Who Killed WV Sports Betting? Inside The Failure Of BetLucky

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WV sports betting

Barely a year after the fall of PASPA, a small corner of US sports betting is staring down its first major failure.

It’s not match-fixing, nor is it point-shaving or insider-information leaking. It’s a “who-done-it” to answer the question: who killed West Virginia sports betting?

This is a high-tech, white-collar tale involving three companies once aligned to provide sports betting in West Virginia. Now they’re adversaries in court, wrestling for control of the failed product they once worked together to create.

The dispute froze both WV sports betting and the trio’s larger plans to build a commercial platform for widespread distribution.

A bit of BetLucky backstory

There are three companies around which this narrative orbits:

It started smoothly for Miomni and EnterG as they entered into a 2017 agreement to develop a sports betting platform together. The companies planned to pair EnterG’s back-end technology with Miomni’s front-end products and services, then license “the Combined Solution” to third parties.

And so they did. Believing it would secure the EnterG source code for €750,000, Miomni subsequently formed its own alliance with Delaware North, a large US hospitality group in the market for a sportsbook supplier.

More on the timeline here.

Into the US they go

In addition to retail and online betting in West Virginia, DNG and Miomni agreed to jointly develop their own B2B platform for licensure all across the US under the BetLucky brand. Miomni had the legal right to pursue such opportunities under the terms of its agreement, according to a UK judge.

The ensuing source-code transaction is where things went awry.

A pricing dispute created a rift between EnterG and Miomni that ultimately left DNG without any solution for sports betting, effectively shuttering WV sports betting in March. Miomni never obtained the intellectual property it sought, and EnterG all but vanished from the radar.

Now it’s up to the courts to decide who’s at fault and which parties own which pieces of the puzzle.

Miomni fighting on home court and away

The fiasco quickly spawned legal proceedings in two countries.

Miomni first filed suit in the High Court of its native UK, alleging that EnterG breached its contract by maliciously disabling the Combined Solution via “kill switches.”

Judge David Edwards subsequently ordered the company to remove any malicious code by June 3, but it has not complied. EnterG instead called the decision unenforceable, countering that it legally disabled Miomni’s access due to “unauthorized use.”

The fight across the pond

On the offensive in the UK, Miomni simultaneously is defending itself in the US.

Delaware North filed its own suit, claiming that Miomni is in breach of the BetLucky contract. Portions of that agreement made public require Miomni to disclose any reliance on third-party products or services, which it allegedly did not do.

Barely a year after toasting their union, the two parties are now brawling over a broken platform in the Delaware Court of Chancery. BetLucky remains offline in the meantime.

Four sides to every story

The well-worn words of Robert Evans need some tweaking for disputes involving three parties.

The first step in finding the truth is getting everyone’s story down on paper, starting at the top with the operator most directly impacted by the outage.

According to Delaware North …

Delaware North says it was duped. Per its initial filing, it contends that Miomni — specifically CEO Michael Venner — breached their agreement with “inaccurate statements that fraudulently induced DNG to enter into the joint venture.”

The crux of DNG’s argument: Venner knew Miomni could not deliver an end-to-end solution as promised, instead relying on a third-party contractor (EnterG) to power the back-end. The complaint lays out the basics from DNG’s perspective:

The BetLucky License Agreement required Miomni to seek prior approval before retaining any third parties to perform services in connection with the Platform. The BetLucky License Agreement also required Miomni to identify all third-party products or materials that were included in, or required to operate, the Platform.

Miomni disclosed several entities that were providing such services, products, or materials, but Miomni… never disclosed, let alone obtained approval, for Entergaming to play any role with respect to the operation or support of the Platform.

According to DNG, Miomni’s contribution to the BetLucky venture was “illusory” from the start:

During negotiations for the joint venture, Miomni and Venner repeatedly represented to DNG that Miomni owned the intellectual property rights in the Platform, including the source code underlying the “front-end interface” and the “back-end” of the Platform.

