ITEM 1A. RISK FACTORS
In addition to the other information contained in this Annual Report on Form 10-K, the following risk factors should be
considered carefully in evaluating our business. If any of the following risks actually occur, our business, financial condition
and results of operations could be adversely affected. If this were to happen, the value of our securities, including our common
stock, could decline significantly, and investors could lose all or part of their investment.
Summary Risk Factors
Our business is subject to a number of risks and uncertainties, including those highlighted in this item in this Annual Report on
Form 10-K. You should carefully consider these risks and uncertainties when investing in our Class A Interests. The principal
risks and uncertainties affecting our business include the following:
• We are subject to various construction and development risks in connection with our permanent casino and resort in
Chicago;
• Any delay between the closing of our temporary casino and the opening of our permanent casino and resort could have
a material adverse effect on our financial condition and results of operations;
• The casino, hotel and hospitality industry is capital intensive and we may not be able to finance development,
expansion and renovation projects, which could put us at a competitive disadvantage;
• Both our temporary casino site and permanent casino and resort site are leased and could experience risks associated
with leased properties, including risks relating to lease termination, inability to obtain satisfactory lease extensions,
consents and approvals, charges and our relationship with landlords, which could have a material adverse effect on our
business, financial position or results of operations;
• Our proposed lines of business are highly sensitive to reductions in discretionary consumer spending;
• The gaming industry, including retail casinos, iGaming and sports wagering, is highly competitive and increased
competition, including through legislative legalization or expansion of gaming by states in or near Illinois or through
Tribal gaming facilities, could adversely affect our financial results;
• We are and will be subject to extensive state and local regulation and licensing, and gaming authorities have
significant control over our operations, which could have an adverse effect on our business;
• Our business is subject to a variety of laws in the United States and in Illinois, many of which are unsettled and still
developing, and which could subject us to claims or otherwise harm our business. Any change in existing regulations
or their interpretation, or the regulatory or prosecutorial climate applicable to the products and services we offer in our
temporary casino and intend to offer in our permanent casino and resort, or changes in gaming tax rates, tax rules and
regulations or interpretation thereof related to such products and services, could adversely impact our ability to operate
our business 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;
• We rely on effective payment processing services from a limited number of providers;
• Our profitability is dependent, in part, on return to players;
• We extend credit to a portion of our customers, and we may not be able to collect gaming receivables from our credit
customers;
• Declining popularity of games and changes in device preferences of players could have a negative effect on our
business;
• We may invest in or acquire other businesses, and our business may suffer if we are unable to successfully integrate
acquired businesses into the Company or otherwise manage the growth associated with multiple acquisitions;
• Our results of operations and financial condition could be adversely affected by the occurrence of natural disasters,
such as blizzards, floods, tornadoes, fires, or other catastrophic events, including war, terrorism and public health
crises;
• Failure to comply with the community investment program obligations specified in the Host Community Agreement
could have a material adverse effect on our financial condition and results of operations;
• The Holding Company’s interests may conflict with our interests and the interests of the other holders of our stock.
Conflicts of interest between the Holding Company’s and us could be resolved in a manner unfavorable to us and the
other holders of our stock;
• We rely on information technology and other systems and platforms, and any failures, errors, defects or disruptions in
our systems or platforms 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 business may be harmed from cybersecurity incidents, and we may be subject to legal claims if there is loss,
disclosure or misappropriation of or access to our customers’, business partners’ or our own information or other
breaches of information security;
• Servicing our indebtedness and funding our other obligations requires a significant amount of cash, and our ability to
generate sufficient cash depends on many factors, some of which are beyond our control;
• Our Class A Interests do not have an active trading market and are subject to restrictions on transferability and
redemption provisions, and you may find it difficult to sell your Class A Interests;
• You may not receive dividends or other distributions on the Class A Interests; and
• Even if we pay dividends on our Class A Interests, pursuant to the terms of our amended and restated certificate of
incorporation, so long as there are Subordinated Loans outstanding that are attributable to each of our various Class
A-1 Interests, Class A-2 Interests and Class A-3 Interests, any cash available for distribution that would otherwise be
paid to holders of our Class A-1 Interests, Class A-2 Interests and Class A-3 Interests, as applicable, will be required to
be used for the repayment of principal and accrued interest on the corresponding Subordinated Loans owed by us until
such time as such Subordinated Loans are fully paid and discharged, which means you may never directly receive a
cash dividend on your Class A-1 Interests, Class A-2 Interests and Class A-3 Interests.
Development and Construction Risks
We are subject to various construction and development risks in connection with our permanent casino and resort in
Chicago.
Our proposed lines of business are dependent on the construction and development of our permanent casino and resort in
Chicago, Illinois. Construction and development projects, particularly of the scale contemplated with our permanent casino and
resort, are often developed in multiple stages involving commercial and governmental negotiations, site planning, due diligence,
permit requests, environmental impact studies, permit applications and review, marine logistics planning and transportation and
end-user delivery logistics, each of which requires significant effort and dedication to complete. Projects of this type are subject
to a number of risks, including, among others:
• engineering, environmental or geological problems;
• shortages or delays in the delivery of equipment and supplies;
• government or regulatory approvals, permits or other authorizations;
• failure to meet technical specifications or adjustments being required based on testing or commissioning;
• construction accidents that could result in personal injury or loss of life;
• lack of adequate and qualified personnel to execute the project for our permanent casino and resort;
• weather interference, particularly during the winter in Chicago;
• delays in removing current tenants from the proposed sites; and
• potential labor shortages, work stoppages or labor union disputes.
Furthermore, because of the nature of our business, we are dependent on numerous third parties, including local, state and
federal governmental entities that are required to certificate and license our facilities. Delays from such third parties or
governmental entities could prevent us from successfully executing the construction and development of our permanent casino
and resort. In addition, as a builder of gaming facilities, we expect to face an intense regulatory process and heightened political
pressure to finalize our permanent casino and resort in a timely manner, which subjects us to risks associated with changes in
the political views and structure, government representatives, new regulations, regulatory reviews, employment laws and
diligence requirements. Each of these could make it more difficult, time-consuming and expensive to develop our permanent
casino and resort.
The occurrence of any one of these factors, whatever the cause, could result in unforeseen delays or cost overruns to the
construction and development of our permanent casino and resort. Delays in the development beyond our estimated timelines,
or amendments or change orders to our construction contracts, could result in increases to our development costs beyond our
original estimates, which could require us to obtain additional financing or funding and could make our permanent casino and
resort less profitable than originally estimated or possibly not profitable at all. Further, any such delays could cause a delay in
our anticipated receipt of revenues from operating our permanent casino and resort. Our inability to meet milestones or
conditions precedent in our contracts with Chicago could also lead to delay penalties and potentially a termination of
agreements, which could render our permanent casino and resort impossible to open and/or operate. Specifically, the Host
Community Agreement with the City of Chicago provides for significant liquidated damages in the event that we do not meet
the milestones specified as to our temporary casino and our permanent casino and resort. Our parent, Bally’s, has experienced
time delays and cost overruns in the construction and development of casinos as a result of the occurrence of various of the
above factors, and no assurance can be given that we will not experience in the future similar events, any of which could have a
material adverse effect on our business, operating results, cash flows and liquidity.
Any delay between the closing of our temporary casino and the opening of our permanent casino and resort could have a
material adverse effect on our financial condition and results of operations.
We may experience a gap between the closing of our temporary casino and the opening of our permanent casino and resort.
While we work to construct our permanent casino and resort on the banks of the Chicago River, we have been operating a
temporary casino in downtown Chicago since September 9, 2023. On October 26, 2023, the Illinois Gaming Board also
approved extending the operation of our temporary casino until September 9, 2026. Under Illinois Law, we cannot operate our
temporary casino beyond September 9, 2026, without an amendment to the Illinois Gaming Act and approval from the Illinois
Gaming Board and City of Chicago. House Bill 4437 was introduced in January 2026, which allows for the operation of the
temporary casino to be extended incrementally until September 2027, if necessary. While the Company has no reason to believe
the legislative amendment would not be passed by the Illinois General Assembly, no assurances can be provided regarding the
legislative outcome.
Additionally, there are a number of risks associated with the opening of our permanent casino and resort, including those
described elsewhere in this section. For example, the opening of our permanent casino and resort is subject to various
construction and development risks, including:
• engineering, environmental or geological problems;
• shortages or delays in the delivery of equipment and supplies;
• government or regulatory approvals, permits or other authorizations;
• failure to meet technical specifications or adjustments being required based on testing or commissioning;
• construction accidents that could result in personal injury or loss of life;
• lack of adequate and qualified personnel to execute the project for our permanent casino and resort;
• weather interference, particularly during the winter in Chicago;
• delays in removing current tenants from the proposed sites; and
• potential labor shortages, work stoppages or labor union disputes.
In addition, we have not yet entered into binding contracts for the construction and development of all of our planned facilities
and assets for our permanent casino and resort, and may not be able to enter into the contracts required on commercially
favorable terms, or at all, which could cause potential changes or delays to our planned development and construction schedule.
Also, any failure to maintain working capital sufficient for the project, business disruptions due to pandemic, crime or civil
unrest and potential legal proceedings could put our planned schedule at risk of delay.
If we are unable to commence the operation of our permanent casino and resort as expected, and thus a gap exists between the
closing of our temporary casino and the opening of our permanent casino and resort, our business, operating results, cash flows
and liquidity could be materially and adversely affected.
We are dependent on third-party contractors, operators and suppliers to develop and construct our permanent casino and
resort.
We are heavily reliant on third-party contractors, equipment manufacturers, suppliers and operators for the development and
construction of our permanent casino and resort. We have not yet entered into binding contracts for the construction and
development of all of our planned facilities and assets in Chicago, and we cannot assure you that we will be able to enter into
the contracts required on commercially favorable terms, or at all, which could expose us to fluctuations in pricing and potential
changes or delays to our planned development and construction schedule. These agreements with third parties will be the result
of arm’s-length negotiations and subject to change. If we are unable to enter into favorable contracts, we may not be able to
construct and operate these assets as expected, or at all.
