Gaming Report: Tax Authorities Question Online Fantasy Gaming Firms on GST; MGM Lays Off 254, Plans to Cut More Jobs & More

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  • Namita Ghosh April 30, 2019
  • 2 Minutes Read

After training their guns on some of the leading lottery firms in the country last year, the tax authorities now seemed to have set their eyes on the fast-growing fantasy gaming industry. Recent reports indicate that the Indirect Tax department has begun to question some of the top online fantasy gaming firms to crosscheck possible revenue leakage in the manner these platforms calculate and pay GST.

In the meantime, Las Vegas’ biggest employer, MGM Resorts International, has started a massive employee layoff exercise. CEO Jim Murren announced last week that 254 employees were being laid off as a cost-cutting measure with all employees handed out pink slips occupying managerial posts. Local tabloids, however, report that services of many mid and entry-level employees have also been terminated.

In a major crackdown on online gambling, Vietnamese police have uncovered a massive online gambling operation linked to Fun88. Police have arrested 22 people who were found involved in processing wagers to the tune of $1 Billion (~₹70 Crores).

Back in the U.S., lawmakers of the U.S. state of Maine held a meeting with local casino operators to discuss the five pending sports betting legalization bills.

 

Indirect Tax Department Questions Online Fantasy Gaming Firms Over GST

Fantasy gaming is a growing sector in India and recent months have been particularly eventful, what with the market leader Dream11 entering the unicorn club, and several firms making expansion moves. The buzz seems to have caught the attention of tax authorities that has now begun to look into the financial transactions and GST payment records of several top-notch online fantasy firms.

Fantasy Gaming GST

According to an Economic Times report, several state-level tax authorities in Bengaluru have initiated an exercise to determine whether GST should be applicable on Fantasy Sports contests basis the entire contest entry amount that includes the users’ contribution to the prize pool, or the gross revenue earned by the operators and online companies.

The report quoted a tax official as saying, “The valuation rules (under GST framework) are quite clear that GST is levied on the consideration and currently there is no clarity as to whether the revenue charged by these companies be considered consideration or the total pool. In March some companies were asked to explain why they shouldn’t be paying GST on the total pool.”

This is not the first time that fantasy gaming setups are being scrutinized by the tax department. Last year in May, indirect tax officials had raided the Jaipur office of MyTeam11 for allegedly not paying GST on amounts collected by the platform.

Rule 31A of the Central Goods and Services Tax Rules 2017 dictates that the value of supply of actionable claim in the form of betting, gambling or horse racing is 100% the face value of the bet. However, online skill gaming companies go by the premise that since their activities are categorized as ‘games of skill’ – which is why they cannot be classified as gambling or betting activities, and so the rule does not apply to them.

Unlike lottery, betting or gambling operations that are paying a 28% tax bracket, fantasy gaming companies are paying GST at 18% under ‘other services’. Dream11 is one such company that pays 18% GST on its gross consideration.

“We pay GST on the gross consideration collected by our platform and not on our margins. Levying GST on user deposits would mean that it’s paid only once when users make their deposits and not every time they play in our contests with their winnings as well, which is when Dream11 provides a service to them. This is the same practice followed globally in every mature GST-following country. GST for online gaming companies is charged on their Gross Gaming Revenue,” said co-founder & CEO, Dream11, Harsh Jain.

According to reports, the Indirect Tax department is currently only assessing the tax parameters of the fantasy gaming firms, and no tax demand has been put forth yet.

 

MGM Lays Off 254, Plans to Cut More Jobs

Las Vegas-based casino firm MGM Resorts International has undertaken a significant layoff exercise as part of a cost-cutting operational shift. The company has already announced 254 layoffs that will reduce labor costs by $100 Million annually.

In January, CEO of MGM Jim Murren had announced the company’s ‘2020 Plan’ that envisages an increase in annual adjusted earnings by $200 Million over the next two years, and an additional $100 Million by the end of 2021. The plan included a 3% reduction in the company’s workforce.

MGM Resorts International

Image Courtesy: Aviana Global

In a letter to employees last week, Murren wrote that the layoffs were part of the company’s efforts to ‘streamline’ its operations and boost earnings. He also underlined that the cuts would affect managers, not union workers.

While the firm had assured that the layoffs have affected only managerial positions, latest reports suggest that the employment of many mid and entry-level workers has also been terminated in the exercise.

Nevada Current has quoted a terminated employee stating on the condition of anonymity, “It was a bloodbath. I waited six hours to find out I’d been fired. They walked around pointing people out. Everyone was crying. Some of those laid off didn’t even bother cleaning out their desks. I can’t speak for the whole company but in my department of 42 people there are 15 left.”