The ensuing dispute with Entergaming ultimately caused the failure of DNG’s sports betting operations. It seeks declaratory judgment and damages, including transfer of Miomni’s stake in BetLucky.

But Miomni says …

The company at the center of the trouble has a different version of events.

According to Miomni, EnterG hacked into the system and maliciously disabled the platform. Venner further claims that EnterG attempted extortion, demanding €1.41 million for the source code — almost twice the agreed-upon price — after realizing the potential value of the BetLucky enterprise.

Edwards validated those allegations, ordering EnterG to reveal and disable the kill switch(es). The financials, on the other hand, are likely a matter for trial.

Regarding the Delaware North complaint, Miomni’s opposition is twofold:

  1. DNG fails to support the claims of breach of contract and fraud.
  2. Jurisdiction precludes DNG from pursuing a remedy in Delaware.

Having earned an injunction in the UK, Miomni might have better grounds to shed the claims of fraud in the US.

A quick reading, however, doesn’t lend much support to the second point regarding jurisdiction. A redacted clause from the JV agreement seems to indicate that both parties consented to litigate any disputes in Delaware, where BetLucky is incorporated.

Miomni moved to dismiss the DNG suit July 12, after which the plaintiffs filed an amended complaint. The public version of the updated filing is heavily redacted, but it seeks to provide additional support for its claims while rejecting the UK inunction as “inconsequential.”

Meanwhile, EnterG goes dark …

EnterG has left us with precious few details to piece together its side of the story. The company did not send a representative to its defense in the UK, and its two known shareholders have disappeared from public view.

The names of those owners and their respective stake in the company came to light during the litigation:

The latter is a former employee of Greek lottery supplier Intralot, which tried to popularize the term “Entergaming” in 2009. The two companies are otherwise unrelated.

According to the DNG filing, EnterG claims the purported “kill switches” were merely anti-theft protections activated due to a breach of the 2017 contract. The amended complaint contains excerpts from EnterG’s response to the High Court, including this passage:

“Miomni does not own any intellectual property rights to the sports betting platform nor does Miomni currently have any license or other right to use and access EnterG’s [Entergaming’s] sports betting platform.”

Neither Marinos nor EnterG responded to requests from LSR for comment.

Sources tell LSR

The troubled “third party” from Cyprus isn’t the only one keeping quiet. None of the parties involved were willing to speak to LSR, nor were representatives from the WV Lottery.

A source familiar with Miomni’s operations was, however, able to fill in some of the blanks.

According to the source, EnterG at one point tried to bypass the agreement with Miomni and work directly with Delaware North. From an exchange with LSR:

“It is clear from the documentation submitted that Delaware North continues to liaise with the perpetrator Entergaming in this matter, which in itself is baffling given they have been judged by the High Courts in the UK to have acted wrongly on a contract which was written based on UK law.”

The amended filing indicates that DNG engaged EnterG in some capacity. Miomni developers, meanwhile, found and removed the malicious code and offered to restore services to DNG and rekindle their joint venture. DNG declined, says the source.

This person accuses DNG of grasping for a cause to terminate the joint venture once it began to realize revenue. Miomni argues that EnterG pulled a similar trick.

EnterG: ‘The cooperation had stopped’

What transpired between Miomni and EnterG might or might not rise to the level of criminal conduct, but the court proceedings reveal a pugnacious undertone.

The relationship between the two parties began to sour in February, when the BetLucky system showed its first signs of trouble. Seeking to end their union out of the blue, EnterG served Miomni with a notice of termination later that month. It alleged “material breaches” of contract but did not elaborate further.

Communications between the two companies, however, seem to indicate EnterG was holding Miomni at ransom. According to Venner’s testimony, Alopoudi proposed three paths to peace via a March 1 e-mail:

  1. Keep the current deals as equal partners ensured with a new agreement.
  2. Allow Miomni to buy the source code while EnterG exits the project.
  3. Immediate termination of cooperation.

