Codere sees the risk of losing its license in Spain due to a legal change that punishes the accumulation of very serious sanctions

Codere sees the risk of losing its license in Spain due to a legal change that punishes the accumulation of very serious sanctions



Codere has warned investors in the US that it is exposed to the risk of losing its online betting operator license in Spain. The reason is a recent legal change that, since last summer, allows these companies to withdraw their license if there is an accumulation of very serious infractions of state or regional gaming regulations.

The warning is contained in a document recently submitted to the SEC, the US stock market regulator, by Codere Online Luxembourg, the online betting business of the Spanish group, which last year began trading on the US stock exchange.

In the section on "risk factors" that may affect your business, the subsidiary of the Spanish multinational recalls that "it depends on licenses to carry out its operations" and acknowledges that the loss or termination of the same could have an adverse effect for her. In the case of Codere Online, its license depends on the General Directorate for the Regulation of Gambling (DGOJ), attached to the Ministry of Consumer Affairs, which is directed by Alberto Garzón.

In the document to the SEC, Codere alludes to a recent modification of the 2011 Gaming Law that, since last July, has introduced a new assumption that disqualifies online gaming operators in Spain: "Having been sanctioned the natural person, the legal entity or its partners, directors or administrators, or any other entity that is part of the business group to which it belongs by means of a firm administrative resolution for two or more very serious infractions in the last four years, for non-compliance with the State gaming regulations or of the Autonomous Communities".

This new assumption to leave bookmakers without a license is included in Law 11/2021, of July 9, on measures to prevent and combat tax fraud, transposing Directive (EU) 2016/1164, of the Council, of July 12, 2016, which establishes rules against tax avoidance practices that directly affect the functioning of the internal market, modification of various tax regulations and in matters of gambling regulation.

According to Codere, "it is not clear" if these legal modifications of the state regulations (which is what regulates online gambling: betting halls are autonomous jurisdiction) "are effective retroactively, or if the requirement regarding the absence of sanctions is applies only to sanctions imposed since the entry into force of Law 11/2021".

The Spanish multinational, which has not responded to questions from elDiario.es on this matter, indicates in the document to the SEC that two of the subsidiaries of the Codere group in Spain, Codere Apuestas Galicia, SL, and Codere Apuestas Extremadura, SAU, "have been sanctioned with two (2) or more very serious breaches" of the respective regional regulations in the last four years.

"If the DGOJ applies Law 11/2021 retroactively, there is a risk that the DGOJ's licenses will be extinguished or not renewed due to the sanctions imposed on Codere Apuestas Galicia, SL, and Codere Apuestas Extremadura," the document states.

And if the application of that rule is not retroactive but Codere or its subsidiaries accumulate two or more very serious sanctions, its online subsidiary, it acknowledges, "could be ineligible to renew its licenses" in Spain. This country is its main market (in the online leg, it contributes more than half of the income). And this scenario "could have a material effect" on the group, he acknowledges.

According to sources from the Ministry of Consumer Affairs, the calculation of the 4 years referred to for the "accumulation" of sanctions "begins to count from the entry into force of the regulations, that is, from July 11 of 2021".

"It cannot be applied retroactively," clarifies Garzón's department. Last November, the DGOJ renewed Codere Online's license to operate as an online betting operator that it received in 2011, according to the agency's website.

Codere details in that document to the SEC the latest sanctions it has received from the DGOJ. On September 24, that general directorate notified him of the imposition of a sanction for a "serious" infraction of the state regulation of online gambling, for not preventing access to this activity to "at least one individual who was included in the Spanish registry that prohibits access to the game".

For this conduct, "on October 7, 2021, Codere Online paid approximately 92,000 euros in fines." And in December he received another sanction for a "serious" violation of the regulations relating to "certain marketing activities". In this case, the fine was 6,000 euros.

Codere's online subsidiary jumped to the floor last December through the merger with the special purpose acquisition company (SPAC, for its acronym in English) DD3 Acquisition Corp.II. A few months earlier, the subsidiary complained to US investors the "negative stance" of the Spanish Government against bookmakersgiving as an example the Consumer's veto of advertising in the sector.

The IPO of Codere Online coincided with the delisting of the former parent company in Spain and its dissolution, after completing the financial restructuring process announced a year ago, which included the injection of up to 225 million euros, the capitalization of more than 350 million debt from its creditors and the extension of maturities to September 2026, in exchange for leaving 95% of the company in the hands of the group's bondholders.

The matrix of the Codere group increased its red numbers in 2021 by 43.1% in 2021, to 338.6 million euros, despite having increased its turnover by 33%, to 790.7 million.



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