Furthermore, there can be no assurance that contractors and suppliers will perform their obligations successfully under their
agreements with us. If any contractor is unable or unwilling to perform according to the negotiated terms and timetable of its
respective agreement with us for any reason or terminates its agreement with us for any reason, we would be required to engage
a substitute contractor, which could be particularly difficult. Although some agreements may provide for liquidated damages if
the contractor or subcontractor fails to perform in the manner required with respect to its obligations, the events that trigger
such liquidated damages may delay or impair the opening or operation of our planned facilities, and any liquidated damages
that we receive may be delayed or insufficient to cover the damages that we suffer as a result of any such delay or impairment,
including, among others, any covenants or obligations by us to or penalties under our agreements with Chicago. Such liquidated
damages may also be subject to caps on liability, and we may not have full protection to seek payment from our contractors to
compensate us for such payments and other consequences. Furthermore, we may have disagreements with our contractors about
different elements of the construction process, which could lead to the assertion of rights and remedies under their contracts and
increase the cost of the applicable facility or result in a contractor’s unwillingness to perform further work.
If we are unable to construct and commission our permanent casino and resort as expected, or, when and if constructed, our
permanent casino and resort does not accomplish our or Chicago’s goals, or if we experience delays or cost overruns in
construction, our business, operating results, cash flows and liquidity could be materially and adversely affected.
We have invested and continue to invest significant capital and resources to develop our permanent casino and resort, which
means that we are subject to the risk that our permanent casino and resort is not successfully developed or that the City of
Chicago does not fulfill its obligations to us following our capital investment in our permanent casino and resort.
Our permanent casino and resort has required us to make significant upfront capital investments and devote significant internal
time and resources to finalize our permanent casino and resort before we can start to generate revenue from the business. We do
not expect to generate meaningful revenues until our permanent casino and resort is completely finalized and has been opened
for some period of time, which may take a year or more to achieve from the opening of our permanent casino and resort.
If our permanent casino and resort is not successfully developed for any reason, we face the risk of not recovering some or all
of our invested capital, which may be significant. If our permanent casino and resort is successfully developed, we face the
risks that customers will not enjoy our permanent casino and resort or that the City of Chicago will hinder our ability to operate
our permanent casino and resort as intended, which could result in significantly lower revenues than what we currently
anticipate. Our contracts and development agreements with Chicago do not fully protect us against this risk and, in some
instances, may not provide any meaningful protection from this risk at all. This risk is heightened by the fact that our
counterparty is a government or government-related entity because any attempt to enforce our contractual or other rights may
involve long and costly litigation where the ultimate outcome is uncertain, and where the government or government-related
entity may enjoy some form of immunity or popular support. Additionally, as a government or government-related entity, our
counterparty is subject to political pressure and frequent administrative changes, which could result in different perspectives
and treatment over the life of our commercial agreements to construct, develop and operate our permanent casino and resort.
If our capital investment does not generate the type of return on investment that we expect, we will have less capital to continue
to develop and improve our permanent casino and resort, and our liquidity, results of operations and financial condition could
be materially and adversely affected. This could result in our inability to comply with the terms of our existing debt or other
agreements, which would exacerbate the aforementioned adverse effects.
We may experience supply chain or procurement disruptions, or increased supply chain costs, which may lead to
construction and development delays in our permanent casino and resort.
The construction and development of our permanent casino and resort is planned for a relatively long-term construction
schedule, with our permanent casino and resort expected to open to the public in September 2026. The construction and
development of our permanent casino and resort will require timely delivery of required equipment and materials in order to be
open to the public by such date.
The global supply chain for the required equipment and materials could be impacted by disruptions that could lead to delays,
reputational damage, interruptions of service and disruptions of our future plans and strategic initiatives, such as:
• political events;
• tariffs, barriers to trade and international trade disputes;
• acts of terrorism;
• hostilities or wars (such as the war in Ukraine and conflict in the Middle East and Latin America);
• natural disasters;
• public health issues;
• industrial accidents;
• inflation; and
• other business interruptions.
While we will obtain customary builder’s risk insurance to provide coverage during the construction of our permanent casino
and resort, such coverage may only cover some, but not all, of any losses or damages incurred during construction. If any such
delay or disruption were to occur, it could have a material adverse effect on our ability to execute the construction and
development of our permanent casino and resort, which could have an impact on our liquidity and financial condition.
Changes in the costs of procuring materials and equipment used in the construction and development of our permanent casino
and resort, including vendor costs, or changes in our relationships with vendors, could also have an adverse effect on our results
of operations. In recent periods, volatility in input costs, including for construction materials, energy and transportation has
persisted due to inflationary pressures, labor shortages and geopolitical developments. In addition, U.S. trade policy continues
to evolve, including the maintenance and potential expansion of tariffs and other trade restrictions on imports from certain
countries, including Canada, China and Mexico, as well as the risk f retaliatory measures by affected jurisdictions. These
measures, together with ongoing regulatory uncertainty and period adjustments to tariff rates and product coverage, could cause
the costs of procuring materials and equipment used in the construction and development of our permanent casino and resort to
significantly increase. To the extent we determine our costs to develop our permanent casino and resort are too high, we may
suspend, reduce the scope of or permanently abandon the implementation of our plans with respect to our permanent casino and
resort, which could have material and adverse effect on our plans and strategic initiatives.
Though we intend to undertake various proactive efforts to secure our global supply chain against the effects of public health
issues and the impact of the wars in Ukraine and Iran conflict in other parts of the Middle East, Latin America, Europe, and
elsewhere, their full extent and impact on our future supply chain and procurement process cannot be reasonably estimated at
this time, and it could have a material adverse impact on our business and financial condition.
Failure to maintain sufficient working capital could limit our growth and harm our business, financial condition and results
of operations.
During the development and construction of our permanent casino and resort, we have had significant working capital
requirements as we work to make the facilities ready to admit potential customers. If we do not have sufficient working capital,
we may not be able to pursue our growth strategy, respond to competitive pressures or fund key strategic initiatives, which may
harm our business, financial condition and results of operations.
The casino, hotel and hospitality industry is capital intensive and we may not be able to finance development, expansion and
renovation projects, which could put us at a competitive disadvantage.
Our permanent casino and resort will have an ongoing need for renovations and other capital improvements to remain
competitive, including room refurbishments, amenity upgrades and replacement, from time to time, of furniture, fixtures and
equipment. We may also need to make capital expenditures to comply with applicable laws and regulations. Construction
projects entail significant risks, which can substantially increase costs or delay a project. Such risks include shortages of
materials or skilled labor, unforeseen engineering, environmental or geological problems, work stoppages, weather interference
and unanticipated cost increases. Most of these factors are beyond our control. In addition, difficulties or delays in obtaining
any of the requisite licenses, permits or authorizations from regulatory authorities can increase the cost or delay the of
expansion or development. Significant budget overruns or delays with respect to expansion and development projects could
adversely affect our business and results of operations.
Renovations and other capital improvements of casino properties, in particular, require significant capital expenditures. In
addition, any such renovations and capital improvements usually generate little or no cash flow until the projects are
operational. We may not be able to fund such projects solely from cash provided from operating activities. Consequently, we
may have to rely upon the availability of debt or equity capital to fund renovations and capital improvements, and our ability to
carry them out will be limited if we cannot obtain satisfactory debt or equity financing, which will depend on, among other
things, market conditions. We cannot assure you that we will be able to obtain additional equity or debt financing on favorable
terms, or at all. Our failure to renovate and maintain gaming and entertainment venues from time to time may put us at a
competitive disadvantage to gaming and entertainment venues offering more modern and better maintained facilities, which
could adversely affect our business, financial condition and results of operations.
Our investments in the construction and building industry are subject to unique risks relating to regulatory changes and
global economic conditions.
Companies in the construction and building sector are subject to many risks, including the negative impact of regulation,
changing real estate market, a competitive marketplace and difficulty in obtaining financing. Any of these factors could
materially and adversely affect our operations, or the operations of third parties we have engaged, in connection with the
construction and building of our permanent casino and resort and, in turn, access to capital may be difficult or impossible for us
to obtain.
Risks Related to our Leases
Both our temporary casino site and permanent casino and resort site are leased and could experience risks associated with
leased properties, including risks relating to lease termination, inability to obtain satisfactory lease extensions, consents and
approvals, charges and our relationship with landlords, which could have a material adverse effect on our business,
financial position or results of operations.
Both our temporary casino site and permanent casino and resort site are leased and could experience risks associated with
leased properties, including risks relating to lease termination, inability to obtain satisfactory lease extensions, consents and
approvals, charges and our relationship with landlords, which could have a material adverse effect on our business, financial
position or results of operations.
On July 17, 2025, into a new master lease agreement with GLP (the “Chicago MLA”), that amended the existing ground lease
for the property on which the Company plans to develop its Permanent Facility and a development agreement with GLP (the
“Chicago Development Agreement”) pursuant to which GLP has committed to advance up to $940.0 million (the “GLP
Development Advances”) for the payment of hard costs used to construct the Permanent Facility in exchange for increasing the
amount of rent payable to GLP under the Chicago MLA. The Chicago MLA has an initial term of 15 years and includes four , 5 -
year options to renew and is subject to annual escalation. Annual rent under the Chicago MLA is $20.0 million , with additional
rent equal to 8.5% of the GLP Development Advances that are granted to the Company.
GLP has the right to terminate the GLP Lease Agreement upon any event of default under the GLP Lease Agreement. Such
events of default include, without limitation, a failure to pay amounts due after applicable notice and cure periods, certain
bankruptcy or insolvency events, a cross-default with the GLP Development Agreement and the failure to comply with a
variety of covenants after applicable notice and cure periods, including those related to the development of our permanent
casino and resort, repair and maintenance, alterations and insurance. In addition, from and after any refinancing, extension or
majority amendment of Bally’s existing credit facilities, the GLP Lease Agreement will include a cross-default to that certain
Master Lease, dated June 3, 2021, as subsequently amended, between GLP and a wholly-owned subsidiary of Bally’s and that
certain Master Lease, dated December 16, 2024, as subsequently amended, between GLP and a wholly-owned subsidiary of
Bally’s.
