A.[Reserved]
B.Capitalization and Indebtedness
Not required.
C.Reasons for the Offer and Use of Proceeds
Not required.
D.Risk Factors
Our business faces significant risks and uncertainties. These risks and uncertainties could materially and adversely affect our business, financial condition or results of operations. You should carefully consider all of the information set forth in this Report and in other documents we file with or furnish to the SEC, including the following risk factors, before deciding to invest in or to maintain an investment in our securities. These risk factors are not exhaustive, and investors are encouraged to perform their own investigation with respect to our business, financial condition and prospects. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations, share price, financial condition or reputation. In such event, the market price of our securities could decline, and you could lose all or part of your investment.
These risks include, among others, the following:
•If the Legend Acquisition is completed, we may not achieve the anticipated benefits of the proposed acquisition, including anticipated synergies.
•If the Legend Acquisition is consummated, our shareholders’ ownership percentage will be diluted. Substantial future sales by the Seller Parties following the completion of the Legend Acquisition, or the perception that such sales may occur, could depress the price of Genius ordinary shares.
•Following the completion of the Legend Acquisition, Genius will be subject to the risks that Legend faces, in addition to the risks faced by Genius.
•We may be exposed to increased litigation as a result of the Legend Acquisition, which could have an adverse effect on our business, financial position, results of operations and cash flows.
•Following the completion of the Legend Acquisition, we may be exposed to a wider risk of regulatory oversight and/or intervention as a result of (i) Legend's business activities which differ from those of Genius, and (ii) Legend's customer base being broader than that of Genius.
•We may not be able to retain our and Legend’s existing customers, which could have an adverse effect on our business and operations following completion of the Legend Acquisition. Third parties may terminate or alter existing contracts or relationships with us or Legend.
•We will incur significant additional indebtedness to finance the Legend Acquisition as well as transaction and acquisition-related costs in connection with the Legend Acquisition, which will limit our operating flexibility.
•We may not be able to close the Legend Acquisition on a timely basis, or at all. Failure to complete the Legend Acquisition could negatively impact our stock price and our future business and financial results.
•Our business and operating results and the business and operating results of our customers, suppliers and vendors may be significantly impacted by political and social conditions, wars or terrorist activity, severe weather events and other natural disasters, climate related disasters, geopolitical circumstances and events, such as the war between Russia and Ukraine or a worsening of
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conflict in the Middle East. Loss or disruption to products and services by key suppliers and partners could have a material adverse effect on our operations.
•General economic downturn, lower consumer discretionary income for use on sports-related activities and betting, and the general health of the sports, entertainment, digital media, and sports betting industries can affect our financial results, business operations, and prospects. A reduction of sports betting handle and revenue globally, betting operators’ investment in marketing expenditure, client advertising or media budgets, or bettor-friendly outcomes in live sporting events all could have an adverse impact on our business. We have a history of losses and may not be able to achieve or sustain profitability in the future.
•Elevated interest rates and inflationary pressures could lead to persistently higher costs in our business, which may not always be offset with higher revenue.
•Fluctuating foreign currency and exchange rates may negatively impact the financial reporting of our business, results of operations and financial position.
•Health epidemics or pandemics may adversely affect consumer spending and consumer engagement in sports and entertainment, and reduce the number of live sporting events or its seasonality, all of which could affect our financial results, our business operations and prospects.
•Changes in gambling regulations, both in mature and emerging markets, could adversely affect our financial results, business operations, and prospects. This could include introduction of mandatory gambling supplier regimes resulting in additional license conditions or restrictions on us and/or our customers, including restrictions on gambling advertisements, restrictions on betting markets or types of betting including in play, player affordability limits, and player incentives controls.
•The international scope of our operations may expose us to increased risk and compliance obligations, and our international operations and corporate and financing structure may expose us to potentially adverse tax consequences.
•We rely on relationships with sports organizations with which we partner or may enter partnerships, and from which we do or may acquire rights including (inter alia) data and streaming rights. Overreliance on or loss of existing relationships with these sports organizations (including, without limitation, rights in relation to English and Scottish Football, the National Football League (the "NFL") and the International Basketball Federation ("FIBA")), failure to win future tenders for new and/or existing rights packages, inability by us to meet the cost of rising rights acquisition fees, or failure to renew or expand existing relationships may cause unanticipated costs or loss of competitive advantage or require us to modify, limit or discontinue certain offerings, which could materially affect our business, financial condition and results of operations and prospects.
•Failure or inability to obtain, maintain, protect or enforce our proprietary, contractual and/or intellectual property rights, including our unregistered intellectual property, and the costs involved in such action could harm our business, financial condition, results of operations and prospects, and could lead to reputational loss with our rightsholder partners and potential legal implications if we are unable to protect and monetize their intellectual property. Failure to obtain intellectual property protection that is sufficiently broad may diminish our competitive advantages or interfere with our ability to develop and market our products and services. Failure to prevent unauthorized collection and use of content including sports data in breach of our exclusive rights may further diminish the value of our rights portfolio and bolster the unofficial data offerings that our competitors can offer.
•Uses of new and developing technologies including artificial intelligence ("AI") by third parties to access, extract or otherwise appropriate content including data that infringe or circumvent our exclusive rights could materially affect our business, financial condition and results of operations and prospects.
•We may face claims for intellectual property infringement, which could subject us to unanticipated legal and advisory fees, monetary damages, or limit us in using some of our technologies or providing certain solutions.
•We operate in a competitive market, and we may lose customers and relationships to both existing and future competitors.
•Fraud, corruption, criminal activity and/or negligence related to sports events, or involving our employees or contracted statisticians collecting data on behalf of the Company, may adversely affect our business, financial condition and results of operations and could negatively impact our reputation.
•Our collection, storage and processing of personal data is subject to applicable data protection and privacy laws in various jurisdictions, and any failure to comply with such laws may harm our reputation and business or expose us to fines and other enforcement actions.
•We may be subject to future litigation and investigations in various jurisdictions and with various plaintiffs or from government agencies in the operation of our business. Protracted legal costs could negatively affect our operational costs, and an adverse outcome in one or more proceedings could adversely affect our business operations and financial position.
•We rely on information technology and other services, systems and platforms, including Amazon Web Services and certain other third-party platforms, and failures, errors, defects or disruptions therein could diminish our brand and reputation, subject us to
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liability, disrupt our business, affect our ability to scale our technical infrastructure and adversely affect our operating results and growth prospects. Our product offerings and other software applications and systems, and certain third-party platforms that we use could contain undetected errors or errors that we fail to identify as material.
•We have, and may in the future, experience a security incident resulting in compromise of our systems and data, which may cause significant reputational damage and loss of customer confidence, negatively impact our ability to continue critical operations, or result in a serious breach of laws and regulations. This could be caused by various factors including control failure, error, negligence or malicious attack by employees, partners, suppliers or other third parties. Cybersecurity attacks are becoming increasingly sophisticated and commonplace.
•Genius may issue additional Genius ordinary shares or other equity securities without your approval, which would dilute your ownership interests and may depress the market price of Genius ordinary shares. In particular, additional Genius ordinary shares may be issued upon exercise of outstanding warrants and pursuant to the terms of the Legend Share Purchase Agreement.
•Because Genius is incorporated under the laws of Guernsey, you may face difficulties in protecting your interests, and your ability to protect your rights through the United States ("US") Federal courts may be limited.
•It may be difficult to enforce a US judgment against Genius or its directors and officers outside the US, or to assert US securities law claims outside of the US.
•As a company incorporated in Guernsey, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ, and in some cases significantly differ, from NYSE corporate governance listing standards; these practices may, and in some cases do, afford less protection to shareholders than they would enjoy if we complied fully with NYSE corporate governance listing standards.
Risks Related to Genius Sports Group’s Business Macroeconomic and Geopolitical Risks
General economic downturn, lower consumer discretionary income for use on sports-related activities and betting, and the general health of the sports, entertainment, digital media, and sports betting and online gaming industries can affect our financial results, business operations, and prospects. A reduction of sports betting handle and revenue globally, betting operators’ investment in marketing expenditure, client advertising or media budgets, or bettor-friendly outcomes live sporting events all could have an adverse impact on our business.
Our business and the businesses of our customers and sports organizations are particularly sensitive to reductions in customer marketing and discretionary consumer spending. Demand for entertainment and leisure activities, including sporting events, sports betting and online gaming, can be affected by economic headwinds and changes in consumer tastes, both of which are difficult to predict and beyond our control. Unfavorable changes in general economic conditions, including recessions, economic slowdowns, sustained high levels of unemployment, high inflation, or the perception by consumers of weak or weakening economic conditions, may reduce consumers’ disposable income or result in fewer individuals engaging in entertainment and leisure activities, such as sporting events, sports betting and online gaming. Alternatively, bettor-friendly outcomes in live sporting events may negatively impact our customers' revenues which could directly or indirectly impact our own revenues generated from such customers.
We rely on relationships with sports organizations with which we partner or may enter partnerships, and from which we do or may acquire properties including (inter alia) data and streaming rights. Overreliance on or loss of existing relationships with these sports organizations, failure to win future tenders for new and/or existing rights packages, an inability or unwillingness by us to meet the cost of rising rights acquisition fees, or failure to renew or expand existing relationships may cause unanticipated costs or loss of competitive advantage or require us to modify, limit or discontinue certain offerings, which could materially affect our business, financial condition and results of operations.
We rely on relationships with sports organizations with which we do and may enter partnerships, and from which we do and may acquire properties including (inter alia) the right to collect and commercialize data and streams on those organizations’ events. A substantial portion of our offerings and services use sports properties acquired under rights granted by sports organizations including (inter alia) sports data and streaming rights. The future success of our business may depend, in part, on our ability to obtain, retain and expand relationships with sports organizations. We have arrangements with sports organizations for properties including (inter alia) sports data and streaming rights, including, in certain cases, exclusive rights for those properties. In many cases, developing and maintaining such partnerships requires the constant improvement of current offerings by continually charging higher fees, and developing more extensive products and offerings to such sports organizations.
Our arrangements with sports organizations, including exclusive arrangements, may not continue to be available to us on commercially reasonable terms or at all. In the event that we lose exclusive existing arrangements or fail to win future tenders for new or and/or existing rights packages (including, without limitation, rights in relation to English and Scottish Football, NFL and FIBA), long term existing rights become less attractive to consumers, or we are unwilling or unable to meet the cost of rising rights acquisition fees, are over-reliant on existing relationships or cannot renew and expand existing arrangements, then customers may become dissatisfied and we may lose our competitive
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advantage, be required to discontinue or limit our offerings or services, or be forced to charge our customers lower fees on account of the reduction in content. If we lose official accreditation from one of our league or federation partners, we could lose our exclusive rights to collect certain data, streams or other properties and any use of official marks and logos. As a result, our services would be less attractive to customers. Our revenue may decrease as a result, which could have a material adverse effect on the results of our operations. If we are unable to continue offering innovative services, we may be unable to attract additional customers or retain our existing customers, which could harm our business, results of operations and financial condition. Additionally, our competitors may choose to infringe on our exclusive stadium rights by collecting data on events on which we have exclusive rights using unauthorized means. In these instances, our rights may be devalued and litigation or other non-legal recourse (i.e. communications/info security support) to enforce our rights or recover damages incurred by such infringement may be costly, ineffective and time consuming.
Our exclusivity arrangements with certain sports organizations are subject to short- and medium-term contracts, which may not be renewed on favorable terms or at all. Additionally, there is the risk that in the future a court of competent jurisdiction might challenge our exclusive arrangements with sports organizations as being in violation of competition laws. The loss of such exclusive arrangements with one or more sports organizations, whether due to a judicial judgment, order or settlement, or otherwise, including as a result of the expiration or termination of our exclusivity arrangements, may cause loss of competitive advantage and could materially adversely affect our financial condition and business operation.
The rising costs of sports rights, including without limitation in relation to our rights agreements with the NFL and the English and Scottish Football leagues (which were renewed in 2025 and 2024, respectively), means that we are required to pass on these higher costs to our customers. If we are unable to convince our customers that the increased fees charged are commercially reasonable, there is a risk that customers may lobby the relevant leagues and federations to require us to lower our fees and/or customers may seek to obtain data via unofficial channels in lieu of signing an official data deal with us.
Fraud, corruption or negligence related to sports events, or by our employees or contracted statisticians collecting data on behalf of Genius, may adversely affect our business, financial condition and results of operations and negatively impact our reputation.
Our reputation and the strength of our brand are key competitive strengths. To the extent that the sports and sports betting industry as a whole or Genius, relative to its competitors, suffers a loss in credibility, our business will be significantly impacted. Factors that could potentially have an impact in this regard include fraud, corruption or negligence related to sports events (i.e., as a result of match fixing), or by our employees or contracted statisticians collecting data, streaming or other properties on behalf of Genius or third parties. Operational errors, whether by us or our competitors, could also harm the reputation of Genius or the sports data, streaming, sports betting, online gaming and sports marketing industries. In addition, a portion of our statisticians and contractors are based in or required to visit jurisdictions where corruption or crime is prevalent. From time to time, this has led to instances of intimidation and threats made against Genius statisticians by third parties to interrupt authorized in-stadia data collection and manipulate or delay real-time data capture. Damage to reputation and credibility could have a material adverse impact on our business, financial condition and results of operations.
Our business depends on a strong brand, and if we are not able to develop, maintain and enhance our brand and reputation, including as a result of negative publicity, our business and operating results may be harmed.
We believe that developing, maintaining and enhancing our brand is critical to achieving widespread acceptance of our products and services, attracting new customers, retaining existing customers, persuading existing customers to adopt additional products and services, and hiring and retaining our employees. We believe that the importance of our brand will increase as competition in our markets further intensifies. Successful promotion of our brand will depend on a number of factors, including the effectiveness of our marketing efforts, thought leadership, our ability to provide high-quality, reliable and cost-effective products and services, the perceived value of our products and services, and our ability to provide quality customer success and support experience. Brand promotion activities require us to make substantial expenditures. To date, we have made significant investments in the promotion of our brand. The promotion of our brand, however, may not generate customer awareness or increase revenue, and any increase in revenue may not offset the expenses we incur in building and maintaining our brand.
The gambling industry can attract negative publicity linked to various perceived issues including (without limitation) social harm, gambling by minors, doping and match fixing. Our links to this industry and the related criticisms (and subsequent additional legislative or regulatory controls) leveled at it or the decline in popularity of sports betting as a result could adversely affect our business, reputation or brand and could impact responsible gaming requirements.
Similarly, our business may be adversely affected by negative public perception of data collection, advertising technology, and data brokerage practices. Consumer advocates, media outlets, and government officials have increasingly criticized companies for their collection, storage, and use of personal data. Negative publicity about data aggregation or privacy practices—whether directed at us specifically or at data-driven industries generally—could lead to reduced consumer trust, increased reluctance to share personal information, higher opt-out rates, changes in data partners' or digital publishers' willingness to work with us, decreased customer demand for our products and services, or additional regulatory scrutiny, any of which could materially and adversely affect our business, financial condition, and results of operations.
In addition, our business could be adversely affected by negative public perception of our technology that is in the public eye. One relevant example is the use of Genius IQ technology in the delivery of semi-automated officiating services in the English Premier League and other high-profile competitions. The accuracy, reliability, and fairness of officiating decisions assisted by our technology are subject to intense
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scrutiny from fans, athletes, coaches, media commentators, and sports governing bodies. Any real or perceived errors, inconsistencies, or controversies involving our technology could result in widespread criticism and reputational harm, which may be amplified by social media and traditional news coverage.
We and our employees also use social media to communicate externally. There is risk that the use of social media by us or our current or former employees, either personally or to communicate about our business, may give rise to liability or result in public exposure of personal information of our employees or customers, each of which could affect our reputation, revenue, business, results of operations and financial condition. Our social media accounts could also be compromised in a security incident, which increases our risk of reputational harm from the use of social media accounts.
Elevated interest rates and inflationary pressures could lead to persistently higher costs in our business, which may not always be offset with higher revenue.
We are subject to inflationary and other general cost increases, including with regard to our rights acquisition costs, labor costs, selling and marketing costs, communications costs, travel costs, software development costs, professional fees and other costs. General economic conditions may result in higher inflation, which may increase our exposure to higher costs. If we are unable to offset these persistently elevated cost increases by price increases, growth, and/or cost reductions in our operations, these inflationary and other general cost increases could have a material adverse effect on our operating cash flows, profitability, and liquidity.
We operate in a competitive market, and we may lose customers and relationships to both existing and future competitors.
