Shares of Evolution AB [ST: EVOG] fell more than 10% on Monday, the final trading day before Christmas, following reports that the UK Gambling Commission (UKGC) was reviewing the Swedish online gaming software provider’s license. The firm's stocks rose modestly on Friday. 

The inquiry pertains to allegations that Evolution’s games were available to players in the UK via unlicensed operators, a matter the company confirmed in a communication to investors on December 20. Evolution acknowledged that its games had been available on unauthorized sites, but stated that the issue has now been resolved. 

“…[G]ames on the identified websites not holding a Commission license have been made unavailable from the UK,” read the note.

‘Assertive Action’ 

Martin Carlesund, CEO of Evolution, stated that his firm was “now implementing strong measures, utilizing all technical resources possible” to guarantee its games were exclusively accessible to British players via UK-licensed operators. 

Carlesund stated that Evolution continued to be dedicated to “a transparent and open relationship” with regulators. 

Investors were alarmed by the potential outcomes of the review, which might lead to a significant penalty, or possibly the suspension or revocation of the license. 

Although the UK represents merely around 3% of Evolution's revenue, analysts from Jeffries indicated that investors feared the review might trigger regulatory measures in other regions. 

Analysts at Pareto indicated that these concerns were exaggerated, and Evolution is not at risk of losing its UK license. 

Enigmatic Document 

Evolution is presently involved in a defamation lawsuit against an unidentified party that created a 2021 report claiming the company was operating in multiple black markets. These encompassed nations under US sanctions, including Iraq, Sudan, and Syria. 

The Newark, NJ-based law firm Calcagni & Kanefsky submitted the report as a complaint to the New Jersey Division of Gaming Enforcement (DGE). 

A later DGE inquiry revealed no regulatory violations by Evolution, and the firm was exonerated in February 2024. The software company has requested that the New Jersey Superior Court disclose the identity of its accuser, but has not been successful so far. 

In April, a judge decided that additional work was required to investigate the claims in the report before Evolution could identify precisely whom it’s suing. The judge ruled this was due to the necessity of balancing an attorney's duty to keep a client's identity confidential with a plaintiff's entitlement to obtain information vital for pursuing civil action. 

The DGE investigation's news reduced Evolution's market cap by US$3 billion, as stated in the company's lawsuit.