The former employee of MGM reportedly also informed that all the terminated employees were assured a minimum severance of one month’s pay.

With a strength of 77,000 employees, MGM is the largest employer in Nevada. Investor pressure to buttress revenue is being cited as the primary reason for the layoffs. Since August last year, the company has seen a fall of nearly 12% in its share prices.

Ironically, the layoffs also come at a time when the Forbes has ranked MGM 18th on its ‘America’s 500 Best Large Employers’ list for 2019. While cutting down operational costs in Las Vegas, MGM has reportedly increased its investment in Asia by expanding into Japan.

 

FanDuel Signs Deal With Sportradar to Offer Live Sports Betting

U.S. bookmaker FanDuel has inked a deal with Switzerland’s media giant Sportradar AG, becoming the first U.S. sports betting operator to offer live broadcasts of games while providing betting odds.

FanDuel Sportradar

Image Courtesy: Wall Street Journal

While neither company disclosed the financial terms of the agreement, the service under the deal will allow viewers to see live odds displayed in one part of the screen allowing them to place a bet while watching the live stream itself. FanDuel will offer the service only in New Jersey for now but hopes to provide it in other states as they allow mobile sports wagering.

The sports on offer will include tennis and German Bundesliga soccer. According to general manager of FanDuel Sportsbook Niall Connell, gambling interest can double or even triple when odds are offered alongside live broadcast.

He stated, “If you’re betting on something, you tend to want to watch the outcome of it. It’d be a bit like betting on a horse race but not being able to see the actual race at all. Plus, a lot of this tennis content is matches that aren’t on terrestrial TV.”

FanDuel Group was established in 2018 when Paddy Power Betfair Plc agreed to buy fantasy sports site FanDuel, creating a company valued at over $1 billion.

 

Vietnam Busts Massive Online Betting Ring Linked to Fun88

Vietnamese police have recently busted an online gambling ring that was involved in taking in over $1 Billion (~₹70 Crores) in bets. With 22 arrested, the crackdown is believed to be the largest-ever illegal online betting operation to be caught in the country.

Vietnam Illegal Online Betting

Image Courtesy: VnExpress International

According to Thanh Nien, after police discovered that thousands of accounts were linked to a ring that processed an estimated $1.28 Billion in funds, massive raids were conducted across the country. The betting ring was linked to the Fun88 brand.

Even as dozens of electronic devices and other tools of the gambling trade were seized from several cities including Hanoi and Ho Chi Minh city, police also seized large amounts of cash and many luxury vehicles from the raided locations. Bank account details with large account balances were also uncovered in the raids.

According to the authorities, the busted gambling ring was running in a highly sophisticated manner and was challenging to detect. The 22 people arrested include 12 organizers. They were using bank accounts with small amounts of money to conduct these transactions.

Police found that wagering was processed through Fun88.com that in the UK operates under the TGP Europe Ltd. banner. Bets were being redirected to a Philippines-licensed Fun88 mirror domain. Gamblers who visited the site were asked to deposit cash into banks in exchange for virtual money in coded accounts. Most of the illegal betting under the ring was on football, police said.

 

Maine Lawmakers Mull Over Legalization of Sports Betting

After the U.S. Supreme Court lifted a federal ban on sports betting, many states in the country have brought in a legal framework for operating legalized sports betting. Eight states already have operational sportsbooks, while several others are in various stages of legal proceedings to get the same functional. Maine is likely to join the list soon.

Maine Sports Betting

Image Courtesy: Gambling Sites

Last Friday, the state’s lawmakers discussed the possibility of legalizing sports betting in Maine. The Maine Veteran and Legal Affairs Committee heard out representatives of the state’s two casinos – Hollywood Casino and Oxford Casino, off-track betting parlors and the harness racing industry. Amid concerns over sports betting leading to increased problem gambling, there was a distinct lack of organized opposition to the proposition.

Talking about the additional revenue that sports betting would bring in, Executive Director of Gambling Control unit, Milton Champion said, “There is only so much discretionary funds available, in my view, indicates that New England has or is very close to reaching its saturation point. It is essential, however, that we have the ability to offer what the competition offers. And by competition, I am referring to other states.”

There are currently five pending sports betting legalization bills in the state, three of which are still in draft stages and pending in the State House. The question that the Maine lawmakers are mulling over right now is how to approach and implement sports betting. During the meeting, testimony was also taken on the five bills. While the state is debating this, Maine residents are hoping that sports betting becomes legal before NCAA’s March Madness in 2020.

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