The markets for sports properties including (inter alia) data, streaming and other sports technology services and solutions and marketing services are competitive and rapidly changing. The sports media industry is also particularly competitive and fast growing. Competition in these markets may increase further if economic conditions or other circumstances, including as a result of rising interest rates, persistently elevated levels of inflation, and heightened risk of recession, cause customer bases and customer spending to decrease and service providers to compete for fewer customer resources. Our existing competitors, or future competitors, may have or obtain greater brand recognition, shorter sales cycles, larger customer bases, better technology or data, lower prices, exclusive or better access to data, greater user traffic or greater financial, technical or marketing resources than we have. Our competitors may be able to undertake more effective marketing campaigns, obtain more data, adopt more aggressive pricing policies, make more attractive offers to potential employees, subscribers, sports betting operators, sports organizations, distribution partners and content providers or may be able to respond more quickly to new or emerging technologies or changes in user requirements. We currently rely on data scouts in respect of the majority of our league agreements to attend events and to collect data. If our competitors develop technology that makes our scouts obsolete, before we are able to roll out our Genius IQ systems in stadiums to replace manual data collection with automated data collection, our business could be materially harmed, and our profitability would be reduced. In addition, disintermediation by our customers, either by building products in-house or acquiring rights directly from leagues and federations could further harm our business. Further, if competitors gain unfettered access to stadiums to collect data in breach of our exclusive rights, or access to faster visual feeds from such stadiums via data scraping or other technological means, our exclusive in-stadium rights would have reduced value, and our revenues could decline. If we are unable to retain customers or obtain new customers or maintain or develop relationships with sports organizations, our revenues could also decline. Increased competition for exclusive and non-exclusive partnerships could result in lower revenues and higher expenses (in part contributed to by significant rights fee increases that the sports organizations are able to charge in the face of increased competition for rights), which would reduce our profitability.
Our business may be materially adversely affected if: (i) our existing and future products, technology, services and solutions do not achieve and maintain broad market acceptance; (ii) if we are unable to keep pace with or adapt to rapidly changing technology, evolving industry standards and changing regulatory requirements; (iii) if there are changes to third-party hardware or software upon which we are reliant to deliver our services; or (iv) if we do not invest in product development and provide services that are attractive to our customers.
Our future business and financial success will depend on our ability to continue to anticipate the needs of customers and potential customers, to achieve and maintain broad market acceptance for our existing and future products and services, to successfully introduce new and upgraded products and services and to successfully implement our current and future geographic expansion plans. To be successful, we must be able to quickly adapt to changes in technology, industry standards and regulatory requirements by continually enhancing our technology, services and solutions. Developing new services and upgrades to products and services, as well as integrating and coordinating current products and services, imposes burdens on our product development team, management and researchers. These processes are costly, and our efforts to develop, integrate and enhance our services may not be successful or may need to be undertaken at the expense of developing other services due to limited resources or budget. In addition, successfully launching and selling a new or upgraded product or service puts additional strain on our sales and marketing resources. There may also be subsequent material changes to, or suspension of, the technology and/or services upon which our business is reliant, such as hardware and/or software supplied by third parties, who typically dictate the functionality of any such hardware and/or software (including the terms upon which we are able to use it to deliver our services). This may necessitate adaptations to our product offering, and/or restrict our ability to offer certain services as we have been able to do so previously (either temporarily or on a permanent basis). Expanding into new markets and investing resources towards increasing the depth of our coverage within existing markets impose additional burdens on our research, systems development, sales, marketing and general managerial resources. If we are unable to manage our expansion efforts effectively, in obtaining greater market share or in obtaining widespread adoption of new or upgraded products and services, we may not be able to offset the expenses associated with the launch and marketing of the new or upgraded product or service, which could have a material adverse effect on our financial results. If we introduce new
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or expand existing offerings for our business, we may incur losses or otherwise fail to enter these markets successfully. Our expansion into these markets will place us in competitive and regulatory environments with which we may be unfamiliar and involve various risks, including the need to invest significant resources and the possibility that returns on such investments will not be achieved for several years, if at all.
Our increased reliance on hardware-based solutions for data collection including the global roll out to sports leagues of the Genius IQ systems and the deployment of these across multiple regions means we face inherent risks of a globally distributed supply chain. These may include component shortages, delays in production, cost fluctuation, increased complexity of maintaining compliance with regulatory frameworks, trade and tariff risks, vendor and subcontractor risks including solvency, quality control issues, labor shortages, political and/or regional instability, and unethical business practices. We distribute production widely and run a vendor risk management program (including comprehensive due diligence) to mitigate these risks as effectively as we can.
If we are unable to develop new or upgraded products or services or decide to combine, shift focus from, or phase out a product or service, then our customers may choose a competitor's product or service over ours and our revenues may decline, and our profitability may be reduced. If we incur significant costs in developing new or upgraded services or combining and coordinating existing services, if we are not successful in marketing and selling these new services or upgrades, or if our customers fail to accept these new or combined and coordinating services, then there could be a material adverse effect on our results of operations due to a decrease of our revenues and a reduction of our profitability. If we eliminate or phase out a service and are not able to offer and successfully market and sell an alternative service, our revenue may decrease, which could have a material adverse effect on our results of operations.
Further, increased competition for skilled staff in locations where we are based and collect data could have a material adverse effect on our business operations. Our service provisions and operations require that we recruit, retain and develop personnel from diverse backgrounds across a wide range of expertise areas and geographies. In order to maintain and grow in a competitive market, we require significant intellectual capital in the fields of technology (including AI and machine learning), gaming, customer service and key management functions across various jurisdictions. Failure to retain key positions could result in increased recruitment costs for senior management positions and across competitive markets. If we cannot retain, attract and develop our intellectual capital, we may see a decrease in our service provision, data collection, technological development, corporate functionality and operations which could cause slower growth or a loss of customers to competitors, resulting in lost revenues and long-term prospects.
Our success depends on our continued improvements to provide products and services that are attractive to our customers. As a result, we must continually invest resources in product development, human capital retention and successfully incorporating and developing new technology.
Regulatory uncertainty surrounding prediction markets could materially affect our business.
The regulatory landscape governing prediction markets in the United States remains uncertain and continues to evolve. Unlike traditional sports betting, which is regulated primarily at US state level, certain prediction market platforms operate under federal regulatory frameworks that differ in structure, oversight, and compliance requirements. Regulators may impose requirements or restrictions on prediction market operators that are different to those applicable to traditional gambling, or may change existing interpretations through litigation, rulemaking, or legislative action. Such developments could alter the structure, economics or permitted scope of these markets.
Differing regulatory treatment between wagering formats could create an uneven competitive environment or affect the relative attractiveness of various products to consumers and operators. We cannot predict how courts, federal regulators, state authorities, or legislators will resolve outstanding regulatory questions or how quickly regulatory clarity, if any, will emerge or whether such clarity will emerge at all. Regulatory fragmentation across jurisdictions may further increase complexity for operators and market participants.
Our business is linked to the broader sports betting ecosystem. Regulatory developments affecting prediction markets could influence operator economics, consumer behavior, market access, or investment priorities in ways that impact sportsbook handle, gross gaming revenue or technology and data spend. Because a portion of our revenue is derived from revenue-sharing arrangements with sportsbook operators, any reduction in sportsbook handle, margin, or gross gaming revenue, whether due to regulatory shifts, competitive dynamics, or consumer migration, could reduce payments to us and changes affecting their performance could adversely affect our results of operations.
The ultimate impact of prediction markets on our business will depend on numerous factors beyond our control, including regulatory developments across multiple jurisdictions, consumer adoption patterns, the response of our existing customers and commercial partners and our ability to adapt our offerings and usage to evolving market conditions and regulations. There can be no assurance that we will be able to successfully navigate the evolving wagering landscape, and any failure to do so could have a material adverse effect on our business, financial condition and results of operations.
The growth of our media business is dependent, in part, on access to quality, premium advertising inventory. Any decreased access to such inventory, or failure to expand on that access, could materially adversely affect our business and financial condition.
The growth and success of our media business are significantly dependent on our ability to secure and maintain access to high-quality, premium advertising inventory. Premium inventory typically includes advertising placements on popular sports events, high-traffic digital platforms, and reputable media outlets that attract large and engaged audiences. This inventory is essential for maximizing the effectiveness of our marketing campaigns, enhancing our brand visibility, and driving user acquisition and engagement. Any reduction in our access to such
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premium inventory, whether due to increased competition, changes in relationships with media partners, shifts in market dynamics or regulatory restrictions, could limit our ability to reach our target audience effectively.
Additionally, if we are unable to expand our access to new or emerging premium inventory sources, we may fall behind competitors who are able to secure such opportunities, potentially resulting in a loss of market share.
Furthermore, the cost of premium inventory may increase due to heightened demand or limited supply, which could negatively impact our advertising return on investment and overall profitability. If we are forced to rely on lower-quality or less effective inventory, our marketing efforts may yield diminished results, adversely affecting our ability to attract and retain customers.
The loss or significant reduction in business from one or more of our large customers could materially adversely affect our business, financial condition and results of operations.
A material portion of our revenues is concentrated in some of our largest customers. Our revenue growth depends on our ability to obtain new clients and achieve and sustain a high level of renewal rates with respect to our existing customers. Failure to achieve one or more of these objectives could have a material adverse effect on our business, financial condition and operating results. If we lose one or more of our large customers or have significant reduction in business from such customers, our business, financial condition or results of operations could be materially adversely affected.
In addition, our betting customers’ losses in the betting market may adversely affect our revenue, particularly if we are participating in a revenue sharing arrangement with that customer. Further, even under a fixed fee arrangement with a customer, in the event that a customer’s revenues are materially adversely affected in a particular year, it is likely this would have a knock-on effect to such customer’s ability to pay increased fees in any renewal agreement with us.
Data suppliers may withdraw, withhold, or restrict data previously made available to us, which could impair our ability to provide products and services and adversely affect our revenue and customer relationships.
Much of the data underlying our products and services comes from third-party suppliers and sources. Our business depends on our ability to obtain necessary data on commercially reasonable terms. If data suppliers withdraw their data, suffer disruption, materially limit our use of it or refuses to renew data licenses, we could experience material adverse consequences.
Data suppliers may withhold or restrict data for numerous reasons, including: competitive considerations; our actual or perceived breach of contractual terms or their expectations regarding data use; their acquisition by competitors; changes in their business strategies; or legal, regulatory, or reputational concerns regarding data collection, use, or dissemination. Additionally, federal or state legislation—including data broker registration and transparency requirements applicable to portions of our business—may limit data suppliers' willingness to provide data due to compliance burdens, liability concerns, or reputational considerations. We may also terminate supplier relationships if they fail to meet our data quality standards or comply with their legal or contractual obligations.
The loss of access to data from a substantial number of suppliers, or material restrictions on our use of such data, could significantly impair our ability to deliver products and services to customers, which could adversely affect our business, financial condition, and results of operations.
We have historically achieved growth organically but have supplemented such growth via strategic acquisitions of key targets. We may undertake acquisitions or divestitures in the future, which may not be successful, and which could materially adversely affect our business, financial condition and results of operations. Our business may suffer if we are unable to successfully integrate acquired businesses into Genius or otherwise manage the growth associated with such acquisitions.
As part of our business strategy, we have made, and we intend to continue to make, acquisitions as opportunities arise to add new or complementary businesses, products, brands or technologies. From time to time, we may enter into letters of intent, agreements, agreements in principle or memoranda of understanding or similar documents or commitments related to acquisitions of new or complementary businesses. In some cases, the costs of such acquisitions may be substantial, including as a result of professional fees and due diligence efforts. There is no assurance that the time and resources expended on pursuing a particular acquisition will result in a completed transaction, or that any completed transaction will ultimately be successful.
In addition, we may be unable to identify suitable acquisition or strategic investment opportunities or may be unable to obtain required financing or regulatory approvals, and therefore may be unable to complete such acquisitions or strategic investments on favorable terms, if at all. We may decide to pursue acquisitions with which our investors may not agree, and we cannot assure investors that any acquisition or investment will be successful or otherwise provide a favorable return on investment ("ROI"). In addition, acquisitions and the integration thereof require significant time and resources and place significant demands on our management, as well as on our operational and financial infrastructure. In addition, if we fail to successfully close transactions or integrate new teams, or integrate the products and technologies associated with these acquisitions into our company, our business could be seriously harmed. Acquisitions may expose us to operational challenges and risks, including:
•the ability to profitably manage acquired businesses or successfully integrate the acquired businesses’ operations, culture, personnel, financial reporting, accounting and internal controls, technologies and products into our business;
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•increased indebtedness and the expense of integrating acquired businesses, including significant administrative, operational, economic, geographic or cultural challenges in managing and integrating the expanded or combined operations;
•entry into jurisdictions or acquisition of products or technologies with which we have limited or no prior experience, and the potential of increased competition with new or existing competitors as a result of such acquisitions;
•complying with additional legal and regulatory regimes and requirements, including the requirement to acquire, maintain or transfer licenses and authorizations following a change of control in the acquired business;
•disputes relating to contingent consideration arrangements which may be used to structure the consideration in an acquisition;
•exposure to compliance, security, intellectual property or other issues, not uncovered by a limited due diligence review of the target or otherwise;
•diversion of management’s attention and the over-extension of our operating infrastructure and our management systems, information technology systems, and internal controls and procedures, which may be inadequate to support growth;
•bringing new businesses into compliance with various laws and regulations, including but not limited to Sarbanes Oxley Section 404, and implementing adequate financial, risk, security and compliance controls to ensure appropriate financial reporting;
•failure to fully integrate new business into our operations and difficulty in utilizing personnel and technology effectively;
•the ability to fund our capital needs and any cash flow shortages that may occur if anticipated revenue is not realized or is delayed, whether by general economic or market conditions, or unforeseen internal difficulties;
•the ability to retain or hire qualified personnel required for expanded operations; and
•inability to successfully migrate and store historical financial data from acquisitions, which could in turn impact our compliance with requests from relevant authorities and/or filing requirements in the future.
Our acquisition strategy may not succeed if we are unable to remain attractive to target companies or expeditiously close transactions. Issuing additional equity to fund an acquisition has and would cause economic dilution to existing stockholders. Issuing debt to fund an acquisition would cause additional strain on our long-term financial resources. If we develop a reputation for being a difficult acquirer or having an unfavorable work environment, or target companies view our equity unfavorably, we may be unable to consummate key acquisition transactions essential to our corporate strategy and our business may be seriously harmed.
Our operations are subject to seasonal fluctuations that may impact our cash flows.
Although the sporting calendar is year-round, there is seasonality in sporting events that may impact our operations and operations of our customers and sports organizations. The broad geographical mix of our customer base also impacts the effect of seasonality as customers in different territories will place differing importance on different sporting competitions and those competitions will often have different sporting calendars. Sports organizations have their own significant sporting events such as the playoffs and championship games, which may cause peaks and troughs in our revenues and revenues of our customers and such sports organizations. Certain sports only hold events during portions of the calendar year. For example, our revenues are significantly impacted by the NFL and European football season calendars. Our revenues and revenues of our customers and sports organizations may also be affected by the scheduling of major sporting events that do not occur annually, such as the FIFA World Cup, or the cancellation or postponement of sporting events and races. Such fluctuations and uncertainties may negatively impact our cash flows.
Indemnity provisions in customer and other third-party agreements potentially expose us to substantial liability for intellectual property infringement and other losses.
Our agreements with customers and other third parties may include indemnification or other provisions under which we agree to indemnify or otherwise be liable to them for losses suffered or incurred as a result of claims of intellectual property infringement, damages caused by us to property or persons, or other liabilities relating to or arising from our products and services or other acts or omissions. The term of these contractual provisions may survive termination or expiration of the applicable agreement. Large indemnity payments of damage claims from contractual breach could harm our business, results of operations and financial condition. Although we generally contractually limit our liability with respect to such obligations, we may still incur substantial liability related to them. Any dispute with a customer with respect to such obligations could have adverse effects on our relationship with that customer and other current and prospective customers, which would reduce demand for our products and services, damage our reputation and harm our business, results of operations, and financial condition.
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Our business and operating results and the business and operating results of our customers, suppliers and vendors may be significantly impacted by general economic, political and social conditions, pandemics, wars or terrorist activity, severe weather events and other natural disasters, geopolitical circumstances and events, such as the conflict in the Middle East, the war between Russia and Ukraine as well as ongoing tensions between the US and China, Venezuela and other jurisdictions. Loss or disruption to products and services by key suppliers and partners could have a material adverse effect on our operations.