BetLucky fully failed five days later, and the root cause was no mystery. A Skype exchange between Miomni and EnterG on March 6 led to this message from Alopoudi: “The cooperation had stopped.”

UK judge orders EnterG to comply

Edwards ruled that “the balance of convenience” favored an injunction for Miomni.

“In my judgment,” he said, “there is plainly a serious issue to be tried.”

The first step, though, is bringing the figureheads to court. Alopoudi and Marinos effectively vanished, and two separate inquiries had trouble establishing tangible evidence of EnterG in 2019.

Here’s an excerpt from the InfoCredit report:

“We have been unable to locate any offices for the subject and believe they do not maintain offices in Cyprus. Under these circumstances no staff is employed and companies may utilize certain staff (2-3 people) from their auditors or lawyers offices … We believe that the subject is an International Business Company (IBC) with no offices of its own in Cyprus.”

A subsequent investigation from System Day reinforced that finding a month later:

“They do not operate owned offices in Cyprus and the address and telephones given are those of the law office of M/S ‘M. Eliades & Partners LLC’ which effected registration and looks after their affairs in Cyprus.”

Public records indicate the co-owners founded EnterG in 2010 and registered the company in Cyprus in late 2016.

Future implications for all involved

Miomni still powers existing US sports betting operations elsewhere, presumably with an independent supply chain. LSR sources indicate it has access to a clean version of the BetLucky source code, minus the kill switches.

Still, it and/or DNG might have to rebuild some components from the ashes of the former EnterG partnership to move forward. They won’t be doing it together, though.

A company representative indicated this week that DNG has begun the process of finding a new sports betting partner.

Failure in West Virginia could jeopardize future licensing opportunities, however, particularly if Miomni misrepresented its supply chain to regulators. In its complaint, DNG expressed concerns over its own suitability going forward:

In a March 25, 2019 Written Consent of its Board of Managers, BetLucky determined that Miomni’s breaches of the JV Agreement were reasonably likely to have jeopardized the regulatory approval required for the business operations of DNG, DNG’s affiliates, and BetLucky …

That passage is among those redacted in the amended filing.

WV sports betting revenue tanking

The ongoing feud punched a hole in the state budget and left West Virginia bettors mostly frustrated.

WV sports betting has been practically non-existent since March, generating less than $500,000 in tax revenue from the three active sportsbooks. With retail operations at Mardi Gras and Wheeling Island suspended, the state collected less than $1.3 million (of a projected $5.55 million) in sports betting taxes for the entire fiscal year.

BetLucky was the only online platform available in WV sports betting when it failed, and no replacement has since appeared in the market.

WV sports betting handle - Lifetime

So what will West Virginia do now?

Perhaps snakebitten by the fiasco, regulators have demonstrated a lack of urgency in licensing additional operators to fill the void. In recent comments to WV News, Director John Myers expressed doubts about the revenue potential from sports betting and referred to his oversight duties as “a pain in the butt.”

The WV Lottery did not return a request from LSR for comment, but Myers did provide a public response this week. Speaking to PlayWV, the top regulator insisted that those blaming the state for the holdup are “misinformed.”

Lawmakers including Del. Shawn Fluharty are among those blaming the regulator for leaving WV sports betting in the lurch despite being one of the first states to legalize. New lottery officials, Fluharty says, did not sufficiently investigate Miomni’s supply chain before issuing its license.

On the cusp of the busy season for sportsbooks and with regional competition growing fast, WV sports betting shows no signs of life. States like New Jersey with robust mobile industries, meanwhile, continue to meet or exceed their projections.

Delaware North + Miomni + EnterG timeline

Here’s the relevant sequence of events, compiled from public documents and previous reporting on LSR and PlayWV.

Partnering up

Falling out

Filing suits

Amended Delaware North complaint

Click here to see the latest filing in the case