By presidential decree, Colombia has imposed a 19 percent value-added tax (VAT) on deposits with igaming operators. In a February 18 investor note, Jefferies Equity Research analyst David Katz wrote that the new impost “highlights the volatility and political risk inherent in the [Latin American] gaming space.
“However,” Katz continued, “we view the potential impact to [Rush Street Interactive] as specifically modest, while the prospects are reasonable that the decree is either short term or not instituted at all.” Colombia is one of Rush Street’s key markets, frequently highlighted in earnings calls.
The tax levy falls under the umbrella of a state of emergency imposed by Colombian President Gustavo Petro. Petro is currently able to issue decrees that have the force of law, cutting the Colombian parliament out of the loop.
“The justification for the order was ongoing violence in a border region adjacent to Venezuela,” Katz informed readers. The VAT was imposed on February 14.
The edict is temporary in nature, subject to judicial review. If the courts do not find it unconstitutional, they still could restrict it to three to six months’ duration. According to Katz, the decree could remain in force through the remainder of 2025.
“While it is fair to question the connection between igaming player deposits and violence in a border region, we believe that the impact to RSI would be relatively modest,” the analyst assured investors. Although Colombia has been growing in importance for Rush Street, Katz noted that it represents only 13.3 percent of RSI revenue “and it is unclear that players would be dissuaded from depositing in a more than marginal amount, particularly if RSI can provide adequate short-term incentives through deposit bonuses.”
Even in the unlikely event that Rush Street paid all the tax itself, the analyst wrote, it would represent just a 2.5 percent bite out of the company’s revenue. “Additionally, given the variable nature of many of RSI’s operating expenses, it is likely that any impact to EBITDA could be mitigated.”
Katz even thought that the VAT might work to Rush Street’s benefit, weeding out more marginal competitors and thus increasing RSI’s market share. This was deemed likely for Rush Street, “given its capabilities are superior to many competitors.”
While awaiting Rush Street’s take via the February 26 earnings call, Katz opined that this was merely a headwind in the near term. He felt, “There is still a lot to like about RSI’s story, with positive igaming trends in the [U.S.] states that have reported January revenue and positive online sports betting trends” in the first quarter of 2025 so far.