Our business and operating results and the business and operating results of our customers, suppliers and vendors are subject to global economic conditions and their impact on levels of consumer spending. Economic recessions have had, and may continue to have, far reaching adverse consequences across many industries, including the global sports, entertainment and sports betting industries, which may adversely affect our business and financial condition and the business and financial condition of our customers, suppliers and vendors. There appears to be an increasing risk of a recession due to international trade and monetary policy, and other changes. If the national and international economic recovery slows or stalls, these economies experience another recession or any of the relevant regional or local economies suffers a downturn, we and our customers, suppliers and vendors may experience a material adverse effect on our and their business, financial condition, results of operations and prospects.
Further, our business and operating results and the business and operating results of our customers, suppliers and vendors are subject to geopolitical conditions, including trade disputes, protectionist measures (including tariffs and quotas), economic or financial sanctions, embargoes, export or import controls, and direct or indirect acts of war or terrorism. For example, we operate an office in Zaporizhzhia, Ukraine and have operations and revenue generating business within Ukraine and, prior to the invasion by the Russian army, revenue from Russia. Geopolitical tensions with the ongoing conflict between Russia and Ukraine may adversely affect our operations involving Ukraine and other countries involved in the conflict and present safety risks to our office and staff in Ukraine. Further, certain countries or organizations have implemented actions and may implement further actions in relation to the conflict, including trade actions, tariffs, export controls, and sanctions, against other countries or localities, including potentially against certain government, government-related, or other entities or individuals, which along with any retaliatory measures, could increase costs, adversely affect our operations, or adversely affect our ability to meet contractual and financial obligations. Although we generated less than 1% of our revenues in Russia, Belarus and Ukraine for the year ended December 31, 2025 the ongoing conflict between Russian and Ukraine, uncertainty and disruption in the global economy and financial markets due to such conflict, and further escalation of geopolitical tensions could have a broader impact that expands into other markets where we do business or have offices, which could adversely affect our business and/or our customers, suppliers and vendors in the broader region.
The ongoing conflicts in the Middle East as well as continued geopolitical tensions between the US and China and the US and certain South American countries could also have unforeseen adverse ramifications on our financial conditions, operations, prospects and threats to the protection of our intellectual property. For example, we have subsidiaries in both the US, China as well as a substantial office in Medellín, Colombia, and an escalation in trade hostilities and retaliatory actions or instability in the region could materially impact our operations, service provision and increase our compliance costs. Where we have personnel in any jurisdiction, we are also subject to local laws and customs regarding, inter alia, data security and privacy, and we are exposed to a degree of risk arising from our lack of control as to the stringency, operation, and enforcement of any such local laws.
Climate change may have a long-term adverse impact on our business.
The long-term effects of climate change on the global economy are unclear, though we recognize that there are inherent climate-related risks wherever business is conducted. Increased frequency and severity of climate-related events, including, but not limited to, the increasing frequency of extreme weather events and their impacts on critical infrastructure globally, have the potential to disrupt our business, our third-party suppliers, partners, and/or the business of our customers.
Furthermore, the effects of climate change may negatively impact regional and local activity, which could lead to an adverse effect on our customers and partners, such as the cancellation or postponement of sporting events, resulting in an adverse impact on our financial condition and operations.
Risks Related to Legal Matters and Regulations
We and our customers, partners and suppliers are subject to a variety of domestic and foreign laws and regulations, which are subject to change and interpretation, and which could subject us to claims or otherwise harm our and our customers’ and suppliers’ respective businesses. Any change in existing regulations or their interpretation, or the introduction of new regulatory compliance requirements could adversely impact our or our customers’ and suppliers’ ability to operate our or their respective businesses as currently conducted or as we seek to operate in the future, which could have a material adverse effect on our financial condition and results of operations or reputation.
We and our customers, partners and suppliers are subject to laws and regulations relating to sports, sports betting, online gaming, marketing, and advertising in the jurisdictions in which we and they conduct our and their businesses. In some circumstances, we are subject to laws and regulations in those jurisdictions in which we and they offer services, or how those services are made available.
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We are also subject to laws and regulations that apply to all e-commerce and online businesses as well as all publicly listed businesses, such as those related to privacy and personal information, tax, anti-money laundering, anti-bribery, advertising, competition, insider information and disclosures, and consumer protection.
These laws and regulations vary from one jurisdiction to another and are subject to change based on legislative and regulatory action, court decisions and other governmental action, which may be affected by, among other things, political circumstances, and changes in legislative or governmental priorities. For instance, some jurisdictions have introduced regulations attempting to restrict or prohibit sports betting, online gaming and advertising, while others have taken the position that sports betting or online gaming should be licensed and regulated and have adopted or are in the process of considering legislation and regulations to adopt sports betting or online gaming in their jurisdictions. In other jurisdictions, there may be differing, limited or no regulatory guidance. The legality of sports betting and gaming may be open to interpretation in such jurisdictions (sometimes described as "grey jurisdictions"). We are therefore subject to a risk that regulators in jurisdictions where we provide our services (or our customers use our services to offer their services) without a license, may take legal action against us (or our customers) despite our good faith efforts to comply with local requirements regarding our supply to those customers. Any such action against us or our customers could have an adverse effect on our reputation, business and results of operations.
Additionally, the imposition or increase of gaming and/or gambling taxes imposed on our sportsbook customers by US or international regulatory authorities may negatively impact the revenue share fees payable under our agreements with such customers. If the revenue share fees paid to us by our customers decrease, this could have a material adverse effect on our business, financial condition and results of operations.
Changes in gambling regulations, both in mature and emerging markets, could adversely affect our financial results, business operations, and prospects. This could include introduction of mandatory gambling supplier regimes resulting in additional license conditions or restrictions on us and/or our customers, including restrictions on gambling advertisements, restrictions on which sports a bettor can bet and which betting markets or types of betting (including in play, player affordability limits, and player incentives controls) can be offered.
For example, the Committees of Advertising Practice in the United Kingdom (the "UK") recommended new rules which ban sports betting advertisements if they are likely to appeal to minors, which became effective in 2022, evidencing a trend across many regulated markets for a greater focus on monitoring and assessing the impact of gambling advertisements and often an increasingly restrictive approach to gambling advertising more generally.
Additionally, some jurisdictions in which we may operate could presently be unregulated or partially regulated and therefore more susceptible to the enactment or change of laws and regulations. Some jurisdictions do not have a legal framework governing the rights in the data we collect.
Further, continued innovation in our technology and services will require Genius to continuously review and monitor its compliance with new and existing laws, which may affect our legal costs and business operations and/or impact the ability to roll out certain products and services in some or all markets. For instance, the European Union (the "EU") has promulgated new laws on AI which is utilized across our business.
The majority of gambling laws in the jurisdictions that we operate do not require us to hold licenses to provide our products and services on a B2B basis. There are some jurisdictions, which include the US and certain countries in Europe, that require us to hold a supplier license. As of December 31, 2025, we have licenses in 31 states and are permitted to provide services in a total of 35 states, provinces and territories in North America that have adopted legislation permitting online sports betting. We also have a further 16 tribal licenses in the US, two licenses in Romania, one license in the UK, one license in Greece and one license in Sweden, and are registered in Peru. However, we offer our services to customers in many countries and do not always have visibility as to where our customers use our products and services. As a result, we are subject to the risk of our products and services being used by customers to offer services in certain jurisdictions which are unlawful in those jurisdictions, which may adversely effect our business and reputation.
Any of our licenses or the licenses of our customers could be voluntarily surrendered, revoked, not renewed, suspended or conditioned at any time. Our license applications or the license applications of our customers may also be denied or conditioned. The loss of a license in one jurisdiction could trigger the loss of a license or affect our eligibility for such a license in another jurisdiction, and any of such losses, or potential for such loss, could cause us to cease offering some or all of our offerings in the impacted jurisdictions or make it difficult or impossible for us to work with certain customers in certain jurisdictions.
In various jurisdictions, as part of the licensing process, key individuals from and related to Genius are required to undergo a determination of suitability through personal disclosures. If an individual does not comply with these requirements or is found to be unsuitable for licensure, we may be unable to obtain or renew our license in that jurisdiction. In order to remain compliant with our regulatory obligations, that individual may be required to be removed from their position.
As laws and regulations change, we may need to obtain and maintain licenses or registrations in additional jurisdictions. In addition, once licensed, we may be subject to various ongoing requirements, including supervision by the respective governmental agency of certain transfers of ownership and acquisitions.
In May 2018, the US Supreme Court struck down the Professional and Amateur Sports Protection Act of 1992 (“PASPA”) as unconstitutional. This decision has the effect of lifting federal restrictions on sports betting and thus allows states to determine by themselves
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the legality of sports betting. Since the repeal of PASPA and up to December 31, 2025, 40 US states (including Washington, DC for these purposes) have legalized sports betting. To the extent new real money gaming or sports betting jurisdictions are established or expanded, we cannot guarantee that we will be successful in penetrating such new jurisdictions or expanding our business or customer base in line with the growth of existing jurisdictions. If we are unable to effectively develop and operate directly or indirectly within these new jurisdictions or if our competitors are able to successfully penetrate geographic jurisdictions that we cannot access or where we face other restrictions, there could be a material adverse effect on our business, operating results and financial condition. Our failure to obtain or maintain the necessary regulatory approvals and licenses in jurisdictions, whether individually or collectively, could have a material adverse effect on our business. See Item 4.B.
To expand into new jurisdictions, we may need to be licensed and obtain approvals for our product offerings. This is a time-consuming process that can be extremely costly. Countries continue to contemplate or progress regulatory efforts to shift from illegal betting to regulated betting markets. As liberalization occurs, we anticipate growing our market presence in emerging markets. Any delays in obtaining or difficulty in maintaining regulatory approvals or licenses needed for expansion within existing jurisdictions or into new jurisdictions, or such jurisdictions never regulating sports betting or at a much slower pace than anticipated, can negatively affect our opportunities for growth, including the growth of our customer base, or delay our ability to recognize revenue from our offerings in any such jurisdictions.
We cannot assure that legally enforceable legislation will not be proposed and passed in jurisdictions relevant or potentially relevant to our business to prohibit, legislate or regulate various aspects of sports betting and online gaming industries (or that existing laws in those jurisdictions will not be interpreted negatively). Compliance with any such legislation may have a material adverse effect on our or our customers’ businesses, financial condition and results of operations, either as a result of our determination that a jurisdiction should be blocked, or because a local license or approval may be costly for us or our customers to obtain and/or such licenses or approvals may contain other commercially undesirable conditions.
Additionally, we are highly reliant on our suppliers (including third-party service providers) in order to furnish our product line and offer products and services to customers. We typically conduct due diligence in relation to new suppliers, and we have contractual safeguards in place to govern any non-compliance, however we are unable to control their continued compliance and there may be occasions where we face the risk of, or we are unaware of, malpractice or non-compliance with domestic and foreign laws and regulations (including, but not limited to, applicable privacy laws). There are also a number of legacy suppliers (with whom we have long-standing relationships) in respect of which we have not conducted due diligence. If we were unable to continue relationships with certain suppliers, whether as a result of their non-compliance with applicable laws, bankruptcy, or otherwise, this could have a detrimental effect on our ability to conduct business in the ordinary course.
Our collection, storage and processing of personal data is subject to applicable data protection and privacy laws in various jurisdictions, and any failure to comply with such laws may harm our reputation and business or expose us to fines and other enforcement action.
In the ordinary course of business, we collect, store, use and transmit certain types of information that are subject to different laws and regulations. In particular, data security and data protection laws and regulations relating to personal and consumer information that we are subject to often vary significantly by jurisdiction. Our media business is particularly impacted by such data security and data protection laws and regulations as the business targets, and helps its customers target, consumers, including end consumers of gambling services. The impact of these laws will grow, particularly as we enter into a new competitive market with the launch in-house advertising and activation offerings.
For example, the EU-wide General Data Protection Regulation (“GDPR”) implemented more stringent operational requirements for processors and controllers of personal data, including, for example, expanded disclosures about what and how personal information is to be used, limitations on retention of information, increased requirements to erase an individual’s information in certain circumstances and provided consumers with certain other rights with respect to their data, mandatory data breach notification requirements and higher standards for data controllers to demonstrate that they have obtained valid consent from individuals to process their personal data (or reliance on another appropriate legal basis) for certain data processing activities. It also significantly increased penalties for noncompliance, including where we act as a data processor.
Largely identical requirements apply under the equivalent legislation in the UK (the “UK GDPR”). We have executed intracompany Standard Contractual Clauses (“SCCs”) and International Data Transfer Agreements (“IDTAs”) which are currently in compliance with the GDPR and the UK GDPR to allow for the transfer of personal data from the EU and from the UK to "non-adequate" jurisdictions and continue to execute SCCs and IDTAs with respect to newly acquired contracts where required to comply with the GDPR and UK GDPR. Data security and data protection laws and regulations are continuously evolving. There have been a number of legal challenges to the validity of EU, UK and Swiss mechanisms for adequate data transfers such as the SCCs, and our work could be impacted by changes in law as a result of a future review of these transfer mechanisms by regulators under the GDPR and UK GDPR, as well as current challenges to these mechanisms in the UK and/or European courts. Given the applicability of the GDPR and UK GDPR to certain of the Company’s operations, the Company is required to take additional steps with respect to the selection of a supervisory authority in an EU member state despite our operational head office location in the UK. Additionally, we are also subject to the Data Protection (Bailiwick of Guernsey) Law, 2017 (as amended) (the “Guernsey DP Law”), which largely follows the GDPR and requires us to control and process personal data only for proper purposes and in accordance with statutory data protection principles, and the Data Protection Law of Colombia, which requires the consent of the user to their data being transmitted outside of Colombia.
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In recent years, US federal and state and UK/European lawmakers and regulators have expressed concern over electronic marketing, tracking and communications, including the use of third-party cookies, web beacons and similar technology for online behavioral advertising. In the EU/UK, the rules specifically on electronic marketing, tracking and communications are currently set out in the ePrivacy Directive (as implemented by local regulations) and which, in the UK, has been amended by the Data Use and Access Act.
US federal and state and UK/European privacy and consumer protection laws, rules and regulations (including those described above) cover nearly all aspects of our electronic marketing efforts, including the use of cookies and similar technologies. The nature of our business requires us to expend significant resources to try to ensure that our electronic marketing activities comply with such privacy and consumer protection laws, including laws relating to the use of third-party cookies and similar technologies. These efforts may not be successful, and we may have to expend even greater resources in our compliance efforts. Additionally, our ability to deliver digital marketing services as part of our business may be adversely impacted by the deprecation of third-party cookies. For example, Google has delayed its deprecation of third-party cookies in Google Chrome, regulations governing privacy and electronic marketing, tracking and communications means that we will continue to be required to implement privacy-conscious solutions. Genius has furthered its investment into the fan engagement space, which includes data-driven digital marketing services to a range of advertisers targeting sports audiences. As Genius continues to develop personalized products that incorporate user information, it will be required to place even greater attention on its compliance with electronic marketing and privacy laws.
Modifications to consumer protection and privacy laws, including proposed laws by US federal and state and UK/European lawmakers, regarding privacy and data protection, could have an adverse impact on our ability to attract and retain customers and users of our services. Various comprehensive US state and foreign privacy laws give new data privacy rights to their respective residents (including, in California, a private right of action in the event of a data breach resulting from our failure to implement and maintain reasonable security procedures and practices) and impose significant obligations on controllers and processors of personal data. Certain U.S. state laws, including California, regulate businesses that are defined as ‘data brokers’ based on specific data collection, use, or disclosure activities. Definitions under these laws may apply to aspects of our business or to certain of our subsidiaries, even where data collection or use is ancillary to our core offerings. Compliance with such laws may require registration, enhanced disclosures, consumer rights fulfillment, and ongoing reporting obligations, and may subject us to regulatory scrutiny, enforcement actions, fines, private litigation, or reputational harm. These laws are evolving and subject to interpretation, and changes in regulatory guidance or enforcement priorities could increase our compliance costs, restrict certain data-driven activities, or require modifications to our products, services, or corporate structure. There can be no assurance that new laws or regulations will not be enacted or adopted, preexisting laws or regulations will not be more strictly enforced or that our operations will comply with all applicable laws, which could have an adverse impact on our operations and financial condition.
UK and EU privacy regulators have reviewed, or are reviewing, digital advertising. For example, in Belgium, the Transparency & Consent Framework has been subject to updates following regulatory scrutiny. In the UK, the Information Commissioner's Office (the "ICO") issued an opinion in November 2021 clarifying their view on the privacy considerations with respect to adtech solutions and on their expectations regarding data protection by default and design for adtech solutions. Should regulators take a stricter view on the impact of advertising technology on privacy rights, or if we are involved in an investigation, we are likely to be required to expend further capital and other resources to ensure compliance with these changing laws and regulations or to represent our interests in regulatory discussions.