There are also certain restrictions on our ability to assign our interest in the GLP Lease Agreement without having to obtain
GLP’s prior consent, including requirements for the transferee (or its parent company) to satisfy certain financial metrics and
have a certain level of experience in operating or managing casinos. GLP’s obligation to make GLP Development Advances
under the GLP Development Agreement is subject to certain conditions, including that we shall have unrestricted access to
funds in an amount sufficient at the time of each GLP Development Advance to fund the construction of our permanent casino
and resort. We are obligated to construct our permanent casino and resort in compliance with terms and conditions set forth in
the GLP Development Agreement, which include the satisfaction of specified development and construction milestones.
The GLP Development Agreement contains customary representations and covenants by us and contains funding conditions,
including, without limitation, (a) GLP’s reasonable approval of plans and specifications, the project budget (including
am endments thereto and reallocations therein except those permitted under the GLP Development Agreement), the project
schedule, the underlying construction and architect contracts, and all change orders (subject to exceptions set forth in the GLP
Development Agreement), (b) GLP’s receipt of appropriate lien waivers, (c) budget balancing requirements, (d) retainage
requirements, and (e) other customary conditions, all as set forth in the GLP Development Agreement. From and after the first
GLP Development Advance, we are required to fund all hard costs of construction of the permanent casino and resort utilizing
solely GLP Development Advances until GLP has funded its entire commitment or construction has been completed. The GLP
Development Agreement also contains defaults and remedies, including, without limitation, a cross-default with the GLP Lease
Agreement. We are not permitted to assign, finance, transfer, pledge or encumber our interest in the GLP Development
Agreement without GLP’s prior written consent, whether or not any such assignment, financing, transfer, pledge or
encumbrance is permitted with respect to the GLP Lease Agreement, other than to a permitted leasehold mortgagee under the
GLP Lease Agreement.
In addition to the GLP Lease Agreement, we also entered into a sublease agreement with Medinah Holdings, LLC and Medinah
Building LLC (the “Medinah Lease Agreement” and, together with the GLP Lease Agreement, the “Casino Lease
Agreements”), to lease the property on which we developed our temporary casino. The consent of the sublandlord under the
Medinah Lease Agreement (the “Medinah Sublandlord”) is generally required for any assignments of our interests thereunder,
except with respect to transfers to affiliates or successors by merger or acquisition. The Medinah Sublandlord has the right to
terminate the Medinah Lease Agreement upon any event of default under the Medinah Lease Agreement. Such events of default
include: the failure to timely pay rent, carry (or provide evidence of) required insurance, or perform any other covenant under
the Medinah Lease Agreement, in each case subject to the notice and cure periods provided therein, certain bankruptcy or
insolvency events, and a failure to surrender the subleased premises on the last day of the term of the Medinah Lease
Agreement. Further, the Medinah Lease Agreement is subordinate to a master lease, and certain defaults by the Medinah
Sublandlord in its capacity as tenant under the master lease could result in a termination thereof, which could result in a
termination of the Medinah Lease Agreement.
Termination of any or all of the Casino Lease Agreements (including as a result of a default under the GLP Development
Agreement) would result in us losing some or all of our rights with respect to the applicable properties, could result in a default
under the Host Community Agreement, and could have a material adverse effect on our business, financial position or results of
operations. In the event of a termination of any of the Casino Lease Agreements (including as a result of a default under the
GLP Development Agreement), we may be required to transfer all personal property located at the applicable property to a
designated successor, and we may not be adequately compensated for that personal property. Moreover, since as a lessee we do
not completely control the land and improvements underlying our operations, the lessors could take certain actions to disrupt
our rights in the properties leased under the Casino Lease Agreements, which are beyond our control. If the lessors chose to
disrupt our use either permanently or for a significant period of time, then the value of our assets could be impaired and our
business and operations could be adversely affected. There can also be no assurance that we will be able to comply with our
obligations under the Casino Lease Agreements (including our obligations under the GLP Development Agreement) in the
future. In addition, if the lessors have financial, operational, regulatory or other challenges, there can be no assurance that the
lessors will be able to comply with their obligations under the Casino Lease Agreements, including their obligations to provide
us financing for the construction of our permanent casino and resort.
General Economic and Political Conditions
Our proposed lines of business are highly sensitive to reductions in discretionary consumer spending.
Our proposed lines of business are highly sensitive to reductions from time to time in discretionary consumer spending.
Demand for entertainment and leisure activities, including gaming, can be affected by changes in the economy and 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 and rising prices or the perception by
consumers of weak or weakening economic conditions, may reduce our prospective customer’s disposable income or result in
fewer individuals engaging in entertainment and leisure activities, such as visiting casinos and casino hotel properties, sports
betting, iCasino and online bingo, some of which are services we intend to offer. We will rely on the strength of the regional
and local economy for the performance of our temporary casino and our permanent casino and resort. As a result, we cannot
ensure that demand for our offerings will remain constant. Adverse developments affecting economies throughout the world,
including a general tightening of the availability of credit, increasing energy costs, rising prices, acts of war or terrorism, natural
disasters, declining consumer confidence, significant declines in the stock market or epidemics, pandemics or other health-
related events or widespread illnesses and the imposition of barriers to trade and/or tariffs, could lead to a reduction in visitors
to our temporary casino and our permanent casino and resort or discretionary spending by our customers on entertainment and
leisure activities, which could adversely affect our business, financial condition and results of operations.
Inflation could adversely impact our business, financial condition and results of operations.
We have experienced, and may in the future experience, inflationary pressures in certain areas of our business, including with
respect to employee wages, the cost of materials, transportation and energy, as well as performance and brand marketing
expenses, store rents and build-out costs and other various professional and technology expenses. We cannot predict any future
trends in the rate of inflation or associated increases in our operating costs or potential weakening of consumer spending power
and how that may impact our business. To the extent we are unable to recover higher operating costs and a potential weakening
of consumer spending power resulting from inflation, or otherwise mitigate the impact of such costs on our business, our
revenues and gross profit margins could decrease and our business, financial condition and results of operations could be
adversely affected.
Business interruptions in Chicago could adversely affect us.
Our business and our assets are planned to be primarily located in Chicago, Illinois, which is a large city. Perceptions of high
incidences of crime at or in the vicinity of any of the facilities that we operate and intend to operate, including our temporary
casino and our permanent casino and resort, may give rise to concerns about lack of personal safety among our patrons, which
could result in a decline in customer traffic and spending patterns, which would result in a decline in revenue.
Additionally, we may be subject to community opposition, administrative challenges, and land-use or nuisance litigation by
neighborhood associations or other stakeholders. Political changes could result in additional operating conditions, such as limits
on hours, event caps, traffic mitigations or supplemental community investments. These developments could increase costs,
constrain operations, and adversely affect our financial performance.
Our business interruption insurance and coverage for malicious attacks may only cover some, but not all, of these potential
events, and even for those events that are covered, it may not be sufficient to compensate us fully for losses or damages that
may occur as a result of such events, including, for example, loss of market share and diminution of our trademarks, reputation
and consumer loyalty. Any one or more of these events could have a material adverse effect on our business, results of
operation, financial condition and/or cash flow.
Political uncertainty could adversely affect our business.
U.S. and non-U.S. markets could experience political uncertainty and/or change that subjects investments to heightened risks,
including, for instance, risks related to the elections in the United States, the wars in Ukraine and Iran, conflicts in other parts of
the Middle East, Latin America, Europe and elsewhere, or the effect of public health issues on world leaders and governments.
These heightened risks could also include:
• increased risk of default (by both government and private issuers);
• greater social, trade, economic and political instability (including the risk of war or terrorist activity);
• greater governmental involvement in the economy;
• greater governmental supervision and regulation of the securities markets and market participants resulting in
increased expenses related to compliance;
• greater fluctuations in currency exchange rates;
• controls or restrictions on foreign investment and/or trade, capital controls and limitations on repatriation of invested
capital and on the ability to exchange currencies;
• inability to purchase and sell investments or otherwise settle security or derivative transactions (i.e., a market freeze);
• unavailability of currency hedging techniques; and
• slower clearance.
During times of political uncertainty and/or change, global markets often become more volatile. There could also be a lower
level of monitoring and regulation of markets while a country is experiencing political uncertainty and/or change, and the
activities of investors in such markets and enforcement of existing regulations could become more limited. Markets
experiencing political uncertainty and/or change could have substantial, and in some periods extremely high, rates of inflation
for many years. Inflation and rapid fluctuations in inflation rates typically have negative effects on such countries’ economies
and markets. Tax laws could change materially, and any changes in tax laws could have an unpredictable effect on us, our
investments and our investors. There can be no assurance that political changes will not cause us or our investors to suffer
losses.
We may face regulatory, legal and reputational risks relating to responsible gaming .
Our operations are subject to responsible gaming obligations, including helpline disclosures, self-exclusion compliance, staff
training, advertising and marketing limitations, and restrictions regarding vulnerable populations. Failures in these programs, or
perceived insufficiencies, could lead to fines, license conditions, litigation or mandated changes to our product and marketing
practices, which could negatively impact our profitability.
Risks Related to Competition
Chicago is still not known as a location for gaming tourism and, therefore, we face significant competition from both
regional and national gaming centers.
The Illinois Gambling Act established the IGB and authorized up to ten casino licenses. Currently, all ten original licenses are
active. In July 2009, Public Act 96-0034 became law, creating the Illinois Video Gaming Act. Since 2009, Video Gaming has
rapidly expanded across Illinois. On June 28, 2019, Illinois Governor J.B. Pritzker signed the gaming expansion bill into law
which permits sports wagering, including online/mobile, a Chicago casino, five additional casinos, slots and table games at
racetracks, possible slots at the Chicago airports, an additional video gaming terminal (“VGT”) at each establishment and in
some instances five additional VGTs, and the opportunity for existing casinos to move to land-based operations or purchase
additional gaming positions.
