Swedish gaming company Evolution AB lost about $3 billion in market value on Wednesday, after a U.S. law firm accused it of operating in countries such as Iran, in violation of U.S. sanctions.
The maker of online slot machines and roulette games has grown rapidly as more people turned to online gambling during the pandemic, with the United States becoming a focus, as more of its regions legalise sports betting.
The complaint was made in a letter last week to the New Jersey Division of Gaming Enforcement on behalf of unnamed private investigators, Bloomberg reported.
The law firm, Calcagni & Kanefsky LLP, did not respond to requests for comment outside business hours.
The Bloomberg report said the investigators, retained by a US-based competitor of Evolution, recorded themselves playing games through internet addresses in Singapore and Hong Kong, where online betting is banned.
A spokesman for Evolution denied the accusation, saying it strictly complied with all applicable laws and regulations.
“We use all tools at our disposal to block play from certain countries, including all countries on sanction lists mentioned in the article,” he said.
Evolution does not own or control any of the operators it works with and has no direct relationship with the underlying player and involvement in handling of players’ money, he added.
Shares of the company were down 9% in morning trade, following a jump of 62% this year to a valuation of $33 billion.
While Evolution holds back its games from countries on sanction lists, the complaint raises questions and could draw increased focus from regulators, which is not positive, Pareto Securities analyst Marlon Värnik said.