While we have numerous mitigation controls in place, there is a risk that cookies and similar technologies may be erroneously deployed on end-users’ devices without appropriate consent, or that advertisements produced by us may be erroneously served on websites that are not suitable for the advertising content of gambling (e.g., websites predominantly aimed at children). There is also a risk that gambling advertisements are viewed by people who do not want to view them, or who have taken measures not to receive them (for example, individuals on “self-exclusion” lists). In each case this may have adverse legal and reputational effects on our business. There is a risk that our media customers may also use our services to target jurisdictions where they are not permitted to advertise, and that our risk mitigation controls fail to identify and/or prevent this and our business suffers adverse legal and reputational effects as a result. In October 2024, the European Data Protection Board (“EDPB”) released new guidelines (the “EDPB Guidelines”) on the scope of the ePrivacy Directive, which now imposes consent and disclosure requirements for a wider range of tracking tools which involve the storage of information on, or access of information already stored on, a user device (for example, tracking pixels or IP addresses) and not just traditional cookies. As a result of the new EDPB Guidelines, our ability to deliver contextual advertising, including by utilizing cookies and similar technologies, may become subject to further end-user consent and disclosure requirements, and this may adversely impact our media business and increase the risk of enforcement activities in the EU.
Because our products and services rely on the movement of data across national boundaries, global privacy and data security concerns could result in additional costs and liabilities to us or inhibit sales of our products globally. European data protection laws, including the GDPR, the UK GDPR and the Guernsey DP Law, generally restrict the transfer of personal information from Europe, including the European Economic Area, the UK and Switzerland, to the US and most other countries unless the parties to the transfer have implemented specific safeguards to protect the transferred personal information. Although we rarely rely on individuals’ explicit consent to transfer their personal information from Europe to the US and other countries, in most cases we have relied or may rely on the SCCs (although, as noted above, we are following ICO and EU guidance and directions to assess the adequacy of such transfers, including ensuring that the guarantees provided in the SCCs can be complied with in practice). Inability to import personal information from the European Economic Area, the UK or Switzerland may also restrict our operations in those jurisdictions, limit our ability to collaborate with our customers, sports organizations, service providers, contractors and other companies subject to UK/European data protection laws and require us to increase our data processing
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capabilities in the UK/Europe at significant expense. Additionally, other countries outside of Europe have enacted or are considering enacting similar cross-border data transfer restrictions and laws requiring local data residency, which could increase the cost and complexity of delivering our services and operating our business.
In order to diversify our data transfer strategy, we will continue to explore other options managing data from Europe and the UK, including without limitation, amending SCCs and IDTAs where required and considering suppliers that limit their data processing activities to ensure processing occurs in the UK/Europe at all times, which may involve substantial expense and distraction from other aspects of our business. We may, however, be unsuccessful in establishing an adequate mechanism for data transfer and will be at risk of enforcement actions taken by an EU/UK/Swiss data protection authority until such point in time that we ensure an adequate mechanism for such EU/UK/Swiss data transfers, which could damage our reputation, inhibit sales and harm our business.
Despite actions we have taken or will be taking to diversify our data transfer strategies, we may be unsuccessful in establishing a conforming means of transferring data due to ongoing legislative activity that could vary the current data transfer landscape. As we expand into new markets and grow our customer base, we will need to comply with any new requirements and continue to progress our compliance to align with changing regulations in our existing operational regions. If we cannot comply with, or if we incur a violation of one or more of these requirements, some customers may be limited in their ability to purchase our products, particularly our cloud products. Growth could be harmed, and we could incur significant liabilities.
Further examples of the evolving legal landscape in relation to the collection of personal data in the US include changes to state laws governing the processing of biometric information, such as the Illinois Biometric Information Privacy Act of 2008 and the Texas Capture or Use of Biometric Identifier Act of 2009, which impose obligations on businesses that collect or disclose consumer biometric information. There is a risk that the processing of athlete information in particular could be construed as biometric data, meaning such processing falls within the scope of these laws.
Additionally, various federal, state, and foreign laws and codes govern how companies provide age-appropriate experiences to children and minors, including the collection and processing of children and minor’s data. These include the Children’s Online Privacy Protection Act of 1998, and the UK Age-Appropriate Design Code, all of which address the use and disclosure of the personal data of children and minors and impose obligations on online services or products directed to or likely to be accessed by children. There is a risk that the digital fan engagement products and free to play games that we provide to customers may be accessed by children and minors, even where safeguards are put in place, and that the data of children and minors are processed.
Although we analyze risks associated with our data processing activities, provide employee training, implement certain policies and procedures, and continue to review and improve such policies and procedures that are designed to ensure compliance with applicable laws, rules and regulations, if our privacy or data security measures fail to comply with applicable current or future laws and regulations, we may be subject to fines, litigation, regulatory investigations, enforcement notices requiring us to change the way we use personal data or our marketing practices or other liabilities such as compensation claims by individuals affected by a personal data breach, as well as negative publicity and a potential loss of business.
In 2021, a group of UK football players issued a data subject access request under the GDPR (dubbed “Project Red Card”) to various participants in the sports data and sports betting industries, including the Company, and the Company continues to receive such data subject access requests, but thus far it has not developed further into litigation. Should any player or participant claims develop into litigation either from Project Red Card or another equivalent organization, it could significantly alter the way we collect and use sports data relating to players, sports staff and referees and could materially affect the sports data industry as whole.
Use of AI in our products or services may result in operational challenges, legal liability, reputational concerns and competitive risks.
Artificial intelligence, including generative AI, is rapidly evolving and its use at scale is relatively new. As a result, our use of AI, and the use of AI by our vendors and other third parties, may create risks that are difficult to predict, prevent or mitigate, particularly as AI becomes more integrated into our products, services, systems and operations.
We use AI and machine learning in certain products and internal operations, including simulated sports reality, certain betting-related offerings and our next generation data and artificial intelligence platform, “Genius IQ.” We may face difficulties in developing, integrating and maintaining AI-enabled solutions, including challenges relating to performance, reliability, scalability and explainability. Ongoing model validation and monitoring require significant resources, and we may not detect model degradation, data drift or emerging biases in a timely manner. We also face increasing dependence on third-party AI providers, whose practices, security measures and contractual terms may limit our ability to control risks or obtain adequate remedies. . There can be no assurance that our use of AI will improve our products, operations, customer outcomes, efficiency or profitability.
AI systems may generate inaccurate, incomplete, biased, misleading or otherwise undesirable outputs, including due to limitations in model design, the quality or completeness of training data, or changes in market conditions that reduce the usefulness of historical data. These issues may be difficult to detect and may adversely affect our decision-making or our customers’ decision-making, harm our reputation, impair product quality or system performance, and expose us to contractual disputes, regulatory scrutiny and litigation.
The use of AI in our operations also creates additional confidentiality, privacy, data protection, intellectual property infringement, cybersecurity and litigation risks. Sensitive information, including confidential, proprietary, competitive or personal data, may be
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unintentionally disclosed or exposed through the use of third-party AI tools or services, and AI-enabled features that process personal data may reveal additional sensitive information in their outputs. While we maintain an AI governance framework, including policies governing acceptable use of AI tools, restrictions on data inputs to third-party AI platforms and oversight mechanisms for AI-generated outputs, we may not be able to prevent AI misuse, policy violations or control failures, including due to human error, circumvention of controls, evolving AI capabilities or limitations in monitoring and enforcement across our global workforce. If our controls are ineffective, or if employees or third parties use AI in an unauthorized manner, our business, results of operations, financial condition and reputation may be adversely affected.
As we continue to develop, integrate and commercialize AI-enabled offerings, we may face increased competition, shifting customer expectations and new business models. We may be required to invest significant resources to remain competitive, manage new partner and vendor relationships and adapt our offerings. If new AI-enabled offerings are not adopted, do not perform as expected or are perceived to cause harm, our business and operating results could be adversely affected.
AI technologies are also subject to existing and emerging laws and regulations, including those relating to privacy, data protection, cybersecurity, consumer protection, employment, discrimination and intellectual property. The regulatory landscape for AI is evolving globally, including under the European Union AI Act and various United States state laws. These laws may impose requirements relating to risk management, transparency, human oversight and documentation, and may require us to modify our products, services, governance processes or technical controls at significant cost. We may face regulatory inquiries, enforcement actions or private claims based on our AI use, including claims that AI-enabled content or outputs infringe intellectual property rights, violate privacy or consumer protection laws or create unfair or discriminatory outcomes. Any of these developments could adversely affect our business, reputation, results of operations and financial condition.
Privacy, data protection, and data usage regulations are complex and rapidly evolving areas. Any failure or alleged failure to comply with these laws could harm our business, reputation, financial condition, and operating results.
Authorities around the world have adopted and are considering a number of legislative and regulatory proposals relevant to the digital economy, concerning, for example, data protection, data usage, encryption of user data and AI technologies. Potential adverse legal rulings, legislation, or regulation could result in fines and orders requiring that we change our practices, and could therefore have an adverse effect on how we provide services, harming our business, reputation, financial condition, and operating results. These new and changing laws and regulations are evolving and subject to interpretation, and compliance obligations could cause us to incur substantial costs or harm the quality and operations of our products and services in ways that harm our business, and may require us to adapt our existing arrangements. Examples of these laws include the EU’s Digital Markets Act, which while not currently directly applicable to us, will require large online platforms that are designated by the European Commission as “gatekeepers” to obtain user consent for combining data across certain products and require search engines to share anonymized data with rival companies, among other changes. The EU AI Act, which entered into force in August 2024 and will become fully effective starting August 2, 2026, includes specific transparency and other requirements for general purpose AI systems and the models on which those systems are based, and has extra-territorial application and imposes significant potential maximum penalties for non-compliance: in the worst cases, up to the greater of €35,000,000 or 7% of an entire group’s total annual worldwide turnover. Thus, our development, use, and commercialization of AI products and services (including our implementation of AI in our offerings and internal systems) could subject us to regulatory action and legal liability, including under specific legislation regulating AI, as well as new applications of existing data protection, cybersecurity, privacy, intellectual property, and other laws.
We may face claims for data rights infringement, which could subject us to monetary damages.
Although we have generally adopted measures to avoid potential infringement of third-party data, streaming, or other properties (“Third-Party Property”) in the course of our operations, ownership of certain Third-Party Property is not always clear in certain jurisdictions we may operate in, particularly in “gray” jurisdictions which are presently unregulated or partially regulated. Should we face claims relating to using unlawful sources of Third-Party Property, or should we inadvertently infringe on another company’s Third-Party Property, or breach any contractual obligations when collecting such Third-Party Property in any jurisdiction, we could be subject to claims of infringement, which could be time consuming and expensive to litigate or settle, divert the attention of management and materially disrupt the conduct of our business, and we may not prevail. Any such clams, which could include a claim for injunctive relief and damages, if successful, could have a material adverse effect on our business, results of operations and financial position.
We may be subject to future litigation and investigations in various jurisdictions and with various plaintiffs in the operation of our business. Protracted litigation costs could negatively affect our operational costs, and an adverse outcome in one or more proceedings could adversely affect our business operations and financial position.
Future legislative and regulatory action, and court decisions or other governmental action, may have a material impact on our and our customers’ operations and financial results. Governmental authorities could view us, or our customers as having violated applicable laws or regulations, despite our or their efforts to obtain and maintain all applicable licenses or approvals. There is also a risk that civil and/or criminal proceedings, including class actions brought by or on behalf of prosecutors or public entities or incumbent providers, or private individuals, could be initiated against us, internet service providers, credit card and other payment processors, advertisers and others involved in sports betting and online gaming industries. Such potential proceedings could involve substantial litigation expense, penalties, fines, seizure of assets, injunctions or other restrictions being imposed upon us or our customers or other business partners, while diverting the attention of key
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executives, which could have a material adverse effect on our and our customers’ businesses, financial condition, results of operations and prospects, as well as impact our and our customers’ reputation.
We have been and are party to litigation (see below), and we may in the future increasingly face the risk of, claims, lawsuits, investigations, and other proceedings, including those which may involve competition and anti-trust, anti-money laundering, Office of Foreign Assets Control (“OFAC”), gaming, intellectual property, privacy, consumer protection, accessibility claims, securities, tax, labor and employment, commercial disputes, services and other matters. We have in the past employed third-party contractors that may operate in countries under US sanctions and, as a result, have been and may continue to be subject to legal proceedings regarding compliance with US sanctions laws. Litigation to defend us against claims by third parties, or to enforce any rights that we may have against third parties, may be necessary, which could result in substantial costs, fines or penalties and diversion of our resources, causing a material adverse effect on our business, financial condition, results of operations and prospects. Genius conducts risk-based due diligence on all third parties and a segment of our clients. Preparations are underway to implement sanctions screening for all clients and automated sanctions screening for all third parties.
The sports betting industry may be subject to government regulations or scrutiny, which may lead to the possibility of anti-trust litigation or investigations into one or more market participants and such processes may involve the Company is some capacity, the outcomes of which could materially adversely affect our financial condition and business operation.
Additionally, there is an emerging global focus on employment status regulation and related employment claims. We engage staff globally as employees, but also as contractors and service providers. With more stringent laws on employment status there is a risk that we open ourselves up to contractors bringing claims alleging they should be engaged as employees. We keep our workers status regularly under reviewing to mitigate this risk.
Furthermore, we store a significant amount of historical financial data in order to comply with regulatory requirements. Any failure or deficiencies in the storage of this data could have an adverse impact on our ability to comply with requests from the relevant authorities and could expose us to the risk of regulatory action. For more information, see Note 21 – Commitments and Contingencies to the consolidated financial statements included in Item 18 of this Report.
Any litigation to which we are a party may result in an onerous or unfavorable judgment that may not be reversed upon appeal, or in payments of substantial monetary damages or fines, the posting of bonds requiring significant collateral, letters of credit or similar instruments, or we may decide to settle lawsuits on similarly unfavorable terms. These proceedings could also result in reputational harm, criminal sanctions, consent decrees or orders preventing us from offering certain products or requiring a change in our business practices in costly ways or requiring development of non-infringing or otherwise altered products or technologies. Litigation and other claims and regulatory proceedings against us could result in unexpected disciplinary actions, expenses and liabilities, which could have a material adverse effect on our business, financial condition, results of operations and prospects. For example, if Project Red Card or a similar action, develops into a legal claim, it could significantly alter the way we collect and use personal data, and could materially affect the sports data industry as a whole. Under the terms of our existing contractual arrangements, any adverse judgments could impact the validity of such contractual arrangements and/or our ability to rely on intellectual property rights to prevent third-party infringement, which may force us to alter our business strategy and have an adverse effect on our business.
Litigation between third parties in our industry may also result in changes in (or interpretation of) law that materially adversely impacts our existing business and strategy. Our insurance or indemnities may not cover all claims that may be asserted against us, and any claims asserted against us, regardless of merit or eventual outcome, may harm our reputation. If we are unsuccessful in our defense in these litigation matters, or any other legal proceeding, we may be forced to pay damages or fines, enter into consent decrees, change our business practices or lose licenses and authorizations, any of which could adversely affect our business, financial condition or results of operations.
Our failure to comply with the anti-corruption, anti-bribery, anti-money laundering and similar laws of the UK, US and various international jurisdictions could negatively impact our reputation and results of operations.
Doing business on a worldwide basis requires us to comply with anti-corruption laws and regulations imposed by governments around the world with jurisdiction over our operations, which may include the UK Bribery Act of 2010 (“UK Bribery Act”), the US Foreign Corrupt Practices Act of 1977 (“FCPA”), the Prevention of Corruption (Bailiwick of Guernsey) Law, 2003 (as amended) (the “Guernsey Bribery Law”), Sistema de Autocontrol y Gestión del Riesgo Integral de Lavado de Activos y Financiación del Terrorismo ("SAGRILAFT"), as well as the laws of the other countries where we do business. These laws and regulations may restrict our operations, trade practices, investment decisions and partnering activities. The FCPA, the Guernsey Bribery Law, the UK Bribery Act and other applicable laws prohibit us and our officers, directors, employees and business partners acting on our behalf, including agents, from corruptly offering, promising, authorizing or providing anything of value to “foreign officials” for the purposes of influencing official decisions or obtaining or retaining business or otherwise obtaining favorable treatment. The UK Bribery Act also prohibits “commercial” bribery or the appearance of such bribery. We are subject to the jurisdiction of various governments and regulatory agencies around the world, which may bring our personnel and representatives into contact with “foreign officials” responsible for issuing or renewing permits, licenses or approvals or for enforcing other governmental regulations. We are further required to draft policies and procedures, and implement various processes around conflicts of interest and related party transactions in order to comply with our obligations under the UK Bribery Act and regulations in the US relating to our listing as a public company on the NYSE. These procedures and processes must be maintained and overseen in various jurisdictions, and
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even still may not be sufficient to prevent a violation. A violation in our procedures and policies could result in disciplinary actions, regulatory fines, litigation, risks to the rights of shareholders with respect to a violation of listing rules and disclosures, and public relations risks; all of which could affect our reputation and results of operations. Additionally, the costs, resourcing and impact of compliance may continue as additional requirements are imposed by various regulators. These additional measures may affect our operating costs or financial results.