The market for gaming, hotel and other entertainment facilities in Chicago is rapidly evolving but remains in its infancy. While
Illinois is undergoing expansion since various states started to liberalize gaming (including sports betting), Chicago is still not
known as a location for gaming tourism and, therefore, subject to significant competition from both regional and national
gaming centers. An underserved and untapped market, the City of Chicago is served by the Rivers Casino in a suburb of
Chicago, the northwestern Indiana casinos, a retail sports book at the United Center, a retail sports book at Wrigley Field, the
Waukegan casino and Hawthorne Race Course.
The gaming industry, including retail casinos, iGaming and sports wagering, is highly competitive and increased
competition, including through legislative legalization or expansion of gaming by states in or near Illinois or through Native
American gaming facilities, could adversely affect our financial results.
Once our permanent casino and resort is complete and operational, we will face significant competition in all of the areas in
which we conduct our business. Increased competitive pressures may adversely affect our ability to continue to attract
customers or affect our ability to compete efficiently.
Our temporary casino is, and our permanent casino and resort will be, located in a jurisdiction that restricts gaming to certain
areas and/or may be affected by state laws that currently prohibit or restrict gaming operations. We also face the risk that
existing casino licensees in Illinois and in nearby states will expand their operations and the risk that Native American gaming
will continue to grow, both throughout Illinois and in nearby states. Budgetary and other political pressures faced by state
governments could lead to intensified efforts directed at the legalization of gaming in jurisdictions where it is currently
prohibited. The legalization of gaming in such jurisdictions could be an expansion opportunity for our business, or create
competitive pressures, depending on where the legalization occurs and our ability to capitalize on it. Our ability to attract
customers could be significantly and adversely affected by the legalization or expansion of gaming in certain jurisdictions and
by the development or expansion of Native American casinos in areas where our customers may visit.
In addition, our competitors in Illinois and in nearby states may refurbish, rebrand or expand their casino offerings, which could
result in increased competition. Furthermore, changes in ownership may result in improved quality of our competitors’
facilities, which may make such facilities more competitive. Certain of our competitors are large gaming companies with
greater name recognition and marketing and financial resources. In some instances, particularly in the case of Native American
casinos, our competitors pay lower taxes or no taxes. These factors create additional challenges for us in competing for
customers and accessing cash flow or financing to fund improvements for our casino and entertainment products that enable us
to remain competitive.
We expect to experience strong competition in hiring and retaining qualified property and corporate management personnel,
including competition from Native American gaming facilities that are not subject to the same taxation regimes as we are and
therefore may be willing and able to pay higher rates of compensation. From time to time, a number of vacancies in key
corporate and property management positions can be expected. If we are unable to successfully recruit and retain qualified
management personnel at our facilities or at the corporate level, our results of operations could be adversely affected.
We also compete with other forms of legalized gaming and entertainment such as bingo, pull-tab games, card parlors,
sportsbooks, pari-mutuel or simulcast betting on horse and dog racing, state-sponsored lotteries, instant racing machines, video
lottery terminals (“VLT”) (including racetracks that offer VLT) and video poker terminals. In the future, we may also compete
with gaming or entertainment at other venues. Further competition from Internet lotteries and other Internet wagering gaming
services, which allow their customers to wager on a wide variety of sporting events and play Las Vegas-style casino games
from home, could divert customers from the facilities we own and thus adversely affect our business. Such Internet wagering
services are likely to expand in future years and become more accessible to domestic gamblers as a result of U.S. Department of
Justice positions related to the application of federal laws to intrastate Internet gaming and initiatives in some states to consider
legislation to legalize intrastate Internet wagering. The law in this area has been rapidly evolving, and additional legislative
developments may occur at the federal and state levels that would accelerate the proliferation of certain forms of Internet
gaming in Illinois and in nearby states.
In addition, in May 2018, the U.S. Supreme Court struck down as unconstitutional the Professional and Amateur Sports
Protection Act of 1992, a federal statute enacted to stop the spread of state-sponsored sports gambling. This decision lifted
federal restrictions on sports wagering and allows each state to determine by itself the legality of sports wagering within its
jurisdiction. While new federal online gaming legislation has been introduced in Congress from time to time, there has been no
federal legislative response to the U.S. Supreme Court’s decision. As a result, numerous states, including Illinois and states
located near Illinois, have passed legislation authorizing fixed-odds sports betting online. This decreases our ability to serve as a
hub for sports betting, as customers can access sports betting throughout Illinois and nearby states without needing to venture to
our temporary casino or our permanent casino and resort, which results in decreased traffic and reduced potential revenue
generation.
We may also face competition from other gaming facilities which are able to offer sports wagering services (including mobile
sports wagering) following the enactment of applicable legislation. Numerous states that border Illinois have pending or
proposed legislation which would allow for sports betting, each of which could have an adverse effect on our financial results
by further reducing the foot traffic to our temporary casino or our permanent casino and resort.
The gaming industry is characterized by an increasingly high degree of competition among a large number of participants
operating from physical locations and/or through online or mobile platforms, and other forms of gaming in the United States.
Recently, there has been additional significant competition in our markets as a result of the upgrading or expansion of
properties by existing market participants, the entrance of new gaming participants into a market or legislative changes
permitting additional forms of gaming. As competing properties and new markets open, our results of operations may be
negatively impacted. We expect each existing or future market in which we participate to be highly competitive.
Existing and new competitors may also increase marketing spending, including to unprofitable levels, in an attempt to distort
the online gambling market to build market share quickly. Some of our competitors have or will have significantly greater
financial, technical, marketing and sales resources and may be able to respond more quickly to changes in customer needs.
Additionally, these competitors may be able to devote a greater number of resources to the enhancement, promotion and sale of
their games and gaming systems. Our future success is or will be dependent upon its ability to retain its current customers and
to acquire new customers. Failure to do so could result in a material adverse effect on our business, financial condition and
results of operations.
Compliance, Regulatory and Legal Risks
We are and will be subject to extensive state and local regulation and licensing, and gaming authorities have significant
control over our operations, which could have an adverse effect on our business.
Our ownership and operation of our temporary casino is, and our permanent casino and resort will be, subject to extensive state
and local regulation, and regulatory authorities at the state and local levels have broad powers with respect to the licensing of
these businesses, and may reject, revoke, suspend, condition, fail to renew or limit our gaming or other licenses, impose
substantial fines and take other actions, each of which poses a significant risk to our business, results of operations and financial
condition. We have applied to hold all state and local licenses and related approvals necessary to conduct our intended
operations in our temporary casino and our permanent casino and resort and will be required to periodically apply to renew
many of these licenses and registrations and have the suitability of certain of our directors, officers and employees renewed.
On October 26, 2023, we obtained a four-year owners license from the IGB. This license will expire on October 25, 2027 and
may be renewed for subsequent four-year terms. The license issued to casino operators is referred to as an “owners license” and
is issued by the IGB for a period of up to four years. The owners license may then be renewed for subsequent four-year terms.
Additionally, the IGB also approved extending the operation of our temporary casino until September 9, 2026. Under Illinois
Law, we cannot operate our temporary casino beyond September 9, 2026, without an amendment to the Illinois Gaming Act
and approval from the Illinois Gaming Board and City of Chicago. House Bill 4437 was introduced in January 2026, which
allows for the operation of the temporary casino to be extended incrementally until September 2027, if necessary. While Bally’s
has no reason to believe the legislative amendment would not be passed by the Illinois General Assembly, no assurances can be
provided regarding the legislative outcome.
Any failure to obtain, maintain or renew existing licenses, registrations, permits or approvals or difficulty or delay in doing so
would have a material adverse effect on us. As we expand our gaming operations to offer new and improved options for
customers, we may have to meet additional suitability requirements and obtain additional licenses, registrations, permits and
approvals from gaming authorities in these jurisdictions. The approval process can be time-consuming and costly and we cannot
be sure that we will be successful. Furthermore, if additional gaming laws or regulations are adopted in jurisdictions where we
operate, these regulations could impose additional restrictions or costs that could have a significant adverse effect on us.
Gaming authorities in Illinois generally require that any beneficial owner of our securities file an application for a finding of
suitability. If a gaming authority requires a record or beneficial owner of our securities to file a suitability application, the
owner must generally apply for a finding of suitability within 30 days or at an earlier time prescribed by the gaming authority.
The gaming authority has the power to investigate such an owner’s suitability and the owner must pay all costs of the
investigation. If the owner is found unsuitable, then the owner may be required by law to dispose of his or her securities in the
Company.
Our officers, directors and key employees are also subject to a variety of regulatory requirements and various licensing and
related approval procedures in Illinois. If the Illinois gaming authority were to find any of our officers, directors or key
employees unsuitable for licensing or unsuitable to continue having a relationship with us, we would have to sever all
relationships with that person. Furthermore, Illinois gaming authority may require us to terminate the employment of any
person who refuses to file appropriate applications. Either result could adversely affect our gaming operations.
Applicable gaming laws and regulations may restrict our ability to issue certain securities, incur debt and undertake other
financing activities. Such transactions would generally require notice and/or approval of applicable gaming authorities, and our
financing counterparties, including lenders, might be subject to various licensing and related approval procedures in the various
jurisdictions in which we manage gaming facilities. Applicable gaming laws further limit our ability to engage in certain
competitive activities and impose requirements relating to the composition of our Board and senior management personnel. If
state regulatory authorities were to find any person unsuitable with regard to his, her or its relationship to us or any of our
subsidiaries, we would be required to sever our relationship with that person, which could materially adversely affect our
business.
Finally, our frequent interactions with municipal and state officials for permitting, inspections, procurement and ongoing
regulatory oversight create anti-corruption, gifts and ethics compliance risks. Any actual or alleged violation of anti-corruption
or ethics rules could lead to investigations, fines, license conditions, reputational harm and contract consequences, each of
which could materially adversely affect our business.
We are subject to numerous federal, state and local laws that may expose us to liabilities or have a significant adverse
impact on our operations. Changes to any such laws could have a material adverse effect on our operations and financial
condition.
