”.

In the 2000s, there was a shift from physical slot machines to digital gambling. Venues would disguise themselves as internet cafes offering ‘slots’ on computers without the chance of winning any real prizes. These early sites didn’t have the ingenuity to build the ‘twin coin’ model which defines the sweepstakes casinos of today, but they did play a key role in catalysing the shift to online slots.

There Are Legal Issues

Not all states allow these so-called sweepstakes casinos.

Chumba Casino was chased out of the state of Michigan by regulators last October.

State gaming regulators first began investigating another sweepstakes casino, Golden Hearts Games, in August 2021 and found Golden Hearts’ activity constituted illegal gaming, as they did not hold a license to offer gaming in the state of Michigan.  State regulated online casinos must pay a licensing fee and a specified tax rate.

In 2022, the Department of Attorney General issued a cease-and-desist letter to Golden Hearts advising that it was illegally operating. Despite the letter, Golden Hearts continued to offer its gaming product to Michigan residents. The Department subsequently sent notice under the Michigan Consumer Protection Act of its intent to file an action in state court. Faced with the intended lawsuit from the State of Michigan for violating the Lawful Internet Gaming Act by conducting internet gaming without a license, Golden Hearts thereafter agreed to halt its activity, signing an Assurance of Discontinuance stating that it would no longer offer its games in Michigan.

The Assurance of Discontinuance was filed in the Ingham County Circuit Court on September 1, 2023. The complaint also alleged that Golden Hearts’ conduct violated the Michigan Consumer Protection Act by deceiving Michiganders into thinking that they were participating in legal gaming.

“Unlicensed gaming robs our schools and our government of essential funding and leaves consumers unprotected,” Nessel said. “When companies like Golden Hearts attempt to circumvent Michigan’s gaming laws, they create the false impression that their games are legal and safe for consumers. My office is committed to ensuring that our gaming laws are strictly enforced and those who violate those laws are held accountable.”

It's not just Michigan, as Andrew points out:

Their operations are quasi-legal, towing the grey line based on technicalities in the law, but there is a big chance that there will be crackdowns and the revenue will go through the floor.

In February of 2023, the state of Delaware ordered VGW to close their operations in the state, whilst Michigan also filed lawsuits against the company in December of 2022.

“The Delaware Division of Gaming Enforcement (DGE) issued a Cease Desist Order against VGW (Virtual Gaming Worlds) Luckyland Inc. on February 23, 2023 concerning their Slot Operations/Games in Delaware.”

In May of 2024, they were also hit with a class action lawsuit for their operations in the state of Georgia. The regulators are coming.

Is There an IPO Coming?

Escalante has hinted about taking the company public.

In 2021, Escalante stated in a shareholder letter:

“No time pressure exists for listing – but VGW remains open to future liquidity events.

VGW is highly profitable and has no requirements for additional funding; however, it does recognise the potential benefits for the Group and shareholders in providing liquidity on an appropriate basis – with an IPO the most likely path. A North American listing venue is now far more likely than the ASX”.

So is an IPO on the cards?

All of the early investors in VGW will want to cash out eventually.

But realistically, listing this business would be an absolute nightmare given the regulatory risks, and going public would only attract more attention.

Their stock is traded on a private markets stock marketplace in Australia called primary markets, but stock on these marketplaces typically trades at a large discount given the lack of liquidity.