In addition, some of the international locations in which we operate lack a developed legal system and have elevated levels of corruption. SAGRILAFT requires Genius Sports to implement a comprehensive risk management system to prevent money laundering and terrorism financing by identifying and monitoring counterparties and transactions. There is a risk that we may not fulfill all the requirements of this regulation, which could result in regulatory repercussions. Our international operations expose us to the risk of violating, or being accused of violating, anti-corruption laws and regulations. Our failure to successfully comply with these laws and regulations may expose us to reputational harm, as well as significant sanctions, including criminal fines, imprisonment, civil penalties, disgorgement of profits, injunctions, and debarment from government contracts, as well as other remedial measures. Investigations of alleged violations can be expensive and disruptive. We are continuously developing and maintaining policies and procedures designed to comply with applicable anti-corruption laws and regulations. However, there can be no guarantee that our policies and procedures will effectively prevent violations by our employees or business partners acting on our behalf, including statisticians who attend events on our behalf, for which we may be held responsible, and any such violation could adversely affect our reputation, business, financial condition, and results of operations.
Risks Related to Genius Sports Group’s Technology, Intellectual Property, and Infrastructure
Failure or inability to obtain, maintain, protect, or enforce our proprietary, contractual and/or intellectual property rights, including our unregistered intellectual property, and the costs involved in such action could harm our business, financial condition, results of operations and prospects, and could lead to reputational loss with our rightsholder partners and potential legal implications if we are unable to protect and monetize their intellectual property. Failure to obtain intellectual property protection that is sufficiently broad may diminish our competitive advantages or interfere with our ability to develop and market our products and services.
Intellectual property rights are important to the success of our business. However, circumstances outside our control could pose a threat to our intellectual property rights. For example, effective intellectual property protection may not be available in certain countries in which we operate or intend to operate our business. Also, the efforts we have taken to protect our intellectual property rights may not be sufficient or effective, and any significant impairment of our intellectual property rights could harm our business or our ability to compete. For example, it may not always have been possible or commercially desirable to obtain registered protection for our products, software, databases, or other technology and, in such situations, we rely on laws governing protection of unregistered intellectual property rights, confidentiality and/or contractual exclusivity of and to underlying data and technology to prevent unauthorized use by third parties. As such, if we are unable to protect our proprietary offerings via relevant laws or contractual exclusivity, technology and features, competitors may copy them. In particular, the EU database right protection does not apply outside the EU and, as such, there are now separate UK and EU database rights protection.
Additionally, protecting our intellectual property rights is costly and time-consuming. Any unauthorized use of our intellectual property or disclosure of our confidential information or trade secrets could make it more expensive to do business, thereby harming our operating results. Furthermore, if we are unable to protect our intellectual property rights or prevent unauthorized use or appropriation by third parties, the value of our brand and other intangible assets may be diminished, and competitors may be able to more effectively mimic our product offerings and services. Any of these events could seriously harm our business, financial condition, results of operations and prospects.
Further, third parties may knowingly or unknowingly infringe our proprietary and intellectual property rights (including by purposefully breaching our exclusive contractual arrangements with third parties, for example, by entering stadiums without the owners’ consent to collect data at events where we hold exclusive data collection rights) or challenge proprietary and intellectual property rights held by us. Further, we cannot guarantee that our patents, registered trademarks, or other intellectual property will be of sufficient scope or strength to provide us with meaningful protection or competitive advantage. We currently hold patents for some but not all of our technology, products, and services, which means some of our technology, products and services are susceptible to copying. The fact that we currently do not hold patents for some of our technology, products and services also means third parties may claim patent rights over some of our technology, products and services and may bring infringement proceedings in respect of the same. Any pending and future trademark or patent applications may not be approved, or we may not be able to overcome a third-party opposition, and competitors and other third parties may also adopt trade names or trademarks similar to ours. In any of these cases, we may be required to expend significant time and expense to prevent infringement of or to enforce our rights, and we may fail to enforce our rights which may have a material adverse effect on our business.
Notwithstanding our intellectual property rights, there can be no assurance that others will not offer products or services that are substantially similar to ours and compete with our business.
We have faced and may in the future face claims for intellectual property infringement, which could subject us to monetary damages or limit us in using some of our technologies or providing certain solutions.
Although we have generally adopted measures to avoid potential infringement of third-party intellectual property rights in the course of our operations, we may not be successful in ensuring all components of our platform, products and services have proper third-party authorization. Additionally, the legal position in all jurisdictions in relation to the ownership and permitted use of sports data and databases is
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subject to change. We cannot be certain that our current uses of data and other materials from publicly available sources (including third-party websites) or otherwise, which are not currently known to infringe or misappropriate third-party intellectual property today, will not result in claims for infringement or misappropriation of third-party intellectual property or other legal claims in the future. Intellectual property infringement claims or claims of misappropriation against us could subject us to liability for damages and restrict us from providing solutions or require changes to certain solutions and technologies. Claims of infringement or misappropriation of a competitor’s or other third-party’s intellectual property rights, regardless of merit, could be time consuming and expensive to litigate or settle, divert the attention of management, and materially disrupt the conduct of our business, and we may not prevail. Any such claims, which could include a claim for injunctive relief and damages, if successful, could have a material adverse effect on our business, results of operations and financial position. For example, on October 5, 2023, Sportscastr Inc. (d/b/a Panda Interactive) (“Sportscastr”) filed a claim against the Company in the US District Court for the Eastern District of Texas. Sportscastr is claiming the Company is infringing patents held by Sportscastr relating to the provision of synchronized live data and content within live video streams. Sportscastr is seeking an order prohibiting any infringement and monetary relief against the Company. While the Company is defending all claims, this litigation is currently ongoing, and we can provide no assurances regarding its outcome and the impact it may have on the Company’s business and reputation.
We rely on information technology and other systems, services and platforms, including Amazon Web Services and certain other third-party platforms and failures, errors, defects, or disruptions therein could diminish our brand and reputation, subject us to liability, disrupt our business, affect our ability to scale our technical infrastructure and adversely affect our operating results and growth prospects. Our product offerings and other software applications and systems, and certain third-party platforms that we use could contain undetected errors or errors that we fail to identify as material.
Our technology infrastructure, including Amazon Web Services and certain other third-party platforms and providers, are critical to the performance of our services and product offerings and to user satisfaction. Consequently, we have experienced, and may again in the future be subject to service disruptions or instability which could impact our products, service provision and cause reputational damage, and loss of revenue. Third party suppliers and services may also fail to provide adequate support for reasons that are outside of our direct control. The performance and availability of Amazon Web Services with the necessary speed, data capacity and security for providing reliable access and services can affect the delivery, availability, and performance of our services. Decisions by the owners and operators of the data centers where our cloud infrastructure, Amazon Web Services, is deployed to terminate our contracts, discontinue services to us, shut down operations or facilities, increase prices, change service levels, limit bandwidth, or prioritize the traffic of other parties could also affect the delivery, availability and performance of our services. Third parties may also experience security incidents, which can impact our operations and the protection of data we process.
Some of our services and offerings require the installation of infrastructure and equipment into customer sites which are not under our control. Consequently, we cannot guarantee the provision of required infrastructure, access to or protection of such assets from compromise. As such, we may be subject to service disruptions, or compromise of data processed by such infrastructure and equipment.
We devote significant resources to network and data security to protect our systems and data. However, our systems may not be adequately designed with the necessary reliability and redundancy to avoid performance delays or outages that could be harmful to our business. We cannot provide assurance that complete security will be provided by the measures we take to: prevent or hinder cyber-attacks and protect our systems, data, and user information or to fully prevent outages, data loss, fraud, or security breaches. We have experienced, and we may in the future experience, system disruptions, outages, and other performance problems due to a variety of factors, including infrastructure changes, human or software errors, operational interruption, workforce disruption, and capacity constraints. To date, such disruptions have not had a material impact on us, individually or in the aggregate; however, future disruptions from unauthorized access to, fraudulent manipulation of, or tampering with our systems and technological infrastructure, or to those of the third parties on which we rely, could result in a wide range of negative outcomes, each of which could materially adversely affect our business, financial condition, results of operations and prospects.
Additionally, our services and product offerings, including our user interfaces, may contain errors, bugs, flaws, or corrupted data that we have not detected, and these defects may become apparent only after their launch and could result in performance issues or vulnerabilities that may compromise the availability or security of our systems Additionally, we have detected certain errors, bugs and flaws in our service and product offerings which may have the potential to be exploited, resulting in harm to our business. If a particular product offering is slower than they expect, customers may be unable to use our services and product offerings as desired and may be less likely to continue to use our services and product offerings, if at all. Furthermore, programming errors, defects and data corruption could disrupt our operations; adversely affect the experience of our customers; harm our reputation; cause our customers to stop utilizing our services and product offerings; or divert our resources or delay market acceptance of our services and product offerings, any of which could result in legal liability to us or harm our business, financial condition, results of operations and prospects. Insufficient incident response and business continuity management could diminish our brand and reputation, subject us to liability, disrupt our business and adversely affect our operating results and growth prospects. Failure of planned availability, continuity solutions and disaster recovery in response to an incident could result in service degradation and service and system interruptions.
If our customer base and engagement continue to grow, and the amount and types of services and product offerings continue to grow and evolve, we will need an increasing amount of technical infrastructure, including network capacity and computing power, to continue to satisfy our users’ needs. Such infrastructure expansion may be complex, and unanticipated delays in completing these projects or availability of
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components may lead to increased project costs, operational inefficiencies, or interruptions in the delivery or degradation of the quality of our services or product offerings. In addition, there may be issues related to this infrastructure that are not identified during the testing phases of design and implementation, which may become evident only after we have started to fully use the underlying equipment or software, that could further degrade the user experience or increase our costs. As such, we could fail to continue to effectively scale and grow our technical infrastructure to accommodate increased demands. In addition, a lack of resources (e.g., hardware, software, personnel, and service providers) could result in an inability to scale our services to meet business needs, system interruptions, degradation of service, or operational mistakes. Our products and systems in some areas of the business are still maturing and the company relies on manual processes for certain operations which expose the company to a heightened risk of human error, which could lead to inaccuracies or misstatements, notwithstanding the existence of oversight, review, and control mechanisms intended to mitigate such risks. Our technology infrastructure also may be subject to interruptions, delays or failures resulting from adverse weather conditions, other natural disasters, power loss, terrorism, cyber-attacks, operational interruption, workforce disruption, public health emergencies or other catastrophic events. While the company maintains an insurance program to protect from various risks that could impact our operations, this may not be sufficient to cover the full financial impact and losses that may result from interruptions to business operations.
We believe that if our customers have a negative experience with our services and product offerings, or if our brand or reputation is negatively affected, customers may be less inclined to continue or resume using our services and product offerings and/or recommend our services and product offerings to other potential customers. As such, a failure or significant interruption in our service could harm our reputation, business, financial condition, results of operations and prospects.
Despite our security measures, our information technology and infrastructure may be vulnerable to attacks or breached due to system or employee error, malfeasance, third-party or customer compromise or other disruptions. A breach could compromise our operations and service availability, as well as the confidentiality and integrity of information belonging to Genius Sports, our employees, customers, partners and any other third party who shares information with us. Any such access, disclosure, other corruption, loss or theft of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, and regulatory penalties, disruption of our operations and the services we provide to users, damage to our reputation, and a loss of confidence in our products and services, each of which could adversely affect our business, financial condition, results of operations and prospects.
The secure maintenance and transmission of information is a critical element of our operations. Our information technology, product offerings and other systems that maintain and transmit information, or the systems of third-party service providers and business partners, may be compromised by a malicious third party, or the security of a third-party service provider or business partner, or impacted by intentional or unintentional actions or inactions by our employees, or the actions or inactions of a third-party service provider, customer, or business partner. As a result, our information may be lost, disclosed, accessed, or taken without consent. We have experienced attempts to breach our systems and other similar incidents in the past. Further, attacks are becoming increasingly sophisticated and ubiquitous with advances in technological developments, such as AI.
We have also been and expect that we will continue to be subject to attempts to gain unauthorized access to or through our information systems or those we develop for our customers, whether by our employees or third parties, including via phishing attacks, installations of malicious software programs, as well as through exploitation of security flaws, and or vulnerabilities in our systems. We have experienced, and may continue to experience, attempts to gain unauthorized access to customer facing systems due to poor account management practices by customers. To date, these attacks have not had a material impact on our operations or financial results, but we cannot provide assurance that they will not have a material impact in the future, including by overloading our systems and networks, and preventing our product offering from being accessed by legitimate users. Despite having incident detection and response capabilities, including a third-party Security Operations Centre ("SOC") monitoring and responding to threats on a constant basis, certain internal response and escalation capabilities may be subject to staffing, geographic, or operational constraints. To date, this has not had a material impact on our ability to mitigate potential threats. However, we may experience delays in responding to escalations from our SOC.
As a fast-growing business, we have accumulated a high number of technology products and large volumes of data, primarily through internal development or acquisition of other companies. The large number of products and considerable variance of technologies adopted by these products can create complexities in attaining complete and ongoing visibility of the vulnerabilities and flaws that may be associated with these products. As such, there is a risk that we are exposed to unknown flaws or vulnerabilities which may be exploited, or we unintentionally fail to adequately prioritize and manage them. In particular, recent acquisitions, including Sports Innovation Lab (SIL) have expanded and, upon closing, Legend, will expand our technology environment, data holdings, and overall attack surface. SIL maintains a substantial database containing information on a substantial number of individuals in the United States, which may qualify SIL or Genius as a data broker under certain evolving U.S. state laws, subjecting us to registration, disclosure, and compliance obligations that vary by jurisdiction. These acquisitions have also introduced (or upon completion will introduce) infrastructure and systems that were developed under different security frameworks and standards than those employed by Genius. Full integration of acquired entities with our corporate security framework—including alignment of security policies, procedures, monitoring capabilities, and incident response processes—requires significant time and resources. Until such integration is complete, acquired entities may operate with security controls that differ from our corporate standards, creating potential gaps in visibility, inconsistent enforcement of security policies, and challenges in coordinating incident detection and response across the combined organization.
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Further, products and services that have been developed in the past or been acquired may have been developed against security standards that no longer align with current best practices. In some cases, the work required to modernize requires a significant amount of engineering effort and carries risk of disruption to the availability of the product and services to our customers. Consequently, we may instead decide to accept the risk or apply compensating controls to sufficiently mitigate the risk.
We operate a distributed model of responsibility for security, such that teams across our business are responsible for the security of their area; however, they attain support from a dedicated Information Security team which provides expert advice, promotes best practices, policies, and surfaces security risks to relevant stakeholders. Adherence to our internal technical and organizational security standards can vary across teams, particularly in the event of an acquisition of a business that adopts different security practices and standards. The integration and alignment of an acquisition’s security related standards, policies and procedures requires significant time and effort, and in the meantime, may expose us to risk of compromise.
We rely on encryption and authentication technology licensed from third parties in an effort to securely transmit and store confidential and sensitive information. Advances in computer capabilities, new technological discoveries or other developments may result in the whole or partial failure of this technology to protect transaction data or other confidential and sensitive information from being breached or compromised. Our security measures, and those of our third-party service providers, may not detect or prevent all attempts to breach our systems, denial-of-service attacks, viruses, malicious software, phishing attacks, social engineering, security breaches or other attacks and similar disruptions that may jeopardize the security of information stored in or transmitted by our websites, networks and systems or that we or such third parties otherwise maintain. We and such third parties may not anticipate or prevent all types of attacks until after they have already been launched. Further, techniques used to obtain unauthorized access to, or sabotage systems change frequently and may not be known until launched against us or our third-party service providers.
