👉 Background: Virtual Gaming World or VGW, which was founded back in 2010, runs a virtual casino called Chumba Casino. It offers games like pokies, poker and blackjack table games to its customers.

👉 What happened: Although VGW is a private company, recent documents show that it recorded revenue of nearly $3.5 billion for the 2022 financial year. And over $450m in profits. Talk about a jackpot!

👉 What else: These results make Virtual Gaming World the sixth largest private company in Australia. But VGW likes to keep a VERY low profile to avoid any regulatory scrutiny. That's because it operates in a gambling grey area in the US called 'sweepstakes'.

What's the key learning?

💡Regulatory risk is when a change to the laws in a sector may significantly hurt a business. And sometimes these regulatory changes can be fatal for a business.

💡In this case, we know that gambling is still illegal in many US states. But VGW uses a sweepstake model to get around this.

• Customers buy virtual gold coins which allow them to play online games
• These gold coins have no value outside of VGW games, but they are redeemable for cash
• Therefore, these games aren't considered 'gambling' because customers aren't technically required to pay cash to enter

💡For some investors, the risk that the US changes its sweepstakes regulation is just too hot to handle. But for those who were brave enough to invest in VGW early, they have been handsomely rewarded.

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