Shareholder Row Sees The Freeze Of New SportPesa License By Court

The High Court has stopped the use of the SportPesa brand in Kenya’s gaming business amid shareholder fights in a ruling that deals a blow to Milestone Games Ltd that had been allowed to run the popular brand.

Justice Anthony Ndung’u issued the temporary order suspending the license issued to Milestone Games last month by the Betting Control and Licensing Board (BCLB) to use the SportPesa brand for the year to June 2023.

The freeze followed a petition from businesswoman Asenath Wachera Maina who has a 21 percent stake in Pevans East Africa that pioneered the sports gaming business in the country with the SportPesa brand.

Pevans East Africa ceased operations after losing its license in 2019, partly due to allegations of non-payment of taxes that the Kenya Revenue Authority last computed at Ksh95 billion.

The SportPesa brand returned on October 30, 2020, through Milestone Games, which is owned by some of the shareholders of Pevans, including Ronald Karauri, amid opposition from the regulator.

The brand which got its first approval from BCLB last month, triggered the court fight for the key assets of the gaming firm, including the trademark and web domains.

Ms. Maina and tycoon Paul Wanderi Ndung’u, who has a 17 percent stake in Pevans East Africa, have accused Milestone Games of procuring the license under circumstances shrouded in mystery while the country was focused on the August 9 elections.

She has faulted the BCLB for allowing Milestone to use the SportPesa brand, saying it acted unreasonably and in breach of laws governing betting.

She added that Milestone Games was previously licensed to trade as Milestone Bet and that a deal of May 26, 2022, that allowed the current use of SportPesa brand was not backed by Pevans East Africa’s board.

“From the disclosed facts, I am satisfied that an arguable case is established that requires ventilation at an inter-parties hearing. The leave sought is thus merited and is hereby granted,” Justice Ndung’u said.

The judge said it was prudent to suspend the license pending the determination of the court fight over the ownership of SportPesa. The judgment, he said, might be rendered useless because Ms. Maina may not recoup earnings made by Milestone Games for using the brand should her case be successful.

“It is hereby ordered that leave so granted do operate as a stay of implementation and thereby suspend the operation and use of the impugned bookmakers name license number 0000448 issued to Milestone Games Limited to trade as SportPesa pending the hearing and determination of the substantive judicial review application,” the judge said.

A list of betting firms authorized to operate in the 2022/23 fiscal year shows that Milestone Games which operates under the SportPesa brand has been awarded license number 0000448. The regulator published the updated list of authorized betting firms on its website.

SportPesa is the most popular gaming brand in the country, enjoying a loyal customer base of over 12 million. The brand was built through heavy marketing and sponsorship of sports by Pevans East Africa at a cost of more than Ksh5 billion, Mr. Ndung’u said in court papers.

Punters resumed betting on the SportPesa platforms, indifferent to the ownership wrangles which do not appear to have affected the customer experience. The fallout among the sports betting pioneers is pitting a group led by Mr. Karauri against Mr. Ndung’u and Ms. Maina’s side.

Besides being sidelined in the ownership of Milestone Games, the two entrepreneurs have also been diluted in the multinational SportPesa Global Holdings Limited (SPGHL) which owns gaming subsidiaries in Tanzania and the United Kingdom among other markets.

At stake are billions of shillings in profits and dividends. Before the fallout, the partners pocketed dividends totaling Ksh7.6 billion from Pevans East Africa in the four and a half years to June 2019. Over the same period, the company reported a cumulative profit of Ksh12.9 billion.

By relaunching SportPesa under Milestone Games, the owners of the new venture effectively accessed the lucrative business while leaving behind the tax and regulatory troubles that brought down Pevans East Africa.

Online sports betting companies such as SportPesa grew rapidly before the drastic hike in taxes and a crackdown on non-compliant firms, riding a wave of enthusiasm for sports.

Kenyans spent Ksh169.1 billion to place bets through Safaricom’s M-Pesa in the year to March, underlining the gambling craze that has become a national pastime.

The telecoms operator’s disclosures show that the value of bets jumped 23.8 percent from Ksh136 billion a year earlier, defying a government clampdown on gambling through the imposition of higher taxes both on the companies and punters.

Safaricom, the Kenya Revenue Authority (KRA) and betting firms are the biggest beneficiaries of the growth and intensity of betting activities, pocketing billions.

The telco’s revenue from betting rose 40 percent to Ksh5.98 billion last year, beating sales of more than a third of firms listed at the Nairobi bourse.

Milestone Games has in the past two years relied on a temporary court order to operate amid battles over ownership of the SportPesa trademark.