Furthermore, security breaches can also occur as a result of non-technical issues, including process failures and intentional or inadvertent breaches by our employees or by third parties. These risks may increase over time as our user number increases and the complexity and number of technical systems and applications we use and employees we have also increases. Breaches of our security measures or those of our third-party service providers or cybersecurity incidents have resulted in and may in the future result in: unauthorized access to our sites, networks and systems; unauthorized access to and misappropriation of information, including personally identifiable information, or other confidential or proprietary information of ourselves or third parties; viruses, worms, spyware, ransomware or other malware being served from our sites, networks or systems; deletion or modification of content or the display of unauthorized content on our sites; interruption, disruption or malfunction of operations; costs relating to breach remediation, deployment of additional personnel and protection technologies, response to governmental investigations and media inquiries and coverage; engagement of third-party experts and consultants; or litigation, regulatory action and other potential liabilities.
In addition, we have experienced and expect to continue to experience social engineering, phishing, malware and similar attacks, and threats of denial-of-service attacks. To date, we are not aware of any material breach to our business; however, such breaches could in the future have a material adverse effect on our operations. If any of these breaches of security should occur and be material, our reputation and brand could be damaged, our business may suffer, we could be required to expend significant capital and other resources to alleviate problems caused by such breaches, and we could be exposed to a risk of loss, litigation or regulatory action, and possibly liability. We cannot guarantee that recovery protocols and backup systems will be sufficient to prevent data loss. In addition, while we maintain cybersecurity insurance coverage that we believe is adequate for our business, such coverage may not cover all potential costs and expenses associated with cybersecurity incidents that may occur in the future. Actual or anticipated attacks may cause us to incur increasing costs, including costs to deploy additional personnel and protection technologies, train employees and engage third-party experts and consultants.
Any compromise or breach of our security measures, or those of our third-party service providers, could violate applicable privacy, data protection, data security, network and information systems security and other laws and cause significant legal, contractual and financial exposure, adverse publicity, and a loss of confidence in our security measures, which could have a material adverse effect on our business, financial condition, results of operations and prospects. We continue to devote significant resources to protect against security breaches and we may need to address problems caused by breaches in the future, including notifying affected users and responding to any resulting litigation, which in turn, diverts resources from the growth and expansion of our business.
We use third-party open source software components, and failure to comply with the terms of the underlying open source software licenses could restrict our ability to provide our product offerings.
We use software components licensed to us by third-party authors under “open source” licenses (“Open Source Software”). Use and distribution of Open Source Software may entail greater risks than use of third-party commercial software, as licensors of Open Source Software generally do not provide support, warranties, indemnification or other contractual protections regarding infringement claims or the quality of the licensed code. In addition, the public availability of Open Source Software may make it easier for others to compromise our services or product offerings. Open Source Software may contain errors, bugs, or flaws that we have not detected, and these defects may become apparent only after their launch and could result in a vulnerability that could compromise the security of our systems.
Some licenses for Open Source Software contain requirements that we make available source code for, modifications or derivative works we create, or grant other licenses to our intellectual property, if we use such Open Source Software in certain ways. If we combine our proprietary software with Open Source Software in a certain manner, we could, under certain licenses for Open Source Software, be required
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to release the source code of our proprietary software to the public. This would allow our competitors to create similar offerings with lower development effort and time and ultimately could result in a loss of our competitive advantages. Alternatively, to avoid the public release of the affected portions of our source code, we could be required to expend substantial time and resources to re-engineer some or all of our proprietary software.
Although we periodically review our use of Open Source Software to avoid subjecting our services and product offerings to conditions we do not intend, the terms of many licenses for Open Source Software have not been interpreted by US, UK or foreign courts, and there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to provide or distribute our services or product offerings. From time to time, there have been claims challenging the ownership of Open Source Software against companies that incorporate Open Source Software into their solutions. As a result, we could be subject to lawsuits by parties claiming ownership of what we believe to be Open Source Software. Moreover, we cannot be sure that our processes for controlling our use of Open Source Software in our services and product offerings will be effective. If we are held to have breached or failed to fully comply with all the terms and conditions of an Open Source Software license, we could face infringement or other liability, or be required to seek costly licenses from third parties to continue providing our services and product offerings on terms that are not economically feasible, to find replacement software, to discontinue or delay the provision of our services or product offerings if replacement cannot be accomplished on a timely basis or to make generally available, in source code form, our proprietary software, any of which could adversely affect our business, financial condition, results of operations and prospects.
Risks Related to Genius Sports Group’s Financial Condition
We have a history of losses and may not be able to achieve profitability in the future.
We have a history of incurring net losses, and we may not achieve profitability in the future. We experienced net losses of $111.6 million, $63.0 million, and $85.5 million for the years ended December 31, 2025, 2024 and 2023, respectively. As of December 31, 2025, we had an accumulated deficit of $1,199.1 million. While we have experienced significant growth in revenue in recent periods, we cannot predict when or whether we will reach or maintain profitability. Our operating expenses may increase in the future as we continue to invest for our future growth, which will negatively affect our results of operations if our total revenue does not increase.
We cannot provide assurance that these investments will result in substantial increases in our total revenue or improvements in our results of operations. In addition to the anticipated costs to grow our business, we also may incur significant additional legal, accounting, and other expenses as a public company. Any failure to increase our revenue as we invest in our business or to manage our costs could prevent us from achieving or maintaining profitability or positive cash flow.
If we are unable to increase our revenues or our costs are higher than expected, our profitability may decline, and our operating results may fluctuate significantly.
We may not be able to accurately forecast our revenues or future revenue growth rate. Many of our expenses, particularly personnel costs, occupancy costs and sports rights costs, are relatively fixed, but we may experience higher than expected operating costs, including increased selling and marketing costs, investments in geographic expansion, acquisition costs, communications costs, travel costs, software development costs, professional fees and other costs. Further, we expect our fixed costs to increase in future periods, due to inflation, including rising costs of data and streaming rights, which could negatively affect our future operating results and ability to achieve profitability. We expect to continue to expend substantial financial and other resources on acquiring and retaining customers, improving our technology infrastructure, research and development, including investments in our research and development team and the development of new features, services and products. Also, we may not generate sufficient revenue to offset our costs, including the cost of maintaining and growing our business and the fixed costs associated with our data licenses and rights. As a result, we may not be able to adjust spending quickly enough to offset any unexpected increase in expenses or revenue shortfall. Increased competition amongst sports data providers for data collection rights granted by sports organizations could lead to an increase in the cost of those properties, which we may be unable to pass on to our customers. Such competition may also mean we lose access to data on certain events if a third-party data provider is granted exclusivity over data on that event. If costs exceed our expectations and cannot be adjusted accordingly, our profitability may be reduced, and our results of operations and financial position will be adversely affected.
Additionally, historic growth rates may not be reflective of future growth, we may not be able to sustain our revenue growth rates, and our percentage revenue growth rates may decline as our revenues increase due to base effect. Reduced demand, whether due to a weakening of the global economy, reduction in consumer spending, competition or other reasons, may result in decreased revenues and growth, adversely affecting our operating results. In particular, we may become subject to increased pricing pressures in our media and advertising-related business where customers and partners may request discounts, fee concessions, rebates, refunds, or increased pricing transparency as a condition to acquiring, maintaining, or expanding engagements. We may agree to such terms or make investments in new or enhanced media products and services, including committing significant resources to product development and client support initiatives, to support client acquisition or retention. These arrangements and investments may adversely affect our margins, cash flow, or profitability if anticipated increases in volume, engagement, or renewals do not materialize. There can be no assurance that such efforts will result in sustained customer adoption, increased spend, or long-term, commercially acceptable relationships, and any failure to do so could adversely affect our business, financial condition, and results of operations.
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We may require additional capital to support our growth plans, including in connection with the acquisition of additional data rights, and such capital may not be available on reasonable terms or at all. This could hamper our growth and adversely affect our business.
We intend to make significant investments to support our business growth and may require additional funds to respond to business challenges, including the need to develop new technology and services or enhance our existing offering, improve our operating infrastructure, enhance our information security systems to combat changing cyber threats or implement more mature corporate processes to support growth, and acquire complementary businesses, personnel, and technologies. Our success depends on our ability to retain and acquire sports data rights, which may require significant investments and additional capital. Accordingly, we may need to engage in equity or debt financings to secure additional funds, which could be costly and/or dilutive based on ongoing market conditions. In January 2025, we completed an offering of 17,647,059 Genius ordinary shares resulting in net proceeds of $144.0 million. We may undertake additional equity offerings in the future. We are party to the Credit Agreement (as defined below) with revolving credit commitments of up to $180.0 million. The Credit Agreement restricts us from engaging in certain activities, including our ability to incur additional indebtedness, create and incur liens, pay dividends and distributions, or purchase, redeem, decrease, or otherwise acquire or retire for value, our capital stock, to make certain payment to our subsidiaries, among other things. Even if the Credit Agreement is terminated, any additional debt that we incur in the future could subject us to similar or additional covenants.
Our ability to obtain additional capital, if and when required, will depend on our business plans, investor demand, operating performance, markets conditions, potential credit ratings, and other factors. If we raise additional funds by issuing equity, equity-linked or debt securities, those securities may have rights, preferences, or privileges senior to the rights of our currently issued and outstanding equity or debt, and our existing shareholders may experience dilution. If we are unable to obtain additional capital when required, or on reasonable terms, our ability to continue to support our business growth or to respond to business opportunities, challenges or unforeseen circumstances could be adversely affected, and our business may be harmed.
Risks Related to the Legend Acquisition
If the Legend Acquisition is completed, we may not achieve the anticipated benefits of the proposed acquisition, including anticipated synergies.
If the Legend Acquisition is completed, there can be no assurance that we will be able to successfully integrate Legend, and the anticipated benefits of the proposed acquisition, including the anticipated operational and other synergies between the companies, may not be realized fully or at all or may take longer to realize than expected or may have unanticipated adverse results. Anticipated benefits are based on expectations about the future that are subject to change (such as assumptions about our future service costs, ability to acquire and retain customers, future operational plans which have not yet been developed, and which may vary from past experiences operating the same assets or recent experiences operating in the same areas). If we are not able to realize the anticipated benefits expected from the Legend Acquisition within the anticipated timing or at all, our business, financial position, results of operations and cash flows may be adversely affected, our earnings per share may be diluted, the accretive effect of the proposed acquisition may decrease or be delayed and the market price of Genius ordinary shares may be negatively impacted.
The integration of the two companies will require significant time and focus from management following the proposed acquisition and could result in performance shortfalls as a result of the diversion of management’s attention to such integration efforts. Difficulties in integrating Legend into Genius may result in Genius performing differently than expected, in operational challenges or in the failure to realize anticipated benefits, including anticipated operational and other synergies between the two companies, in whole or in part, on the anticipated timeline or at all. Potential difficulties that may be encountered in the integration process include:
•complexities associated with managing a larger, more complex, integrated business;
•costs and procedures associated with incorporating Legend’s operations, financial reporting and internal controls into our accounting control environment;
•integration challenges between differing AI platforms or technological platforms used by Genius and Legend;
•potential unknown liabilities and unforeseen expenses associated with Legend and its integration into Genius;
•transfer pricing, indirect tax, or cross-border tax compliance issues;
•potential unknowns with respect to future operational plans; and
•inconsistencies between the two company’s standards, controls, procedures and policies, including with respect to regulatory compliance, information security and cybersecurity.
In addition, our business may be negatively impacted if we are unable to effectively manage the expanded operations of Genius following completion of the Legend Acquisition. Actual growth and any potential cost savings, if achieved, may be lower than what we expect and may take longer to achieve than anticipated. If we are not able to adequately address integration challenges, we may be unable to successfully integrate our operations or realize the anticipated benefits of the integration of the two companies.
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Genius and Legend, including their respective subsidiaries, have operated and, until the completion of the Legend Acquisition, will continue to operate independently. It is possible that the pendency of the Legend Acquisition, as well as the integration process, could result in the loss of key executives and employees, the loss of customers, inconsistencies in standards, controls, procedures and policies, unexpected integration issues, higher than expected integration costs, an overall post-completion integration process that takes longer than originally anticipated, as well as the disruption of each company’s ongoing businesses. Any or all of those occurrences could adversely affect our operations, including the ability to maintain relationships with customers and employees prior to, or after, the Legend Acquisition or to achieve the anticipated benefits of the Legend Acquisition.
If the Legend Acquisition is consummated, our shareholders’ ownership percentage will be diluted. Substantial future sales by the Seller Parties following the completion of the Legend Acquisition, or the perception that such sales may occur, could depress the price of Genius ordinary shares.
A significant component of the consideration in connection with the Legend Acquisition is payable (or may be paid) in Genius ordinary shares. At the closing of the Legend Acquisition, Genius would issue to the Seller a number of Genius ordinary shares equal to $100,000,000 divided by a specified 30 trading-day volume weighted average trading price of Genius ordinary shares. As a result of the issuance of these shares, our shareholders will own a smaller percentage of Genius after the Legend Acquisition is completed and will therefore have a reduced voting interest after the closing of Legend Acquisition. In addition, the earn-out consideration in the amount of $300,000,000, payable in two tranches, each of up to $150,000,000, can be paid in cash or Genius ordinary shares. If we elect to pay such earn-out consideration in Genius ordinary shares, the ownership percentage of our shareholders will be further diluted.
Furthermore, while the share consideration to be issued will be subject to lock-up and orderly sell down restrictions, substantial future sales of Genius ordinary shares by the Seller Parties following the completion of the Legend Acquisition and the expiry of the applicable lock-up period, or the perception that such sales may occur, could depress the price of Genius ordinary shares.
Following the completion of the Legend Acquisition, Genius will be subject to the risks that Legend faces, in addition to the risks faced by Genius.
Legend operates in a highly regulated sports and gaming media space, which is subject to complex, evolving, and often inconsistent regulatory frameworks across multiple jurisdictions. The Legend Acquisition will also expand the number of customers that will be held by the combined business, particularly in the online gaming sector. As a result, the acquisition will expose Genius to a broader array of regulatory and compliance risks, including, but not limited to, licensing requirements, advertising restrictions, anti-money laundering obligations, data privacy and protection mandates, and responsible gaming standards, among others. Any failure to comply with applicable regulations, including as a result of actions taken by Legend prior to the completion of the Legend Acquisition, could result in significant fines, penalties, suspension or revocation of licenses, or other enforcement actions. Furthermore, the process of integrating Legend may reveal previously unidentified regulatory issues, compliance gaps or liabilities. Any of these matters, individually or in the aggregate, could have a material adverse effect on our business, cash flow, financial condition or results of operations. There can be no assurance that we will be able to successfully manage these additional risks or that the anticipated benefits of the Legend Acquisition will be realized.
We may be exposed to increased litigation as a result of the Legend Acquisition, which could have an adverse effect on our business, financial position, results of operations and cash flows.
We may be exposed to increased litigation from shareholders, customers, suppliers and other third parties due to the combination of our and Legend’s businesses following the Legend Acquisition. Any such litigation, whether with or without merit, could result in significant costs, diversion of management’s attention, injunctions or other restrictions on our business operations, and the payment of substantial damages, settlements, or licensing fees. In addition, adverse outcomes in such proceedings could, among other consequences, result in the loss of important intellectual property rights, limitations on our ability to use certain technologies, brands, or content, or the need to redesign products or services. The integration process may also reveal previously unidentified or contingent liabilities relating to litigation or intellectual property, which could further increase our exposure. Any of these risks, individually or in the aggregate, could have a material adverse effect on our business, financial position, results of operations, and cash flows, or may cause disruptions to our operations.
We may not be able to retain our and Legend’s existing customers, suppliers and other business partners which could have an adverse effect on our business and operations following completion of the Legend Acquisition. Third parties may terminate or alter existing contracts or relationships with us or Legend.
As a result of the Legend Acquisition, we may experience impact on relationships with customers and suppliers that may harm our business, financial position, results of operations and cash flows. Certain customers and suppliers may seek to terminate or modify contractual obligations following the Legend Acquisition, whether or not contractual rights are triggered as a result of the Legend Acquisition. There can be no guarantee that our and Legend's existing customers and suppliers will remain with or continue to have a relationship with us or do so on the same or similar contractual terms following the Legend Acquisition. If any of our or Legend's existing customers or suppliers seek to terminate or modify contractual obligations or discontinue the relationship with us or Legend, then our business, financial position, results of operations and cash flows may be harmed.
Genius and Legend also have contracts with other business partners, including lessors of office space, which may require Genius or Legend, as applicable, to obtain consent from these other parties in connection with the Legend Acquisition, or which may otherwise contain
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limitations applicable to such contracts following the Legend Acquisition. If these consents cannot be obtained, we may suffer a loss of potential future revenue, incur costs and lose rights that may be material to our business. In addition, third parties with whom Genius or Legend currently have relationships may terminate or otherwise reduce the scope of their relationship with either party in anticipation of the Legend Acquisition. Any such disruptions could limit our ability to achieve the anticipated benefits of the Legend Acquisition. The adverse effect of any such disruptions could also be exacerbated by a delay in the completion of the Legend Acquisition or by a termination of the Legend Share Purchase Agreement.