Our business is subject to a variety of federal, state and local laws, rules, regulations and ordinances. These laws and
regulations include, but are not limited to, restrictions and conditions concerning alcoholic beverages, (including under Illinois’
Dram Shop Act), environmental matters, employees, currency transactions, taxation, zoning and building codes (including
public accommodation laws relating to mobility, signage, and hearing and vision accommodations) and marketing and
advertising. Such laws and regulations could change or could be interpreted differently in the future, or new laws and
regulations could be enacted. Material changes to any of the laws, rules, regulations or ordinances to which we are subject, new
laws or regulations or material differences in interpretations by courts or governmental authorities could have an adverse effect
on our business, financial condition and results of operations.
Our employees, especially those that interact with our customers, receive a base salary or wage that is established by applicable
Illinois and federal laws that establish a minimum hourly wage that is, in turn, supplemented through tips and gratuities from
customers. From time to time, Illinois and U.S. lawmakers have increased the minimum wage. It is difficult to predict when
such increases may take place, if at all. Any such change to the minimum wage could have a material adverse effect on our
business, financial condition and results of operations.
The sale of alcoholic beverages is a highly regulated and taxed business. Federal, state and local laws and regulations govern
the production and distribution of alcoholic beverages, including permitting, licensing, trade practices, labeling, advertising,
marketing, distributor relationships and related matters. Federal, state and local governmental entities also levy various taxes,
license fees and other similar charges and may require bonds to ensure compliance with applicable laws and regulations. Failure
to comply with applicable federal, state or local laws and regulations could result in higher taxes, penalties, fees and suspension
or revocation of permits, licenses or approvals and could have a material adverse effect on our business, financial condition and
results of operations. From time to time, local and state lawmakers, as well as special interest groups, have proposed legislation
that would increase the federal and/or state excise tax on alcoholic beverages or certain types of alcoholic beverages. If federal
or state excise taxes are increased, we may have to raise prices to maintain profit margins on the sales of any alcoholic
beverages. Higher taxes may reduce overall demand for alcoholic beverages, thus negatively impacting sales of our alcoholic
beverages at our temporary casino or our permanent casino and resort. Further federal or state regulation may be forthcoming
that could further restrict the distribution and sale of alcohol products. Any material increases in taxes or fees or the adoption of
additional taxes, fees or regulations could have a material adverse effect on our business, financial condition and results of
operations.
In addition, each restaurant we operate must obtain a food service license from local authorities. Failure to comply with such
regulations could cause our licenses to be revoked or our related restaurant business or businesses to be forced to cease
operations. Moreover, Illinois liquor laws may prevent the expansion of restaurant operations or interfere with the manner in
which we intend to operate our restaurants.
We handle significant amounts of cash in our operations and are subject to various reporting and anti- money laundering laws
and regulations. Recently, U.S. governmental authorities have evidenced an increased focus on compliance with anti-money
laundering laws and regulations in the gaming industry. Any violation of anti-money laundering laws or regulations could have
a material adverse effect on our business, financial condition and results of operations. Internal control policies and procedures
and employee training and compliance programs that we intend to implement will attempt to deter prohibited practices, but they
may not be effective in prohibiting our future employees, contractors or agents from violating or circumventing our policies and
the law. If we or our employees or agents fail to comply with applicable laws or our policies governing our operations, we may
face investigations, prosecutions and other legal proceedings and actions which could result in civil penalties, administrative
remedies and criminal sanctions. Any such government investigations, prosecutions or other legal proceedings or actions could
have a material adverse effect on our business, financial condition and results of operations.
We may be subject to extensive environmental regulation, which creates uncertainty regarding future environmental
expenditures and liabilities.
We may in the future be subject to various federal, state and local environmental laws and regulations that govern activities that
may have adverse environmental effects, such as discharges to air and water, as well as the management and disposal of solid,
animal and hazardous wastes and exposure to hazardous materials. These laws and regulations, which are complex and subject
to change, include U.S. Environmental Protection Agency regulations. Compliance with these and other environmental laws
can, in some circumstances, require significant capital expenditures.
We expect to also be subject to laws and regulations that create liability and cleanup responsibility for releases of regulated
materials into the environment. Certain of these laws and regulations impose strict, and under certain circumstances joint and
several, liability on a current or previous owner or operator of property for the costs of remediating regulated materials on or
emanating from our property. The costs of investigation, remediation or removal of those substances may be substantial. The
presence of, or failure to remediate properly, such materials may adversely affect our ability to operate our temporary casino or
our permanent casino and resort or to borrow funds using such property as collateral. Additionally, as an owner or manager of
real property, we could be subject to claims by third parties based on damages and costs resulting from environmental
contamination at or emanating from third-party sites. These laws typically impose clean-up responsibility and liability without
regard to whether the owner or manager knew of or caused the presence of the contaminants and the liability under those laws
has been interpreted to be joint and several unless the harm is divisible and there is a reasonable basis for allocation of the
responsibility.
The possibility exists that contamination, as yet unknown, may exist on our anticipated properties. There can be no assurance
that we will not incur expenditures for environmental investigations or remediation in the future.
We are currently involved in legal proceedings and may become involved in additional legal proceedings that, if adversely
adjudicated or settled, could impact our business and financial condition.
From time to time, we have been and may continue to be named in lawsuits or other legal proceedings relating to our
businesses. In particular, the nature of our business subjects us to the risk of lawsuits filed by customers, past and present
employees, holders of our stock, competitors, business partners and others in the ordinary course of business.
As an example, on January 29, 2 025, the American Alliance for Equal Rights and certain other individuals filed a complaint
against the City of Chicago, certain members of the IGB, the Operating Company and the Company, alleging that the
requirements that 25% of the Operating Company’s equity be owned by individuals that are women or minorities or woman- or
minority-owned and controlled entities (the “Criteria”) violated federal laws. In addition, on January 30, 2025, a complaint was
filed against the City of Chicago (including the Mayor and Treasurer in their official capacities), certain members of the IGB,
Bally’s Corporation and the Company, also alleging that the Criteria violate federal laws. On January 31, 2025, an emergency
motion was filed for preliminary injunction and temporary restraining order, seeking to preclude the closing of our initial public
offering while the case proceeds on the merits. On February 6, 2025, the court denied the plaintiffs’ request for a temporary
restraining order to enjoin our initial public offering. In response to the filing of our amended S-1 on April 22, 2025, which
removed the Criteria, plaintiffs in both lawsuits voluntarily dismissed their claims against all defendants (the former with
prejudice on June 6, 2025 and the latter without prejudice on April 30, 2025).
As with all legal proceedings, no assurances can be given as to the outcome of future matters to which we may be a party.
Moreover, legal proceedings can be expensive and time consuming, and we may not be successful in defending or prosecuting
these lawsuits, which could result in settlements or damages that could adversely affect our business, financial condition and
results of operations.
The regulatory framework which governs our business, and its interpretation, may be subject to change which we may fail to
anticipate and/or respond to.
In order to operate our temporary casino and our permanent casino and resort, we are required to hold licenses issued by the
IGB. The holders of such licenses are bound to meet stringent compliance requirements relating to matters such as anti-money
laundering, safer gaming, data protection, advertising and consumer rights issues. Compliance with such requirements is
incorporated into the relevant licenses as a licensing condition (or similar) with a corresponding requirement for us to comply
with such onerous requirements.
In carrying out its functions, the IGB is under a statutory duty to ensure that license holders are operating their businesses in
ways that are reasonably consistent with the licensing objectives set out in the law, which include preventing gaming from
being a source of (or associated with) crime or disorder, or being used to support crime; ensuring that gaming is conducted in a
fair and open way and protecting children and other vulnerable people from being harmed or exploited by gaming.
While the objectives of regulation may remain largely stable, the methods that operators are required to employ to meet those
objectives is in a state of constant evolution and development. We must respond adequately to the challenges this presents. If
we are found to be in breach of our obligation to comply with such licensing requirements, then the IGB may impose a financial
penalty on us or impose other penalties, including removing or imposing conditions on the relevant gaming licenses. A breach
of our Host Community Agreement with the City could also result in non-renewal of our owners license by the IGB,
particularly if the breach results in a termination of the Host Community Agreement. Maintaining the authorization from the
City is a condition for any future renewal of the owners license could have material adverse effect on our financial performance.
Our business is subject to a variety of laws in the United States and in Illinois, many of which are unsettled and still
developing, and which could subject us to claims or otherwise harm our business. Any change in existing regulations or
their interpretation, or the regulatory or prosecutorial climate applicable to the products and services we offer in our
temporary casino and intend to offer in our permanent casino and resort, or changes in gaming tax rates, tax rules and
regulations or interpretation thereof related to such products and services, could adversely impact our ability to operate our
business 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.
We are generally subject to laws and regulations relating to gaming in Illinois, as well as the general laws and regulations that
apply to all gaming and hospitality businesses, such as those related to privacy and personal information, tax and consumer
protection. These laws and regulations vary, and future legislative and regulatory action, court decisions or other governmental
action, which may be affected by, among other things, political pressures, attitudes and climates, as well as personal biases, may
have a material impact on our operations and financial results. The regulatory environment in Chicago or on a federal level may
change in the future and any such change could have a material adverse effect on our results of operations.
Future legislative and regulatory action, and court decisions or other governmental action, may have a material impact on our
operations and financial results. Governmental authorities could view us as having violated local laws, despite our efforts to
obtain all applicable licenses or approvals. There is also risk that civil and criminal proceedings, including class actions brought
by or on behalf of prosecutors or public entities or incumbent monopoly providers, or private individuals, could be initiated
against us, Internet service providers, credit card and other payment processors in the gaming industry. Such potential
proceedings could involve substantial litigation expense, penalties, fines, seizure of assets, injunctions or other restrictions
being imposed upon our licensees or other business partners, while diverting the attention of key executives. Such proceedings
could have a material adverse effect on our business, financial condition and results of operations, as well as impact our
reputation.
There can be no assurance that legally enforceable legislation will not be proposed and passed in Illinois to prohibit, legislate or
regulate various aspects of our business (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 business, financial condition and results of
operations because a local license or approval may be costly for us or our business partners to obtain and/or such licenses or
approvals may contain other commercially undesirable conditions.
