The suspension of the PlayUp sportsbook betting platform in Colorado and New Jersey resonated with many in the American gambling industry, regardless if they had any direct connection to the highly publicized but troubled start-up.
For the 40 United States-based employees of the Australian company, the last several weeks were a financial roundhouse.
For CEO Daniel Simic, it was another horrible optic. Publicly, he claims to be closing in on a sale of the company after a planned deal with now-bankrupt cryptocurrency exchange FTX dissolved in 2021. And it could also be a major legal problem for PlayUp, with the New Jersey Department of Gaming Enforcement accusing PlayUp of filing improper payroll and tax information before ordering the site to stop taking bets in July. A similar move was made by the Colorado Division of Gaming.
These legal and commercial details will eventually be sorted out, as will whether the laid-off workers see the money they are owed. They had not been compensated for severance packages and PTO as of Oct. 1, however.
But this morass might also prove a cautionary tale for other gambling companies, whether start-ups or established global brands, in attempting to affix the model and methods from gambling economies in other countries onto the disparate and myriad models in the United States. Or for domestic entrepreneurs, in not realizing what they don’t know.
“They tried to mirror the Australian business in the US, and you just can’t do that,” a former PlayUp employee told Gaming Today.
Another noted a “sheer lack of knowledge” by PlayUp’s home office and Simic in operating a business of any kind in the United States and recounted pushback after trying to educate Australian executives about the process.
Millions of investment dollars put into PlayUp’s plans over the previous six years couldn’t buy experience or, apparently, the patience to gain it.
Brendan Bussmann, B2 Global managing partner said:
Anytime you enter into a new market, you need to take a deep dive to understand not just where the opportunities are but the potential pitfalls. Anyone that walks in thinking they can use the same cookie cutter no matter the market is likely doomed to have problems if not fail.”
PlayUp Catch-Up: New Jersey and Colorado Sites Frozen
The NJDGE in July revoked PlayUp’s license to accept bets in the state, ordering it to pay out pending wagers. The site announced it was entering a maintenance mode later in the day, meaning it was essentially barred from any transactions other than refunding customer money.
The NJDGE listed several reasons for its decision:
Simic floated internally the intention to cap potential future payouts for winning bets at $2,000, but that idea was shot down by the NJDGE.
“We plan on releasing a new platform whereby we will relaunch in NJ and CO at the same time,” Simic said. “With NJ, we simply have to resolve the issues at hand which we are working through now and reapply for a transactional waiver. As for CO, we requested permission to go into maintenance mode, but will relaunch at some time. (It’s) not cost efficient to run one state on its own.”
Simic didn’t initially respond to an interview request from Gaming Today, then agreed to answer a list of questions after this report was published. He has not yet answered any of them.
Simic had acquired the remnants of PlayUp, including its name, out of liquidation in 2017 with the goal of turning Australia’s top fantasy sports provider into a one-stop gambling shop.
FTX founder Sam Bankman-Fried had seen PlayUp as an entry point for cryptocurrency into the expanding American gambling market. That synced with Simic’s vision for a metaverse-inspired Bettaverse project that would offer multiple types of betting globally with one virtual app. Considering the matrix of regulatory and financial law in the United States alone, the project would be ambitious as a licensed entity.
Still, well before FTX’s epic crash, the deal was seen as a coup by rank-and-file PlayUp employees in the US, given the size of the investment, the growing profile of crypto, and the technology platform FTX wielded.
PlayUp Cleaning Up Details After NJ, Colorado Shutdown
At the center of it all is Simic, an Australian investor whose decision-making and bravado in the process has, former workers claim, benefitted no one, either laid-off workers seeking back pay, or PlayUp’s ownership hoping to find a desperately needed cash infusion so it can actually become a sports betting operation again.
Reports also have PlayUp attempting to land a buyer and vacate the US.