We will incur significant additional indebtedness to finance the Legend Acquisition as well as transaction and acquisition-related costs in connection with the Legend Acquisition, which will limit our operating flexibility.
Upon completion of the Legend Acquisition, we will increase our indebtedness, which will include acquisition debt financing of approximately $850 million resulting in us having a higher debt-to-equity ratio. This increased indebtedness will reduce the amount of cash flow available to fund our efforts to integrate Legend and realize expected benefits of the pending acquisition, to pursue other acquisitions, and to engage in investments in product development, capital expenditures, dividend payments, share repurchases and other activities, which could, among other things, limit our flexibility in planning for, or reacting to, changes in or challenges relating to our business and industry. In addition, the increased amount of debt following the Legend Acquisition may increase our borrowing costs.
We also expect to incur a number of non-recurring costs in connection with the acquisition, whether or not the acquisition is completed, which will be mostly comprised of transaction costs, facilities and systems consolidation costs and employment-related costs. Although we expect that the realization of efficiencies related to the integration of the businesses will offset at least a portion of these costs, this net benefit may not be accomplished in the near term or events at all.
Our stock price may experience increased volatility as a result of the Legend Acquisition.
Following the public announcement of the Legend Acquisition, the price of Genius ordinary shares declined and may continue to be volatile as the market reacts to developments related to the transaction, including the progress toward completion, perceived benefits or risks, and any changes in the anticipated terms or timing. Our obligations and the obligations of the Seller Parties to complete the Legend Acquisition are subject to satisfaction or waiver of a number of conditions. There can be no assurance that the conditions to completion of the Legend Acquisition will be satisfied or waived or that the Legend Acquisition will be completed. If the Legend Acquisition is not consummated for any reason, we may receive negative reactions from our shareholders, customers, vendors, regulators and employees and we may be subjected to various material risks, including the possibility that the price of Genius ordinary shares may decline.
Risks Related to Genius Sports Group’s International Operations
The international scope of our operations may expose us to increased risk, and our international operations and corporate and financing structure may expose us to potentially adverse tax consequences.
We have international operations and, accordingly, our business is subject to risks resulting from differing legal and regulatory requirements, political, social, and economic conditions and unforeseeable developments in a variety of jurisdictions. Our international operations are subject to the following risks, among others:
•political instability;
•international hostilities, military actions, terrorist or cyber-terrorist activities, natural disasters, pandemics, and infrastructure disruptions;
•differing economic cycles and adverse economic conditions;
•unexpected changes in regulatory environments and government interference in the economy, including gambling, data privacy and advertising laws and regulations;
•changes to economic and anti-money laundering, sanctions, laws, and regulations;
•varying tax regimes, including with respect to the imposition of withholding taxes on remittances and other payments by our partnerships or subsidiaries;
•inflation and exchange rate fluctuations;
•differing labor regulations;
•foreign exchange controls and restrictions on repatriation of funds;
•increased costs for corporate, administrative and personnel costs to support operations in various jurisdictions;
•inability to collect payments or seek recourse under or comply with ambiguous or vague commercial or other laws;
•insufficient protection against product piracy and rights infringement and differing protections for intellectual property rights;
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•varying attitudes towards sports data providers and betting by foreign governments;
•difficulties in attracting and retaining qualified management and employees, or rationalizing our workforce;
•differing business practices, which may require us to enter into agreements that include non-standard terms; and
•difficulties in penetrating new markets due to entrenched competitors, lack of recognition of our brands or lack of local acceptance of our products, lack of local expertise and services.
Our overall success as a global business depends, in part, on our ability to anticipate and effectively manage these risks, and there can be no assurance that we will be able to do so without incurring unexpected costs. If we are not able to manage the risks related to our international operations, business, financial condition, and results of operations may be materially affected.
We have expanded our presence in a number of major regions and any future actions or escalations that affect trade relations may cause global economic turmoil and potentially have a negative impact on our business. In particular, we may have access to fewer business opportunities and our operations in that region may be negatively impacted.
As a result of the international scope of our operations and our corporate and financing structure, we are subject to taxation in, and to the tax laws and regulations of, multiple jurisdictions. We are also subject to intercompany pricing laws, including those relating to the flow of funds between our companies pursuant to, for example, purchase agreements, licensing agreements or other arrangements. Adverse developments in these laws or regulations, or any change in position regarding the application, administration or interpretation of these laws or regulations in any applicable jurisdiction, could have a material adverse effect on our business, financial condition, and results of operations. Furthermore, changes in or to the interpretation of the tax laws or tax treaties of the countries in which we operate may adversely affect the manner in which we have structured our business operations and legal entity structure to efficiently realize income or capital gains and mitigate withholding taxes and may also subject us to tax and return filing obligations in such countries that do not currently apply to us. Such changes may increase our tax burden and/or may cause us to incur additional costs and expenses in compliance with such changes. In addition, the tax authorities in any applicable jurisdiction may disagree with the positions we have taken or intend to take regarding the tax treatment or characterization of any of our transactions, including the tax treatment or characterization of our indebtedness. If any applicable tax authorities were to successfully challenge the tax treatment or characterization of any of our transactions, it could result in the disallowance of deductions, the imposition of withholding taxes, the reallocation of income or other consequences that could have a material adverse effect on our business, financial condition, and results of operations.
In addition, the US Congress, the UK Government, the Organization for Economic Co-operation and Development, and other government agencies in jurisdictions where we and our affiliates do business have had an extended focus on issues related to the taxation of multinational corporations. Also, within the EU, the European Council Directive 2016/1164 (Anti-Tax Avoidance Directive (“ATAD”)) and Directive 2017/952 (“ATAD II”) required EU member states to transpose certain measures affecting multinational corporations into national legislation by December 31, 2019. Finally, the international scope of our business operations subjects us to multiple overlapping tax regimes that can make it difficult to determine what our obligations are in particular situations.
Fluctuating foreign currency and exchange rates may negatively impact the financial reporting of our business, results of operations and financial position.
Due to our international operations, a portion of our business is denominated in foreign currencies. As a result, fluctuations in foreign currency and exchange rates may have an impact on our business, results of operations and financial position. Foreign currency exchange rates have fluctuated and may continue to fluctuate. Significant foreign currency exchange rate fluctuations may negatively impact our international revenue, which in turn affects our consolidated revenue. Currencies may be affected by internal factors, general economic conditions, and external developments in other countries, all of which can have an adverse impact on a country’s currency. Currently, we are not party to any hedging transactions intended to reduce our exposure to exchange rate fluctuations. We may seek to enter into hedging transactions in the future, but we may be unable to enter into these transactions successfully, on acceptable terms or at all. We cannot predict whether we will incur foreign exchange losses in the future. Further, significant foreign exchange fluctuations resulting in a decline in the respective local currency may decrease the value of our foreign assets, as well as decrease our revenues and earnings from our foreign subsidiaries, which would reduce our profitability and adversely affect our financial position.
Risks Related to Genius Ordinary Shares
The market price of Genius' securities may decline, and you may not be able to resell Genius’ securities at or above the price at which you purchased them.
Adverse developments affecting financial markets and economies throughout the world, including fluctuation in stock markets resulting from, among other things, trends in the economy as a whole, a general tightening of availability of credit, decreased liquidity in certain financial markets, increased interest rates, foreign exchange fluctuations, increased energy costs, acts of war or terrorism, transportation disruptions, severe weather events and other natural disasters, declining consumer confidence, sustained high levels of unemployment or significant declines or volatility in stock markets, as well as concerns regarding pandemics, epidemics and the spread of contagious diseases, may further reduce spending on sporting events, sports betting and marketing services and may negatively affect the sports, entertainment and
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sports betting industries. Any one of these developments could have a material adverse effect on our and our customers’, suppliers’ and vendors’ business, financial condition, results of operations and prospects.
The market price of Genius ordinary shares has declined since their listing date. The market value of Genius ordinary shares in the future may vary significantly from the date of this Report or the time you purchased them. The trading market for Genius ordinary shares may be impacted, in part, by the research and reports that securities or industry analysts publish about us or our business. There can be no assurance that analysts will cover us, continue to cover us, or provide favorable coverage. If one or more analysts downgrade our ordinary shares, or change their opinion of our ordinary shares, our share price may decline. In addition, if one or more analysts cease coverage or fail to regularly publish reports on us, our share price or trading volume may decline.
The trading price of Genius ordinary shares could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond Genius’ control. Any of the factors listed below could have a material adverse effect on your investment in Genius ordinary shares, and Genius ordinary shares may trade at prices significantly below the price you paid for them. In such circumstances, the trading price of Genius ordinary shares may not recover and may experience a further decline.
Factors affecting the trading price of Genius ordinary shares may include:
•announcements of significant transactions, like the Legend Acquisition, and any material developments relating to such transactions;
•actual or anticipated fluctuations in Genius’ quarterly financial results or the quarterly financial results of companies perceived to be similar to Genius;
•changes in the market’s expectations about Genius’ operating results;
•changes in the market’s valuation multiple ascribed to Genius and its industry;
•Genius’ high beta as a growth, technology, and gaming business, which increases its sensitivity to fluctuations in market risk sentiment;
•success of competitors;
•Genius’ operating results failing to meet the expectation of securities analysts or investors in a particular period;
•changes in financial estimates and recommendations by securities analysts concerning Genius or the industries in which Genius operates in general;
•operating and share price performance of other companies that investors deem comparable to Genius;
•Genius’ ability to market new and enhanced products on a timely basis;
•changes in laws and regulations affecting Genius’ business;
•concerns over customers' business or the wider consumer market for sportsbooks;
•commencement of, or involvement in, litigation involving Genius;
•changes in Genius’ capital structure, such as future issuances of securities (including, but not limited to, pursuant to stock option plans and other equity compensation arrangements available to officers, directors or employees, or other equity issuance transactions for which Genius, as a foreign private issuer, is not required by the NYSE corporate governance listing standards to seek shareholder approval) or the incurrence of additional debt;
•changes in significant shareholding;
•the volume of Genius ordinary shares available for public sale;
•any major change in Genius’ management or Genius' Board;
•social, environmental or governance factors relating to our relationship to sportsbooks or otherwise;
•sales of substantial amounts of Genius ordinary shares by Genius’ directors, executive officers or significant shareholders or the perception that such sales could occur; and
•general economic and political conditions such as recessions, interest rates, fuel prices, inflation, international currency fluctuations and acts of war or terrorism.
Broad market and industry factors may materially harm the market price of Genius ordinary shares irrespective of Genius’ operating performance. The stock market in general, and the NYSE, have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of its constituent companies. The trading prices and valuations of these stocks, and of Genius ordinary shares, may not be predictable. A loss of investor confidence in the market for the stocks of other companies that investors perceive
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to be similar to Genius could depress its share price, regardless of its business, prospects, financial conditions, or results of operations. A decline in the market price of Genius ordinary shares could also adversely affect Genius’ ability to issue additional securities and its ability to obtain additional financing in the future.
Techniques employed by short sellers may drive down the market price of our ordinary shares
Short selling is the practice of selling securities that the seller does not own but rather has borrowed from a third party with the intention of buying identical securities back at a later date to return to the lender. The short seller hopes to profit from a decline in the value of the securities between the sale of the borrowed securities and the purchase of the replacement shares, as the short seller expects to pay less in that purchase than it received in the sale. As it is in the short seller’s interest for the price of the security to decline, many short sellers publish, or arrange for the publication of, negative opinions regarding the relevant issuer and its business prospects in order to create negative market momentum and generate profits for themselves after selling a security short. These short seller attacks have, in the past, driven selling of shares in other market participants.
We may in the future be the subject of unfavorable allegations made by short sellers. Any such allegations may be followed by periods of instability in the market price of our ordinary shares and negative publicity. If we become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we could have to expend significant amounts of resources to investigate such allegations and/or defend ourselves. While we would strongly defend against any such short seller attacks, we may be constrained in the manner in which we can proceed against the relevant short seller by principles of freedom of speech, applicable federal or state law, or issues of commercial confidentiality. Such a situation could be costly and time-consuming and could distract our management from growing our business. Even if such allegations are ultimately proven to be groundless, allegations against us could severely impact our business operations, reputation, and shareholder’s equity, and the value of any of our investments could be greatly reduced or rendered worthless.
Because Genius is incorporated under the laws of Guernsey, you may face difficulties in protecting your interests, and your ability to protect your rights through the US Federal courts is limited.
Genius is a limited company incorporated under the laws of Guernsey. As a result, it may be difficult for investors to effect service of process within the US upon Genius’ directors or officers, or enforce judgments obtained in the US courts against Genius’ directors or officers.
We have been advised that there is doubt as to the enforceability in Guernsey of judgments of the US courts of civil liabilities predicated solely upon the laws of the US, including federal securities laws.
As a result of all of the above, public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the Genius Board or controlling shareholders than they would as public shareholders of a corporation incorporated in the US.
It may be difficult to enforce a US judgment against Genius or its directors and officers outside the US, or to assert US securities law claims outside of the US.
The majority of Genius directors and executive officers are not residents of the US, and the majority of Genius’ assets and the assets of these persons are located outside the US. As a result, it may be difficult or may be impossible for investors to effect service of process upon Genius within the US or other jurisdictions, including judgments predicated upon the civil liability provisions of the federal securities laws of the US. Additionally, it is difficult to assert US securities law claims in actions originally instituted outside of the US. Foreign courts may refuse to hear a US securities law claim, because foreign courts may not be the most appropriate forum in which to bring such a claim. Even if a foreign court agrees to hear a claim, it may determine that the law of the jurisdiction in which the foreign court resides, and not US law, is applicable to the claim. Further, if US law is found to be applicable, the content of applicable US law must be proved as a fact, which can be a time-consuming and costly process, and certain matters of procedure would still be governed by the law of the jurisdiction in which the foreign court resides.
As a foreign private issuer company incorporated in Guernsey, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ, and in some cases significantly differ, from NYSE corporate governance listing standards; these practices may afford less protection to shareholders than they would enjoy if we complied fully with NYSE corporate governance listing standards.
We are a company incorporated in Guernsey, and our ordinary shares are listed on the NYSE. The NYSE market rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in Guernsey, which is our home country, differ, and in some cases significantly differ, from the NYSE corporate governance listing standards.
Among others, we are not required to:
•have a majority of the members of our board of directors who are independent;
•hold regular meetings of our non-executive directors without the executive directors;
•have a nominating and/or corporate governance committee composed of entirely independent directors;
•have a remuneration/compensation committee composed of entirely independent directors;
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•adopt a code of business conduct and ethics;
•seek shareholder approval of stock option plans and other equity compensation arrangements available to officers, directors or employees and any material amendments thereto;
•seek shareholder approval of certain equity issuances, including, but not limited to, certain issuances of more than 1% of our outstanding ordinary shares or 1% of the voting power outstanding to a related party;
•comply with certain rules and regulations under the Exchange Act and the NYSE including the proxy rules that apply to domestic issuers;
•have an audit committee or another independent body of the Genius Board conduct a reasonable prior review and oversight of certain related party transactions that foreign private issuers are not required to disclose;
•disclose specifics relating to employee compensation or human capital management; and
•provide notice to shareholders if the date of the annual meeting is changed by more than 30 calendar days from the date of the previous years’ meeting.
We currently follow and intend to continue to follow some of the NYSE corporate governance requirements from which foreign private issuers are exempt. For example, we have adopted a Code of Conduct, and our Board and Board Committees regularly meet without our executive directors. We may in the future, however, decide to use foreign private issuer exemptions with respect to some or all of such NYSE corporate governance requirements. Also, we currently utilize and intend to continue to utilize exemptions from many of the NYSE corporate governance requirements. Following our home country governance practices may provide less protection than is accorded to investors under the NYSE corporate governance requirements applicable to domestic issuers.
We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such, we are exempt from certain provisions of the securities rules and regulations in the US applicable to US domestic public companies.
Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the US that are applicable to US domestic issuers, including: (i) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q or current reports on Form 8-K; (ii) the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act; (iii) the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and (iv) the selective disclosure rules by issuers of material non-public information under Regulation FD.
In addition, information we are required to file with or furnish to the SEC is less extensive and less timely compared to that required to be filed with the SEC by US domestic issuers. As a result, you may not be afforded the same protections or information that would be made available to you were you investing in a US domestic issuer.
Provisions in our governing documents may inhibit a takeover of Genius, which could limit the price investors might be willing to pay in the future for Genius ordinary shares and could entrench management.