We may share part of the regulatory burdens of Bally’s.
The majority of our voting power is held by Bally’s. In January 2023, the Operating Company and certain other subsidiaries of
Bally’s entered into a Services Agreement with Bally’s Management Group, LLC (“BMG”), a subsidiary of Bally’s (the
“Permanent Services Agreement”). In August 2023, the Operating Company’s participation in the Permanent Services
Agreement was suspended until the future opening of the Permanent Facility, at which time, the Operating Company will
automatically be deemed upon said opening to be participating under the Permanent Services Agreement again. In the
meantime, in August 2023, the Operating Company entered into a corporate services agreement with BMG (the “Temporary
Services Agreement”) which governs the provision of and payment for services by BMG to the Operating Company until the
opening of the Permanent Facility. Pursuant to each of the Temporary Services Agreement and the Permanent Services
Agreement, BMG agreed to provide us with general business support services. Bally’s and its affiliates hold many privileged
licenses in jurisdictions around the world, allowing them to operate gaming, hospitality and entertainment businesses.
Regulators that issue such licenses have broad investigative powers and could ask for information from our majority
stockholder, the entities from which we license intellectual property and their affiliates. Bally’s and its affiliates, including us
and the Operating Company, will be obligated to cooperate with the investigations of such regulators. Such licenses may also
limit the operations and activities of subsidiaries and affiliates of Bally’s, including us and the Operating Company.
We may face significant liability and operational constraints under Illinois’ Biometric Information Privacy Act (“BIPA”)
and similar biometric privacy laws.
To protect patrons, employees and property, we may implement technologies such as enhanced video analytics, access controls,
or identity verification that could capture or process biometric identifiers or information subject to BIPA. BIPA imposes strict
requirements for informed written consent, publicly available retention policies, data minimization, security, and timely
deletion, and provides a private right of action with statutory damages that can be material on a per-violation basis. Failure to
comply with the requirements of BIPA, even if inadvertently, could result in class actions, regulatory investigations, injunctive
relief, and significant damages, as well as reputational harm and operational changes to surveillance or access systems. Any
such outcome could adversely affect our business, financial condition and results of operations.
Business Operational Risks
We rely on effective payment processing services from a limited number of providers.
The provision of convenient, trusted, fast and effective payment processing services to our customers and potential customers is
critical to our business. If there is any deterioration in the quality of the payment processing services provided to these
customers or any interruption to those services (including with respect to system intrusions, unauthorized access or
manipulation), or if such services are only available at an increased cost to us or our customers or are terminated and no timely
and comparable replacement services are found, our customers and potential customers may be deterred from using our
products and services. Any of these occurrences may have a material adverse effect on our business, financial condition and
results of operations.
Furthermore, a limited number of banks and credit card companies process gambling-related payments as a matter of internal
policy and any capacity to accept such payments may be limited by the regulatory regime of a given jurisdiction. The
introduction of legislation or regulations restricting financial transactions with gambling operators, other prohibitions or
restrictions on the use of credit cards and other banking instruments for gambling transactions may restrict our ability to accept
payments from our customers. These restrictions may be imposed as a result of concerns related to fraud, payment processing,
AML or other issues related to the provision of gambling services. A number of issuing banks or credit card companies may
from time to time reject payments to us that are attempted to be made by our customers. Should such restrictions and rejections
become more prevalent, or any other restriction on payment processing be introduced, gambling activity by our customers
could be adversely affected, which in turn could have a material adverse effect on our business, financial condition and results
of operations.
In addition, we are subject to the risk of credit card chargebacks, which may also result in possible penalties. A chargeback is a
credit card originated deposit transaction to a player account with an operator that is later reversed or repudiated. The risk of
such chargeback transactions is greater in respect of certain markets and certain payment methods. We intend to recognize
revenue upon the first loss of the player on amounts tendered, with any credit card chargebacks then deducted from revenues.
Even though security measures are in place, high rates of credit card chargebacks could result in credit card associations levying
additional costs and fines or withdrawing their service and could have a material adverse effect on our business, financial
condition and results of operations.
Our electronic and table games and slot machines hold percentages may fluctuate.
The gaming industry is characterized by an element of chance and guests’ winnings at our temporary casino depend, and at our
permanent casino and resort will depend, on a variety of factors, some of which are beyond our control. In addition to the
element of chance, hold percentages (the ratio of net win to total amount wagered) are affected by other factors, including
players’ skill and experience, the mix of games played, the financial resources of players, the volume of bets placed and the
amount of time played. The variability of our hold percentages has the potential to adversely affect our business, financial
condition and results of operations.
Our profitability is dependent, in part, on return to players.
The revenue we derive from certain of our proposed gaming products depends on the outcome of random number generators
built into the gaming software running the games made available to our customers. Return to player is measured by dividing the
amount of real money won by players on a particular game by the total real money wagers over a particular period on that
game. An increasing return to player may negatively affect revenue as it represents a larger amount of money being won by
players. Return to player is driven by the overall random number generator outcome, the mechanics of different games and
jackpot winnings. Each game utilizes a random number generating engine; however, generally the return to player fluctuates in
the short-term based on large wins or jackpots or a large share of wagers made for higher- payout games. To the extent we are
unable to set, or fail to obtain, a favorable return to player in our (or a third-party supplier’s) gambling software which
maximizes revenue, it could have a material adverse effect on our business, financial condition and results of operations.
The success, including win or hold rates, of future sports betting and gaming products depends on a variety of factors and is
not completely controlled by us.
The sports betting and gaming industries are characterized by an element of chance. Accordingly, we employ theoretical win
rates to estimate what a certain type of sports bet or game, on average, will win or lose in the long run. These theoretical win
rates may not always yield positive results for us, which could cause our revenue to decrease as players’ winnings increase.
Our success depends in part on our ability to anticipate and satisfy user preferences in a timely manner. As we operate in a
dynamic environment characterized by rapidly changing industry and legal standards, our products will be subject to changing
consumer preferences that cannot be predicted with certainty. We will need to continually introduce new offerings and identify
future product offerings that complement our existing platforms, respond to our customer’s needs and improve and enhance our
existing platforms to maintain or increase our customer engagement and growth of our business. We may not be able to
compete effectively unless our product selection keeps up with trends in the digital sports entertainment and gaming industries
in which we compete, or trends in new gaming products.
We extend credit to a portion of our customers, and we may not be able to collect gaming receivables from our credit
customers.
We conduct our gaming activities on a credit and cash basis at our temporary casino and will conduct our gaming activities on a
credit and cash basis at our permanent casino and resort. Any such credit we extend will be unsecured. Table game players
typically are extended more credit than slot players, and high- stakes players typically are extended more credit than customers
who tend to wager lower amounts. High- end gaming is more volatile than other forms of gaming, and variances in win-loss
results attributable to high- end gaming may have a significant positive or negative impact on cash flow and earnings in a
particular period. We will extend credit to those customers whose level of play and financial resources warrant, in the opinion
of management, an extension of credit. These large receivables could have a significant impact on our results of operations if
deemed uncollectible. Gaming debts evidenced by a credit instrument, including what is commonly referred to as a “marker,”
and judgments on gaming debts are enforceable under the current laws of Illinois, and judgments on gaming debts in such
jurisdictions are enforceable in all U.S. states under the Full Faith and Credit Clause of the U.S. Constitution; however, other
jurisdictions may determine that enforcement of gaming debts is against public policy. Although courts of some foreign nations
will enforce gaming debts directly and the assets in the United States of foreign debtors may be reached to satisfy a judgment,
judgments on gaming debts from U.S. courts are not binding on the courts of many foreign nations.
Declining popularity of games and changes in device preferences of players could have a negative effect on our business.
Revenue from games tends to decline over time after reaching a peak of popularity and player usage. The speed of this decline
is referred to as the decay rate of a game. As a result of this natural decline in the life cycle of our products, our business
depends on our ability and the ability of our third-party partners to consistently and timely launch new games across multiple
platforms and devices that achieve significant popularity. Our ability to successfully launch, sustain and expand games as
applicable, largely will depend on our ability to, amongst other things: (1) anticipate and effectively respond to changing game
player interests and preferences; (2) anticipate or respond to changes in the competitive landscape; (3) develop, sustain and
expand games that are fun, interesting and compelling to play; (4) minimize launch delays and cost overruns on new games; (5)
minimize downtime and other technical difficulties; (6) acquire leading technology and high quality personnel; and (7) comply
with constraints on game design and/or functionality imposed by regulators. There is a risk that we may not launch any new
games according to schedule, or that those games do not attract and retain a significant number of players, which could have a
negative effect on our business, financial condition and results of operations.
In addition to offering popular new games, we must extend the life of the existing games which we make available to future
customers, in particular the most successful games. While it is difficult to predict when revenues from any such existing games
will begin to decline, for a game to remain popular, we must constantly enhance, expand or upgrade the relevant game with new
features that players find attractive. There is a risk that we may not be successful in enhancing, expanding or upgrading our
current games or any new games in the future and, in addition, regulators may introduce new rules that limit functionality
within existing games. Should we not succeed in sufficiently offsetting the effects of declining popularity in the games we make
available, this may have a material adverse effect on our business, financial condition and results of operations.
We may invest in or acquire other businesses, and our business may suffer if we are unable to successfully integrate
acquired businesses into the Company or otherwise manage the growth associated with multiple acquisitions.
