Online Gaming
Audit, tax, and controls services for online casino and sports betting operators and the platforms that power them, across multiple state licenses.
Overview
Online casino and sports betting operators grow state by state, and each new license brings its own financial requirements. Regulators can ask for audited financial statements, evidence of financial capacity, segregation or reserves for player funds, and gaming tax returns calculated under that state’s definitions. Pease Bell helps iGaming and sports betting operators, platform providers, and suppliers keep up with those demands through audit, tax, and advisory services coordinated across jurisdictions.
Online gaming is also a technology business. Revenue flows through wallets, payment processors, and third-party platforms, and regulators and commercial partners want assurance that the systems behind those numbers are controlled. We help clients apply ASC 606 to wagering and promotional activity, reconcile platform data to the general ledger, and prepare for SOC examinations and IT control reviews. The result is reporting that is consistent from one state filing to the next.
How We Help Online Gaming Operators
Multi-State Licensing Financials
We help operators prepare the financial statements, schedules, and supporting documentation that state regulators request during initial licensing, renewals, and changes in ownership or financing.
Gaming Tax Returns
We help prepare and review state gaming tax returns, reconciling reported gross gaming revenue and allowable deductions to platform data and the general ledger in each jurisdiction.
Revenue Recognition
We help operators apply ASC 606 to wagering activity, open bets, promotional credits, and revenue-share arrangements with platform, market access, and media partners, and document the policies chosen.
Player Funds Reconciliation
We help operators reconcile player account balances to cash and reserve accounts and document the controls regulators expect over customer funds held on the platform.
SOC and IT Controls
We help operators and platform providers assess IT general controls and prepare for SOC 1 and SOC 2 examinations requested by regulators, operators, and partners.
Financial Statement Audits
We audit financial statements for online gaming operators, platform suppliers, and holding companies, addressing complex revenue streams, liabilities to players, and related-party and multi-entity structures.
Online Gaming Challenges We Help You Address
- ✓Different gaming revenue definitions and tax rules in every licensed state
- ✓Promotional credit and bonus accounting that differs between GAAP and tax filings
- ✓Reconciling platform, wallet, and payment processor data to the ledger
- ✓Regulator and partner requests for SOC reports and IT control evidence
- ✓Licensing financial disclosures that multiply with each new market
Frequently Asked Questions
What financial requirements do states impose on online gaming licensees?
Requirements vary by state, but regulators commonly ask online casino and sports betting licensees for audited financial statements, proof of financial capacity, controls over player funds, and regular gaming tax and revenue reporting. Many also review ownership and financing arrangements during licensing and renewals. Operators in several states need to track each regulator’s specific requirements and deadlines.
How do sports betting operators recognize revenue?
Under U.S. GAAP, many operators account for wagers under ASC 606, generally recognizing net gaming revenue when the outcome of a bet is settled, with unsettled wagers carried as liabilities. Promotional credits, free bets, and bonuses can reduce revenue depending on their terms. The specific treatment depends on the operator’s contracts and facts, and should be evaluated with its auditors.
Do online gaming operators need SOC reports?
Often. Regulators, operators, payment partners, and other customers may ask online gaming platforms and suppliers for SOC 1 reports covering controls relevant to financial reporting or SOC 2 reports covering security and availability. Whether one is required depends on the jurisdiction and contracts, but preparing for an examination also helps operators document and strengthen their IT controls.
Are promotional credits deductible from online gaming taxes?
It depends on the state. Some jurisdictions allow certain promotional credits or free play to be deducted when calculating taxable gaming revenue, some limit the deduction, and others do not allow it. Because these rules differ and change over time, operators should calculate each state’s return under that state’s current definitions and keep reconciliations between GAAP revenue and taxable revenue.
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