Colombia's 19% iGaming Tax: An Unsettling Turn for Rush Street Interactive
Impact of Rush Street Interactive Minimized Due to Sudden Tax Change in Colombia
In a shocking move, Colombia imposed a hefty 19% value-added tax (VAT) on iGaming deposits. According to Jefferies Equity Research analyst David Katz, this tax highlights the inherent volatility and political risks lurking in the Latin American gaming sector.
However, he assures investors that the potential repercussions for Rush Street Interactive (RSI) would likely be minimal. The Colombian market is significant for RSI, frequently noted during earnings calls.
Colombia's President Gustavo Petro, currently holding the reins in a state of emergency, has the authority to issue decrees with legal force, effectively bypassing the Colombian parliament. The tax decree, issued on February 14, was supposedly to tackle ongoing violence in a border region adjacent to Venezuela.
This decree is, however, temporary and open to judicial review. If upheld, it could persist through the remainder of 2025. Though the connection between iGaming player deposits and border violence might seem tenuous, Katz suggests the impact on RSI would be limited.
Though the tax could dent RSI's revenue slightly, it represents only 13.3% of the company's overall income. Moreover, players may still deposit, albeit marginally, if RSI offers attractive short-term incentives like deposit bonuses.
Interestingly, Katz speculates that this tax could potentially benefit RSI. By weeding out less competitive operators, RSI could potentially strengthen its market share due to its superior capabilities compared to its competitors.
As we await RSI's official take on this matter in their February 26 earnings call, Katz remains bullish about RSI's broader story. Despite this temporary setback, positive trends in U.S. states' iGaming revenues and online sports betting indicate a promising first quarter of 2025.
Enrichment Insights:
- Potential Revenue Impact: The 19% VAT in Colombia could lead to reduced player spending on iGaming platforms, decreasing the Gross Gaming Revenue (GGR) for operators like RSI.
- Market Dynamics: The VAT has already caused a 30% decline in Colombia's online GGR since its implementation in February 2025. If this trend continues, it could further impact RSI's revenue from the Colombian market.
- Impact on Market Share: The VAT may intensify competition among operators. However, RSI's adaptability and competitive strategies could help it maintain or increase its market share.
- RSI's Response: Despite the challenges, RSI demonstrated resilience with a 61% increase in Q1 LatAm MAUs, indicating a strong user engagement strategy. The long-term impact on RSI's revenue and market share will depend on how effectively the company navigates these regulatory changes.
In light of the 19% iGaming tax in Colombia, the potential impact on Rush Street Interactive (RSI) would be a slight dent in their revenue, representing only 13.3% of the company's overall income. This tax could also possibly have a positive impact on RSI by potentially strengthening their market share due to the weeding out of less competitive operators and their superior capabilities compared to competitors.