All of PlayUp’s US workers were technically laid off on June 30. PTO payouts and severance package problems have been outsourced, with one former employee admitting, “I’m not expecting to see it.” But salaries have been paid out, according to a source.
Some former employees believe that the potential for a sale is real, but not likely. Others discount that there is a potential buyer.
Pondered a former company executive: “Why in their right mind would anybody buy this company.”
The reason, they said: there’s not much left to buy. There’s no proprietary tech, the market is soft, and the assets are “toxic.”
Any sale would have to take into account monies owed to vendors — as much as $12 million by some estimates — and the fact that the company has no US employees or market access to increase PlayUp’s value. With a technology platform, agreements for market access in Iowa, Indiana, and West Virginia through Caesars, and actual employees, the company is estimated to have been worth as much as $10 million before the recent controversy. But PlayUp is in breach of its agreement with Caesars and worth just $3-5 million now, an industry observer estimated.
“Probably just starting from scratch would be better,” a former employee said.
For context, PointsBet, with a US headquarters and sports betting licenses in 14 states, recently was purchased for $225 million by Fanatics.
Did PlayUp Sportsbook Misread How the US Sports Betting Business Changed?
One of the first problems, former employees claim, is that Simic and PlayUp didn’t recognize how the American sports betting market had changed. Previously, the focus of any successful sportsbook, one said, was on company valuation and market access. Now, it’s about profit, product, and user experience. The hire of experienced American gambling executive Dr. Laila Mintas as US CEO didn’t help, they say, because she was often undercut.
“They were trying to build this valuation up and then sell it,” a source said.
PlayUp “spent money left and right” in chasing market access, signed a partnership with the New Jersey Devils, and saw its valuation boosted. Still, former employees feel that Simic considered them an expense and “a burden instead of an opportunity to create something.” While they don’t feel he intentionally “sabotaged” potential SPAC deals being quarterbacked by Mintas, he apparently unraveled some.
Simic is cast by his former employees as ill-informed in basic bookmaking practices, concurrently mettlesome in daily activities well below CEO-level, and unavailable to make decisions in keeping with his job title.
Former employees interviewed by Gaming Today felt that Simic’s leadership exacerbated two key forces in PlayUp’s troubles: 1) trying to treat American sports betting markets like one national entity, and 2) not understanding the life cycle of a start-up endeavor. One called PlayUp the “quintessential start-up, claiming you have a differentiating product” to shake up a billion-dollar industry, but lacking in the vision to execute it.
Understanding compliance rules and regulations, especially in New Jersey, was a problem, sources said. Simic, one noted, believed regaining permission to offer bets in the state would be a quick process when it could take as long as 18 months in a state NJDGE director David Roebuck has referred to as the “platinum standard” in the US. Simic’s proclamation about a quick re-launch from “maintenance mode,” they noted, was disingenuous.
Former Employees: Relationship with Australian Office Toxic
Meanwhile, mistrust festered between the American and Australian offices. A toxic atmosphere worsened when the $450 million acquisition by FTX collapsed. A former employee claims that FTX refused to increase its bid for PlayUp when Simic "asked for more money for certain Australian employees." Court documents in subsequent lawsuits between PlayUp and Maintas appear to confirm those claims, but FTX later invested $35 million.
Mintas, whose work was praised by former employees, is countersuing PlayUp and Simic seeking $100 million in damages for attempting, she claims, to make her a scapegoat for the FTX debacle. She recently updated her suit claiming PlayUp falsified documents during the discovery process and asserts that Simic attempted to coerce her into a side deal to buy a PlayChip company that she considered a conflict of interest.
There was also a mass resignation when the FTX deal cratered and a constant churn of high-level executives that in the most recent phases of problems led to the departure of Dennis Drazin, the chairman and CEO of Darby Development, which operates Monmouth Park racecourse in New Jersey.
The exodus of C-Level employees has spilled into PlayUp's Australian business, too, as Glenn MacPherson resigned as CFO in July, and Ashley Kerr's role as General Counsel ended in June.