We cannot assure you that we will be able to consummate any future acquisitions, or that any future acquisitions will enhance
our financial performance. For example, while we are in discussion with the Illinois Gaming Board and Chicago Midway
International Airport to install slot machines at Midway International Airport we cannot assure you that we will reach
agreement on the terms of that installation, or such terms will ultimately be advantageous to us. Our ability to achieve the
expected benefits of any acquisitions will depend on, among other things, our ability to effectively translate our strategies into
revenue, our ability to retain and assimilate the acquired businesses’ employees, our ability to retain existing customers and
suppliers on terms similar to, or better than, those in place with the acquired businesses, our ability to attract new customers, the
adequacy of our implementation plans, our ability to maintain our financial and internal controls and systems as we expand our
operations, the ability of our management to oversee and operate effectively the combined operations and our ability to achieve
desired operating efficiencies and revenue goals. The integration of the businesses that we acquire might also cause us to incur
costs that are unforeseen or that exceed our estimates, which would lower our future earnings and would prevent us from
realizing the expected benefits of such acquisitions. In some cases, the services provided by the sellers are critical to the
ongoing efficient operation of the properties and may involve costly payments from us to the provider of the services. If the
provision of these services by the sellers is disrupted or given insufficient attention by the sellers, our ability to operate the
properties may be negatively impacted until such time as we are able to take full control over the services. Moreover, we must
pay the sellers for these services and the costs to us for these services may exceed our estimates and these expenses will
negatively impact the results of operations of these properties during these transition periods. Failure to achieve the anticipated
benefits of these acquisitions could result in decreases in the amount of expected revenues and diversion of management’s time
and energy and could adversely affect our business, financial condition and operating results.
Our growth will depend, in part, on the success of our strategic relationships with third parties. Overreliance on certain third
parties or our inability to extend existing relationships or agree to new relationships may cause unanticipated costs for us
and impact our financial performance in the future.
We may enter into strategic relationships with advertisers, casinos and other third parties in order to attract customers to our
temporary casino and our permanent casino and resort. We believe that these relationships, along with providers of online
services, search engines, social media, directories and other websites and e-commerce businesses, will help direct consumers to
our temporary casino and our permanent casino and resort. In addition, many of the parties with whom we may enter into
advertising arrangements may provide advertising services to other companies, including fantasy sports and gaming platforms
with whom we compete. While we believe there are other third parties that could drive users to our temporary casino and our
permanent casino and resort, adding or transitioning to them may disrupt our business and increase our costs. In the event that
any of our existing relationships or our future relationships fails to provide services to us in accordance with the terms of our
arrangement, or at all, and we are not able to find suitable alternatives, this could impact our ability to attract consumers cost
effectively and harm our business, financial condition and results of operations.
We conduct our business in an industry that is subject to high taxes and may be subject to higher taxes in the future.
In Illinois, state and local governments raise considerable revenues from taxes based on casino revenues and operations. We are
also required to pay property taxes, occupancy taxes, sales and use taxes, payroll taxes, franchise taxes and income taxes. Our
profitability depends on generating enough revenues to cover variable expenses, such as payroll and marketing, as well as
largely fixed expenses, such as property taxes and interest expense. From time to time, state and local governments have
increased gaming taxes and such increases could significantly impact the profitability of our gaming operations.
Our operations are generally subject to significant revenue-based taxes and fees in addition to normal federal, state and local
income taxes, and such taxes and fees are subject to increase at any time. In addition, from time to time, federal, state and local
legislators and officials have proposed changes in tax laws, or in the administration of such laws, affecting the gaming industry.
Further, worsening economic conditions could intensify the efforts of applicable state and local governments to raise revenues
through increases in gaming taxes and/or property taxes. It is not possible to determine with certainty the likelihood of changes
in tax laws in these jurisdictions or in the administration of such laws. Such changes, if adopted, could adversely affect our
business, financial condition and results of operations. Any material increase, or the adoption of additional taxes or fees, could
adversely affect our future financial results.
There can be no assurance that governments in Illinois or Chicago, or the federal government, will not enact legislation that
increases gaming tax rates. General economic pressures have the potential to reduce revenues of state and local governments
from traditional tax sources, which may cause state legislatures or the federal government to be more inclined to increase
gaming tax rates.
If we fail to detect fraud, theft or cheating, including by our users and employees, our reputation may suffer which could
harm our brand and reputation and negatively impact our business, financial condition and results of operations and can
subject us to investigations and litigation.
We may incur losses from various types of financial fraud, including use of stolen or fraudulent credit card data, claims of
unauthorized payments by a customer and attempted payments by customer with insufficient funds. Bad actors use increasingly
sophisticated methods to engage in illegal activities involving personal information, such as unauthorized use of another
person’s identity, account information or payment information and unauthorized acquisition or use of credit or debit card
details, bank account information and mobile phone numbers and accounts. Under current credit card practices, we may be
liable for use of funds at our temporary casino and our permanent casino and resort with fraudulent credit card data, even if the
associated financial institution approved the credit card transaction.
Acts of fraud may involve various tactics, including collusion. Successful exploitation of our systems could have negative
effects on our product offerings, services and customer experience and could harm our reputation. Failure to discover such acts
or schemes in a timely manner could result in harm to our operations. In addition, negative publicity related to such schemes
could have an adverse effect on our reputation, potentially causing a material adverse effect on our business, financial condition
and results of operations. In the event of the occurrence of any such issues with our proposed product offerings, substantial
engineering and marketing resources and management attention, may be diverted from other projects to correct these issues,
which may delay other projects and the achievement of our strategic objectives.
In addition, any misappropriation of, or access to, customer’s or other proprietary information or other breach of our
information security could result in legal claims or legal proceedings, including regulatory investigations and actions, or
liability for failure to comply with privacy and information security laws, including for failure to protect personal information
or for misusing personal information, which could disrupt our operations, force us to modify our business practices, damage our
reputation and expose us to claims from our customers, regulators, employees and other persons, any of which could have an
adverse effect on our business, financial condition and results of operations.
Despite measures we take to detect and reduce the occurrence of fraudulent or other malicious activity in our temporary casino
and will take in our permanent casino and resort, we cannot guarantee that any of our measures will be effective or will scale
efficiently with our business. Our failure to adequately detect or prevent fraudulent transactions could harm our reputation or
brand, result in litigation or regulatory action and lead to expenses that could adversely affect our business, financial condition
and results of operations.
We have limited operating history.
We have limited operating history and there can be no assurance that our proposed plan of business can be realized in the
manner contemplated and, if it cannot be, holders of our stock may lose all or a substantial part of their investment. There is no
guarantee that it will ever realize any significant operating revenues or that its operations will ever be profitable. As we have
limited operational history, it is extremely difficult to make accurate predictions and forecasts on our finances.
We are largely dependent on the skill and experience of management and key personnel.
Our officers, directors and key employees either are or will be required to file applications with the IGB, and are required to be
licensed or found suitable by such authority. If the IGB were to find an officer, director or key employee unsuitable for
licensing or unsuitable to continue having a relationship with us, we would have to sever all relationships with that person.
Furthermore, the IGB may require us to terminate the employment of any person who refuses to file appropriate applications.
Either result could significantly impair our operations. The time and effort needed to successfully complete the application
process could impact our ability to attract, hire and retain top talent.
We are subject to risks associated with labor relations, labor costs and labor disruptions.
We are subject to the costs and risks generally associated with labor disputes and organizing activities related to unionized
labor. From time to time, our operations may be disrupted by strikes, public demonstrations or other coordinated actions and
publicity. We may incur increased legal costs and indirect labor costs as a result of contractual disputes, negotiations or other
labor-related disruptions.
We may incur impairments to indefinite-lived intangible assets or long-lived assets.
We monitor the recoverability of our long-lived assets, such as buildings in our permanent casino and resort, and evaluate their
carrying value for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets
may not be fully recoverable. We intend to perform interim reviews whenever events or changes in circumstances indicate that
impairment may have occurred. If the testing performed indicates that impairment has occurred, we will be required to record a
non-cash impairment charge for the difference between the carrying value and fair value of the long-lived assets or the carrying
value and fair value of the reporting unit, in the period the determination is made. The testing of long-lived assets for
impairment will require us to make estimates that are subject to significant assumptions about our future revenue, profitability,
cash flows, fair value of assets and liabilities, weighted average cost of capital, as well as other assumptions. Changes in these
estimates, or changes in actual performance compared with these estimates, may affect the fair value of long-lived assets or
reporting unit, which may result in an impairment charge.
We cannot accurately predict the amount or timing of any impairment of assets. Should the value of long- lived assets become
impaired, our financial condition and results of operations may be adversely affected.
Our operations are subject to seasonal variations and quarterly fluctuations in operating results.
Casino and hotel operations are subject to seasonal variation. Seasonal weather conditions can frequently adversely affect
transportation routes to Chicago and may cause snowfall, flooding and other effects that result in the closure of our temporary
casino or our permanent casino and resort. In addition, any sports betting business we open in our casino and resort may
experience seasonality based on the relative popularity of certain sports at different parts of the year. As a result, unfavorable
seasonal conditions could have a material adverse effect on our business, financial condition and results of operations.
Our business is particularly sensitive to energy prices and a rise in energy prices could harm our operating results.
We are a large consumer of electricity and other energy in Chicago and, therefore, higher energy prices may have an adverse
effect on our results of operations. Accordingly, increases in energy costs may have a negative impact on our operating results.
Additionally, higher electricity and gasoline prices that affect our customers may result in reduced visitation to our temporary
casino or our permanent casino and resort and a reduction in our revenues. We may be indirectly impacted by regulatory
requirements aimed at reducing the impacts of climate change directed at up-stream utility providers, as we could experience
potentially higher utility, fuel and transportation costs.
Our insurance and self-insurance programs, through Bally’s Corporation, may not be adequate to cover future claims.
Although we maintain insurance that we believe is customary and appropriate for our business at this stage of our operations,
we cannot assure you that insurance will be available or adequate to cover all losses and damage to which our business or our
assets might be subjected in current or future periods. We use a combination of insurance and self-insurance, through Bally’s
Corporation, to provide for potential liabilities, including employee healthcare benefits, up to certain stop-loss amounts which
limit our exposure above the amounts we have self-insured. We estimate the liabilities and required reserves associated with the
risks we retain. Any such estimates and actuarial projection of losses is subject to a considerable degree of variability. A
considerable increase in claims as a result of a pandemic, including as a result of a pandemic could have a material adverse
effect on our business, financial condition or results of operations. If actual losses incurred are greater than those anticipated,
our reserves may be insufficient and additional costs could be recorded in our consolidated financial statements. If we suffer a
substantial loss that exceeds our self-insurance reserves, and any excess insurance coverage, the loss and attendant expenses
could harm our business, financial condition or results of operations. The lack of adequate insurance for certain types or levels
of risk could expose us to significant losses in the event that a catastrophe occurred for which we are uninsured or underinsured.