Our governing documents contain provisions that may discourage unsolicited takeover proposals that shareholders may consider to be in their best interests. These provisions include that the Genius Board will be classified into three classes of directors. As a result, in most circumstances, a person can gain control of the Genius Board only by successfully engaging in a proxy contest at two or more annual general meetings. Genius may issue additional shares without shareholder approval and such additional shares could be utilized for a variety of corporate purposes, including future offerings to raise additional capital, acquisitions, and employee benefit plans. Genius has previously utilized this right to issue additional shares for acquisitions and to raise capital without requiring a shareholder vote and may do so again in the future. The ability for Genius to issue additional shares could render hostile takeovers more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise that could involve the payment of a premium over prevailing market prices for Genius ordinary shares.
If a US Holder is treated as owning at least 10% of Genius ordinary shares, such US Holder may be subject to adverse US federal income tax consequences.
If a US Holder (as defined below) is treated as owning (directly, indirectly or constructively) at least 10% of the value or voting power of Genius ordinary shares, such US Holder may be treated as a “United States shareholder” with respect to Genius, or to any of its subsidiaries, if Genius or such subsidiary constitutes a “controlled foreign corporation” (in each case, as such terms are defined under the US Tax Code). Certain United States shareholders of a controlled foreign corporation may be required to annually report and include in their US taxable income, as ordinary income, their pro rata share of “Subpart F income”, “global intangible low-taxed income” and certain investments in US property by such controlled foreign corporations, whether or not such controlled foreign corporation make any distributions to such United States shareholder. A failure by a United States shareholder to comply with its reporting obligations may subject the United States shareholder to significant monetary penalties and other adverse tax consequences and may extend the statute of limitations with respect to the United States shareholder’s US federal income tax return for the year for which such reporting was due. Genius cannot provide any assurances that it will assist investors in determining whether Genius or any of its non-US subsidiaries are treated as controlled foreign corporations or whether
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any investor is a United States shareholder with respect to any such controlled foreign corporations. Genius also cannot guarantee that it will furnish to any United States shareholders information that may be necessary for them to comply with the aforementioned obligations. US investors are urged to consult their own advisors regarding the potential application of these rules to their investments in Genius. The risk of being subject to increased taxation may deter our current shareholders from increasing their investment in us and others from investing in us, which could impact the demand for, and value of, Genius ordinary shares.
Shareholders owning at least 5% of Genius ordinary shares may be subject to regulatory obligations.
As a service provider to the gambling industry, Genius is required, in certain jurisdictions, to obtain licenses to provide its products and services. In each jurisdiction where licenses are held, Genius is subject to continuing reporting obligations. Under Genius’ reporting obligations each relevant regulatory authority is provided with information on our shareholders owning at least 5% of Genius ordinary shares as reported to the SEC. Certain relevant regulatory authorities may require these investors to obtain suitability approval as a result of the ownerships interests in Genius. If an investor fails to comply with the requirements, the relevant regulatory authority could restrict, condition, suspend or revoke Genius’ license in that jurisdiction, which could have a material adverse effect on our business, financial condition, or results of operations.
If Genius or any of its subsidiaries is characterized as a passive foreign investment company for US federal income tax purposes, US Holders may suffer adverse tax consequences.
If Genius or any of its subsidiaries is or becomes a passive foreign investment company, (a "PFIC"), within the meaning of Section 1297 of the US Tax Code for any taxable year (or portion thereof) during which a US Holder (as defined in Item 10.E “Material Tax Considerations — Material US Federal Income Tax Considerations”) holds Genius ordinary shares certain adverse US federal income tax consequences may apply to such US Holder and such US Holder might be subject to additional reporting requirements.
We do not believe Genius will be treated as a PFIC for its current taxable year and do not expect Genius to become one in the near future. Nevertheless, whether Genius is treated as a PFIC for US federal income tax purposes is a factual determination that must be made annually at the close of each taxable year and, thus, is subject to significant uncertainty. Accordingly, we are unable to determine whether Genius will be treated as a PFIC for the taxable year of 2025 or for future taxable years, and there can be no assurance that Genius will not be treated as a PFIC for any taxable year. If Genius determines that it is a PFIC for any taxable year, Genius intends to, upon written request from a US Holder of Genius ordinary shares, provide a PFIC Annual Information Statement for 2025 or going forward, as applicable. Please see Item 10.E “Material Tax Considerations — Material US Federal Income Tax Considerations — US Federal Income Taxation of US Holders — Tax Consequences to US Holders of Ownership and Disposition of Genius Ordinary Shares — Passive Foreign Investment Company Rules” for a more detailed discussion with respect to Genius' potential PFIC status. US Holders are urged to consult their tax advisors regarding the possible application of the PFIC rules to US Holders of the Genius ordinary shares.
Future resales of Genius ordinary shares may cause the market price of such securities to drop significantly, even if its business is doing well.
Certain of our pre-Listing holders, NFL Enterprises and certain other shareholders have been granted registration rights that require Genius to register the resale under the Securities Act of their Genius ordinary shares held by them, subject to certain conditions. Substantial future sales by any of the aforementioned parties, or by the Seller Parties following the completion of the Legend Acquisition, or the perception that such sales may occur, could depress the price of Genius ordinary shares.
Genius may issue additional Genius ordinary shares or other equity securities without your approval, which would dilute your ownership interests and may depress the market price of Genius ordinary shares.
Genius has issued additional ordinary shares and other equity securities in connection with mergers, acquisitions and employee and director equity plans. Genius will be required to issue additional shares in connection with the Legend Acquisition and also intends to continue to issue shares under its employee and director equity plan. Genius may also issue additional ordinary shares in connection with, among other things, future capital raising and transactions and future acquisitions, or pursuant to agreements in connection with past acquisitions, without your approval in many circumstances.
Genius’ issuance of additional Genius ordinary shares or other equity securities may have the following effects:
•Genius’ existing shareholders’ proportionate ownership interest in Genius may decrease;
•the amount of cash available per share, including for payment of dividends in the future, may decrease;
•the relative voting strength of each previously outstanding Genius ordinary share may be diminished; and
•the market price of Genius ordinary shares may decline.
We may lose our foreign private issuer status in the future, which could result in significant additional cost and expense.
We are a “foreign private issuer,” as such term is defined in Rule 405 under the Securities Act; however, under Rule 405, the determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter, and, accordingly, the next determination will be made with respect to us on June 30, 2026.
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In the future, we would lose our foreign private issuer status if a majority of our shareholders are US residents and if any of the following occurs: (a) a majority of our directors or executive officers are US citizens or residents, (b) more than 50% of our assets are located in the US or (c) our business is administered principally in the US. Although we have elected to comply with certain US regulatory provisions, our loss of foreign private issuer status would make such provisions mandatory. The regulatory and compliance costs to us under US securities laws as a US domestic issuer may be significantly higher. If we are not a foreign private issuer, we will be required to file periodic reports and registration statements on US domestic issuer forms with the SEC, which are more detailed and extensive than the forms available to a foreign private issuer. For example, the annual report on Form 10-K requires domestic issuers to disclose executive compensation information on an individual basis with specific disclosure regarding the domestic compensation philosophy, objectives, annual total compensation (base salary, bonus and equity compensation) and potential payments in connection with change in control, retirement, death or disability, while the annual report on Form 20-F permits foreign private issuers to disclose compensation information on an aggregate basis. We will also have to mandatorily comply with US federal proxy requirements, and our officers, directors and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. We may also be required to modify certain policies to comply with good governance practices associated with US domestic issuers. Such conversion and modifications will involve additional time and costs. In addition, we may lose our ability to rely upon exemptions from certain corporate governance requirements on NYSE that are available to foreign private issuers and may still be responsible for maintaining home country governance requirements in addition to domestic governance requirements.
Genius is subject to costs and responsibilities for mandatory corporate governance, stakeholder engagement, UK Section 172 CA 2006 and climate-related reporting in accordance with its UK operations. Compliance with these obligations creates the need for additional public disclosures and governance compliance requirements. These additional compliance requirements are unlikely to be released should we lose our foreign private issuer status as they are triggered by our operational footprint in the UK. Therefore, there is a risk that compliance requirements and costs in the UK and Guernsey will remain in place even if Genius was to lose its foreign private issuer status and this could negatively affect our operations or financial results. Additionally, the added disclosures may cause our business to face increased scrutiny related to these activities which would not otherwise be disclosed by a domestic issuer, including from the investment community, which could adversely affect our brand or reputation.
Genius’ operations and its corporate structure currently subject many of its subsidiaries to compliance with certain UK corporate governance, corporate compliance, and corporate reporting requirements. Individual UK compliance and reporting obligations are frequently reviewed and amended by the UK government and may result in Genius being subject to varying or additional compliance and reporting obligations or require additional disclosures in relation to entities operating both in the UK and those operating or incorporated elsewhere. Should any corporate compliance, disclosure or reporting obligations be expanded, Genius may incur costs to comply with these obligations for many of their entities within their group companies, including those outside of the UK.
Genius may not be subject to the UK Takeover Code.
Based upon Genius’ current and intended plans for its directors and management, for the purposes of UK Takeover Code, Genius anticipates that it will be considered by the UK Takeover Panel not to have its place of central management and control in the UK, the Channel Islands, or the Isle of Man. Therefore, the UK Takeover Code should not apply to us. It is possible that in the future circumstances could change that may cause the UK Takeover Code to apply to us.
The UK Takeover Code provides a framework within which takeovers of companies subject to it are conducted. If, at the time of a takeover offer, the UK Takeover Code applies to Genius, this would result in certain restrictions and obligations applying, including but not limited to the following: (i) Genius’ ability to enter into deal protection arrangements in favor of a bidder would be extremely limited; (ii) Genius might not be able to perform certain actions that could have the effect of frustrating an offer, such as issuing shares or carrying out acquisitions or disposals; and (iii) all due diligence information given to one bidder or potential bidders would be required to be provided to all other bidders or bona fide potential bidders (even if less welcome). In addition, the UK Takeover Code contains certain rules in respect of mandatory offers. Under Rule 9 of the Takeover Code, if a person:
•acquires an interest in Genius shares that, when taken together with shares in which persons acting in concert with such person are interested, carry 30% or more of the voting rights of Genius; or
•together with persons acting in concert with such person, is interested in shares that in the aggregate carry not less than 30% of Genius’ voting rights but does not hold shares carrying more than 50% of such voting rights, and such person (or any person acting in concert with such person) acquires additional interests in Genius shares that increase the percentage of shares carrying voting rights in which that person is interested, then the acquirer, and, depending on the circumstances, its concert parties would be required (except with the consent of the UK Takeover Panel) to make a cash offer for Genius’ outstanding shares at a price not less than the highest price paid for any interests in the shares by the acquirer or its concert parties during the previous 12 months.
If Genius is not subject to the UK Takeover Code, shareholders would not be afforded the protections provided by the UK Takeover Code. If, however, Genius is later deemed to be subject to the UK Takeover Code, the Company may incur significant costs in relation to complying with the UK Takeover Code should a shareholder, or group of shareholders acting in concert, seek to acquire a significant portion of Genius’ shares.
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If we fail to implement and maintain effective internal control over financial reporting, our ability to accurately and timely report our financial results could be adversely affected.
Management is responsible for establishing and maintaining adequate internal control over financial reporting, designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with US GAAP. Pursuant to Section 404 of the Sarbanes-Oxley Act, we are required to issue an annual management report on the effectiveness of our internal control over financial reporting, and our independent registered public accounting firm must attest to that effectiveness. This assessment may identify deficiencies in our internal control over financial reporting, including material weaknesses, and the existence of any material weakness could adversely affect investor confidence and lead to a decline in the market price of our stock.
Recruitment and retention of qualified personnel and key employees, and ensuring we effectively manage succession planning and transition including members of our senior management team, are vital to growing our business and meeting our business plans. The loss of any of our key executives or other key employees could harm our business.
We depend on a limited number of key employees to manage and operate our business. We believe a significant portion of our success is owed to our CEO and founder, Mark Locke. The leadership of Mr. Locke and our current executive officers has been critical and the departure, death or disability of Mr. Locke, or any one of our executive officers, or other extended or permanent loss of any of their services, or any negative market or industry perception with respect to any of them or their loss, could have a material adverse effect on our business. We may not be able to attract or retain such highly qualified personnel in the future.
In addition, the loss of employees or the inability to hire qualified personnel that are knowledgeable regarding the sports data and technology industry could result in significant disruptions to our business, and the integration of replacement personnel could be time-consuming and expensive and cause additional disruptions to our business. The sports data, media and technology industry requires specific knowledge that is not easily transferable from other industries, and finding suitable replacements for specialized roles can be challenging in a limited talent pool. If we do not succeed in attracting, hiring, and integrating qualified personnel, or retaining and motivating existing personnel, we may be unable to grow effectively and our business, financial condition, results of operations and prospects could be adversely affected.
Certain US states impose restrictions on non-competes and other US states have proposed similar restrictions. If such rules are ultimately implemented at the US federal level or states in which we do business, we may be unable to enter into or enforce non-compete agreements with our employees or employees of companies that we acquire, except in limited circumstances. This could result in employees working for our competitors, which could make it more difficult to protect our trade secrets and other intellectual property and could harm our business and results of operations.
We may not be able to achieve any specific target or make progress in other sustainability initiatives.
Genius engages in sustainability initiatives, some of which have been disclosed in the past. Genius formalized its sustainability program in 2022 and has, and may continue to consider relevant sustainability issues. Any estimates concerning the timing and cost of implementing our goals are subject to risks and uncertainties, and there can be no assurances that our commitments will be achieved. Furthermore, where reporting on such sustainability matters does not require standardized reporting or external auditing, any reporting of achievements may be subject to variables in calculation methodology. Additionally, the manner and frequency in which the Company reports on sustainability matters may be informed by relevant frameworks, such as the Taskforce on Climate-Related Financial Disclosures, or may be provided without reference to any particular framework or benchmark. Reporting in one year does not ensure continued reporting on the same metric or promote a guarantee of continued topical reporting in future periods or years.
We are also required, by local law in various operational jurisdictions, to report publicly on compliance with certain environmental or social regulations. For example we may be required to publicly disclose our compliance or publicly report in relation to various local regulations such as the Equality Act 2010 (UK) (Gender Pay Gap Information), the Workplace Relations Act 1996 (Aus), Section 172 of the Companies Act 2006 (UK) (as stated above), the Modern Slavery Act 2015 (UK), the Task Force on Climate-Related Financial Disclosures, and other similar disclosures as required currently or may be required in the future, by local law in the jurisdictions in which we operate. Furthermore, we may also elect, or have elected, to share publicly our corporate initiatives, policies, targets, activities, programs and other related information voluntarily by posting on our website, social media or other communications channels.
This reporting, whether voluntary or involuntary, may cause our business to face increased scrutiny related to these activities, or receive scrutiny for a lack of activities on sustainability initiatives, including from the investment community, and our failure to make progress in these areas on a timely basis, or at all, could adversely affect our brand and reputation. Although we expect that our consideration of relevant sustainability issues will improve our financial performance over the long term, these decisions may not be consistent with the expectations of investors and any longer-term benefits may not materialize within the time frame we expect or at all, which could harm our business, revenue and financial results.
Genius may exercise its rights under Guernsey law with respect to the format, notice and process for its shareholder meetings even where common practice for a domestic issuer would dictate alternative format, notice and process requirements.
Guernsey laws may not offer as stringent of shareholder protections with respect to annual and extraordinary shareholder meetings, as would be required for a domestic issuer. Genius has outlined these exceptions in the Company’s Articles of Incorporation (as amended and
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approved on April 20, 2021). Genius may exercise its rights under Guernsey law with respect to the format, notice and process for its shareholder meetings even where common practice for a domestic issuer would dictate alternative format, notice and process requirements.
The terms of future indebtedness or share issuances may contain restrictions on our business and operations. Our inability to comply with the terms of any of our existing or future indebtedness may adversely affect our business.
The terms of our future indebtedness may stipulate higher than historically average interest rates and contain covenants that could, among other things, restrict our business and operations, our ability to incur additional indebtedness, pay dividends or make other distributions or repurchase stock, make certain investments, create liens on certain of our corporate assets, enter into affiliate transactions, merge, consolidate or sell all or substantially all of our assets. If we breach any of these covenants, our lenders and holders of other indebtedness may be entitled to accelerate our debt obligations. Any default could require that we repay outstanding indebtedness prior to maturity or that a lender could enforce a lien on our assets, as well as limit our ability to obtain additional financing, which in turn may have a material adverse effect on our cash flow and liquidity.