Carousel Group/MaximBet Fined $80,000 For Colorado Geolocation Snafu

Written By Ken Pomponio on 04/21/2022
MaximBet CO geolocation fine 042122

Carousel Group-operated MaximBet Colorado Sportsbook took an $80,000 hit Thursday.

And, no, it wasn’t the result of a fortunate sports bettor cashing in on a 12-leg parlay.

The Colorado Limited Gaming Control Commission, in its monthly meeting Thursday, unanimously approved an $80,000 fine for Carousel Group. The New Jersey-headquartered company will face other sanctions as well.

The penalties came via a stipulation agreement between Carousel Group and the Colorado Division of Gaming. It stemmed from CDOG and CG investigations into a self-reported 16-day MaximBet geolocation shutdown in December.

Those missed location checks resulted in bettors placing sports wagers outside Colorado bordersviolations of the Colorado Limited Gaming Act and Sports Betting Regulations.

MaximBet is one of 27 licensed Colorado online sportsbooks. But its operations are currently limited to Colorado as it looks to expand its US base.

Only a day prior on Wednesday, MaximBet announced a landmark sponsorship agreement with Colorado Rockies outfielder Charlie Blackmon.

Carousel Group accepts sanctions

The $80,000 fine was based on a rate of $5,000 per day that MaximBet’s web-based customer-location system wasn’t functioning. That timeframe was Dec. 1-16, according to the official agreement documents available on the Colorado Department of Revenue website.

In addition to the fine, the stipulation agreement requires Carousel Group/MaximBet to:

  • Have its sports betting online platform “recertified.”
  • Review its user access controls.
  • Audit its internal controls and “submit proposed changes to the (Colorado) Division (of Gaming) to address compliance issues.”
  • Assure the Division that “it will affirmatively and actively, at all times hereafter, comply with the Colorado Constitution, the Colorado Limited Gaming Act and Colorado Sports Betting Regulations.”

Further violations could result in $25,000 per-infraction fines and a “revocation or suspension of licensing privileges.”

Carousel Group has accepted the conditions and sanctions.

In an April 11-dated letter sent to the CLGCC, Carousel Group CEO Daniel Graetzer wrote, in part:

“We thank the Colorado Division of Gaming for working with us through this manner to reach a fair conclusion. … We hold regulatory compliance as a top priority in the company. As a result, the Carousel Group has, prior to receiving the Stipulation and Agreement, voluntarily undertaken an audit of our Colorado operations and controls, instituted a more rigorous change management process, increased staffing in our compliance department, and updated our internal controls. We look forward to continuing to expand our presence and operation in Colorado.”

Bettor’a phone call spurred investigations

The joint investigation into the geolocation issues resulted from a Dec. 18 phone call to MaximBet customer support. 

The caller, quoted in the case documents, said he was unable to place a bet due to “failed location check.”  When the customer was informed that he must be located in Colorado to do so, he responded “that had not been an issue previously.”’

That spurred an MaximBet internal inquiry which revealed “one high-probability case and four suspected cases” of site wagers being placed outside Colorado.

On Dec. 23, Carousel Group self-reported a geolocation “computer system error” to the Colorado Division of Gaming. 

Two days later on Christmas, in a initial incident report, CG explained that:

“We discovered a technical conflict between our fraud management system and GeoComply system, which introduced an edge case scenario in which the back end system was not correctly verifying all GeoComply tokens, which had allowed one player to place bets without verification.”

MaximBet’s geolocation was ‘turned off’

Further inquiry uncovered 29 MaximBet customers — including the initial caller — who placed wagers from Dec. 1-16 without being geolocated. All but four of those 29 were initially and “reasonably” determined to have placed wagers inside Colorado state lines.

Those four patrons, who were not identified by name, were located in Hickory, N.C., Pittsburgh, New York and Portsmouth, N.H.

Odds on Compliance, a consulting firm, was hired by Carousel Group to assist them in the investigation.

A Colorado Department of Gaming investigator, however, later disagreed with with some of the conclusions of Carousel Group’s internal inquiry. Specifically, the CDOG discounted CG’s “assumption that any patron who had placed a wager and been successfully in Colorado continued to place their wagers in Colorado during the system error.”

It’s still unclear how many MaximBet wagers were placed outside Colorado during the 16-day timeframe. But the CDOG investigation estimates there were 336 failed geolocation checks during the period.

On Feb. 1, Odds on Compliance reported to the Division of Gaming that MaximBet had “turned off” its geolocation service Nov. 30 and then turned it back on Dec. 17. 

MaximBet head of operations Federico Rocca told the CDOG on Feb. 15, that the sportsbook “did not know who turned the (geolocation) off or why, as they were not conducting any testing or changes at the time.”

In all, the dual investigations lasted more than two months.

The stipulation agreement was signed by both parties in early April.

Photo by Shutterstock
Ken Pomponio Avatar
Written by
Ken Pomponio

Ken is a fourth-generation Coloradan and career sports journalist with more than 30 years covering the gamut from the preps to the pros. A lifelong Front Range resident and son of 1960s Denver Broncos season-ticket holders, he is a long-time sports betting enthusiast whose insight and passion shine through in his coverage at PlayColorado.

View all posts by Ken Pomponio