IMGL Magazine April 2022

War in Europe

Agency has launched a “Shields Up” campaign aimed at helping companies strengthen their defenses. Similar strategies have been followed in Europe although the threat appears to be non-specific. Whilst cyber attacks directly connected to the war have yet to be seen, there are things going on that we may not recognise as cyberwar but which are making a big difference. In the early hours of the invasion part of the KA-SAT infrastructure was disrupted taking out internet access for thousands across Europe including Ukraine’s satellite defenses. Several weeks later the disruption remains. The impact on gaming and its response Given the levels of disruption to the region it would be surprising if the gaming industry were not affected in both Russia and Ukraine. The Russian gaming market was expected to reach $3.6 billion in 2025, however, with current trends, that figure is likely to be significantly smaller. The Ukrainian government has asked gaming companies to pull out and discontinue any business in Russia. In response, Russia has threatened to legalize the piracy of software and take other economic retaliation against companies. The limited information coming from Russia itself makes it all-but impossible to track the impact on locally based companies. However, there have been numerous reports of international investors mothballing projects in the region. Summit Ascent Holdings said it was postponing phase II of its development of the Tigre De Cristal resort based in Primorye Economic Zone, Vladivostok having previously indicated its investment would continue. Other companies like bet365, Next-gen gaming provider BETER and sports data supplier Genius Sports who were already active in Russia, have exited the market. Aspire Global has terminated its contract with Sports Lotteries LLC, operator of the Russian National Lottery and Parimatch, which was founded in Ukraine in 1994, has withdrawn its Russian franchise operation in response to the invasion. Parimatch has also temporarily relocated its Kyiv-based operation to Cyprus amid concerns over the safety of its staff. Game development studio Evoplay which was located in Lviv in the east of Ukraine has pulled the trigger on emergency contingency plans for its majority-Ukrainian team, relocating some staff to Cyprus and others to a new facility in Lviv. Aristocrat Leisure has suspended its Russian operation and helped 70 percent of the staff at its Pixel United mobile social gaming division relocate to new offices in Wroclaw, Poland or to safer parts of Ukraine. Software provider Playtech announced it was facing writedowns of some Ukrainian assets. Content developer Playson also paid a tribute to its staff in Ukraine revealing some employees have signed up to

join Ukraine’s Armed Forces. The threat of being hacked by cyber criminals predates the invasion, but the fact remains that gambling websites are a lucrative target. No doubt long in the pipeline, the European Gaming and Betting Association (EGBA) has set up a new expert group in response. The group will help support and coordinate the efforts of members and non-members to counter the latest cyber security threats against gambling websites. The gaming industry has not stood by as a spectator of events in Ukraine. As at the end of march ‘Gaming Industry for Ukraine’, a global gaming industry fundraiser that launched to support people in Ukraine, had exceeded its initial GP£250,000 target in donations. The wider gaming and game development industry has made a much larger orverall contribution with in excess of US$200 million raised, boosted by US$144 million from Epic Games and Microsoft through the proceeds of its fortnite game. Other tech giants Humble Bundle, Sony, Square Enix, Activision Blizzard, and Riot Games have also been major donors. As we heard in January, Ukraine had a thriving gambling industry, a first-rate gambling services sector and a well educated population. Until Russia’s illegal invasion hopes were high that new regulations of online gaming would increase the attractiveness of the country to investors. Those hopes have now been dashed. A quick resolution to war followed by European support to rebuild would see Ukraine bounce back but realistically it will be years before it returns to 2021 levels of economic activity. That said, the impact on the global gambling sector is likely to be greater beyond Ukraine’s borders. There are 20 or so non-NATO countries in Europe often acting as a buffer with Russia. Many of these countries contain significant B2C and B2B gaming markets. With restricted money flows a likely consequence of economic sanctions the choice they make as to their allegiance is a difficult one. If China continues to align itself with Russia in opposition to sanctions that choice potentially extends to all 160 countries outside NATO. The continuation of sanctions will increase the pressure on countries to plug the tax leaks represented by offshore gambling. For a sector whose business operations rely upon cash transactions straddling these emerging borders life may just have gotten a lot more complicated. Acknowledgments: this summary and analysis was put together based on numerous news and information sources. Particular thanks must go to Chad P Bown and colleagues, Peterson Institute for International Economics, Dave Itel, Cyborcorp systems, Sultan Maji, Cyber Policy Initiative, Gus Hurwitz, Nebraska college of law, Paul Leyland, Regulus Partners, Reuters, Lexology

IMGL Magazine • April 2022 • 11

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