Any losses we incur that are not adequately covered by insurance may decrease our future operating income, require us to find
replacements or repairs for destroyed property and reduce the funds available for payments of our obligations. We renew our
insurance policies on an annual basis. The cost of coverage may become so high that we may need to further reduce our policy
limits, further increase our deductibles or agree to certain exclusions from our coverage.
Our results of operations and financial condition could be adversely affected by the occurrence of natural disasters, such as
blizzards, floods, tornadoes, fires, or other catastrophic events, including war, terrorism and public health crises.
Natural disasters, such as major hurricanes, typhoons, tornados, floods, fires, winter storms and earthquakes, could adversely
affect our business and operating results.
Catastrophic events, such as terrorist attacks and global and regional conflicts (e.g., the war in Ukraine and conflicts in the
Middle East and Latin America), have had a negative effect on travel and leisure expenditures, including lodging, gaming (in
some jurisdictions) and tourism. We cannot accurately predict the extent to which such events may affect us, directly or
indirectly, in the future.
Public health crises may also significantly impact our business. For example, the global spread of the COVID-19 pandemic,
which began in early 2020, resulted in governments, public institutions and other organizations imposing or recommending, and
businesses and individuals implementing, restrictions on various activities or other actions to combat its spread, such as
restrictions and bans on travel or transportation, stay-at-home directives, requirements that individuals wear masks or other face
coverings, limitations on the size of gatherings, closures of work facilities, schools, public buildings and businesses,
cancellation of events, including sporting events, concerts, conferences and meetings and quarantines and lock- downs. The
pandemic and its consequences dramatically reduced travel and demand for hotel rooms and other casino resort amenities.
There are no assurances that a resurgence of future COVID-19 variants or future pandemics will not cause similar disruptions.
There can be no assurance that we will be able to obtain or choose to purchase any insurance coverage with respect to
occurrences of catastrophic events, such as those described above. If there is a prolonged disruption at our facilities due to
natural disasters, terrorist attacks, wars, public health crises or other catastrophic events, our results of operations and financial
condition would be adversely affected.
We may be unable to obtain business interruption coverage for casualties resulting from severe weather such as hurricanes, and
there can be no assurance that we will be able to obtain casualty insurance coverage at affordable rates, if at all, for casualties
resulting from severe weather.
Failure to comply with the community investment program obligations specified in the Host Community Agreement could
have a material adverse effect on our financial condition and results of operations.
The Host Community Agreement with the City of Chicago provides for certain community investment program obligations,
with which the failure to comply could have a material adverse effect on our financial condition and results of operations. We
have agreed to meet or exceed the goals, as specified in the agreement, for contracting with city-based businesses for the design
and construction of our permanent casino and resort and the provision of goods and services to our permanent casino and resort;
meet or exceed the hiring of the minimum number of employees as specified in the agreement; meet or exceed the goals, as
specified in the agreement, for work hours for construction work by city residents and residents of the area surrounding our
permanent casino and resort; meet or exceed the goals for hiring specific percentages of city residents, women, minorities,
veterans and persons with a disability; satisfy the requirements for business utilization and building wealth and increasing
employment in disadvantaged communities, prioritize hiring of city residents and achieve a diverse workforce; and satisfy the
requirements for locally sourcing goods and services as specified in the agreement. In addition, we have also agreed to
establish, fund and maintain human resource hiring and training practices and comply with certain workforce development
plans. Any failure to comply with these obligations may result in an event of default under the agreement, and the City of
Chicago will have the right, among others, to exercise any and all remedies available at law or in equity, terminate the
agreement, and institute and prosecute proceedings to enforce in whole or in part the specific performance of the agreement by
In addition, the Illinois Gambling Act requires the IGB, in determining whether or not to issue the casino owners license, to
have considered whether applicants have provided evidence of their best efforts to attain certain ownership goals (25%
ownership representation by minority persons and 5% ownership representation by women) (the “Best Efforts Ownership
Standards”). The IGB approved the issuance of the license to us on October 26, 2023. The IGB may decide to revoke or not
renew our owners license if we fail to adhere to the standards and requirements set forth in the Illinois Gambling Act and the
IGB Rules, including the Best Efforts Ownership Standards. If our license is revoked, we may lose our ability to operate our
temporary casino and/or our permanent casino and resort in the City of Chicago, which could lead to the value of our Class A
Interests declining, and you could lose all or part of your investment. Further, recent public scrutiny of business diversity
initiatives, particularly in governmental contracting and other programs, may result in challenges to the community investment
obligations required by the City under the Host Community Agreement.
Risks Related to Our Relationship with Bally’s
The Holding Company controls the direction of our business, and the concentrated ownership of our stock will prevent you
and other stockholders from influencing significant decisions.
As the sole holder of our Class B Interests and the holder of 3,141 Class A-4 Interests, Bally’s Chicago Holding Company (the
“Holding Company”), a wholly-owned subsidiary of Bally’s Corporation, holds approximately 89.5% of the voting power and
approximately 44.8% of the economic power of our stock, in addition to its interests under the Subordinated Loans and its LLC
Interests in the Operating Company. As long as the Holding Company continues to control stock representing a majority of our
combined voting power, it will generally be able to determine the outcome of all corporate actions requiring stockholders’
approval. Even if the Holding Company were to control less than a majority of our combined voting power, it may be able to
influence the outcome of corporate actions so long as it owns a significant portion of our combined voting power. If the
Holding Company does not sell or otherwise dispose of its Class B Interests and Class A-4 Interests, the Holding Company
could retain control over us for an extended period of time or indefinitely.
Investors may not be able to affect the outcome of any stockholders’ vote while the Holding Company controls the majority of
our combined voting power. The Holding Company thus will be able to elect a majority or more of the members of our Board,
which in turn will be able to influence all matters affecting us, including, among other things:
• any determination with respect to our business direction and policies, including the appointment and removal of
officers and, in the event of a vacancy on our Board, additional or replacement directors;
• any determinations with respect to mergers, business combinations or disposition of assets;
• determination of our management policies;
• determination of the composition of the committees on our Board;
• our financing policy;
• our compensation and benefit programs and other human resources policy decisions;
• termination of, changes to or determinations under our agreements with Bally’s;
• changes to any other agreements that may adversely affect us; and
• the payment of dividends.
Moreover, pursuant to the Stockholders Agreement, the Holding Company has veto rights over any transactions involving: (i)
change in control transactions of our company or any of our subsidiaries, including the Operating Company, (ii) acquiring or
disposing of assets or any business enterprise or division thereof for consideration in excess of $50.0 million in any single
transaction or series of transactions, (iii) increasing or decreasing the size of our board of directors, (iv) initiating any
liquidation, dissolution, bankruptcy, or other insolvency proceeding involving us or any of our subsidiaries, including the
Operating Company, and (v) any transfer, issue, sale, or disposition by us of any shares of stock, other equity securities, equity-
linked securities, or securities that are convertible into equity securities of us or our subsidiaries to any person or entity that is a
non-strategic financial investor in a private placement transaction or series of transactions. Because the Holding Company’s
interests may differ from ours or from those of our other stockholders, actions that the Holding Company takes with respect to
us, as our controlling stockholder, may not be favorable to us or our stockholders.
If the Holding Company sells a controlling interest in our Company to a third party in a private transaction, you may not
realize any change-of-control premium on our Class A Interests, and we may become subject to the control of a presently
unknown third party.
The Holding Company, holds approximately 89.5% of the voting power and approximately 44.8% of the economic power of
our stock. The Holding Company has the ability, should it choose to do so, to sell some or all of these Class B Interests and
Class A-4 Interests in a privately negotiated transaction, which, if sufficient in size, could result in a change of control of our
Company.
The ability of the Holding Company to privately sell the Class B Interests, with no requirement for a concurrent offer to be
made to acquire all of our Class A Interests, could prevent you from realizing any change-of-control premium on your Class A
Interests that may otherwise accrue to the Holding Company on its private sale of Class B Interests. Additionally, if the Holding
Company’s sells Class B Interests representing a significant portion of our stock, we may become subject to the control of a
presently unknown third party. Such third party may have conflicts of interest with those of other stockholders. In addition, if
the Holding Company sells a controlling interest in our Company to a third party, any debt financing we secure in the future
may be subject to acceleration, Bally’s subsidiary, BMG, may terminate the Permanent Services Agreement, the Temporary
Services Agreement and other arrangements, and our other relationships and agreements could be impacted, all of which may
adversely affect our ability to run our business as described herein and may have a material adverse effect on our results of
operations, cash flows and financial condition.
The Holding Company’s interests may conflict with our interests and the interests of the other holders of our stock. Conflicts
of interest between the Holding Company’s and us could be resolved in a manner unfavorable to us and the other holders of
our stock.
Various conflicts of interest between us and the Holding Company’s could arise. Stock of our directors and officers in the stock
of Bally’s, or a person’s service either as a director or officer of both companies, could create or appear to create potential
conflicts of interest when those directors and officers are faced with decisions relating to our Company. These decisions could
include:
• corporate opportunities;
• the impact that operating decisions for our business may have on Bally’s consolidated financial statements;
• differences in tax positions between Bally’s and us;
• the impact that operating or capital decisions (including the incurrence of indebtedness) for our business may have on
Bally’s current or future indebtedness or the covenants under that indebtedness;
• future, potential commercial arrangements between Bally’s and us or between Bally’s and third parties;
• business combinations involving us;
• our dividend policy;
• Bally’s exercising their right under the Guarantee Agreement to cause the Operating Company and its subsidiaries to
guarantee Bally’s indebtedness;
• The Holding Company’s exercising their rights under the Stockholders Agreement;
• management interest ownership; and
• intercompany agreements between Bally’s and us.
Furthermore, disputes may arise between Bally’s and us relating to our past and ongoing relationship and these potential
conflicts of interest may make it more difficult for us to favorably resolve such disputes, including those related to:
• tax, employee benefits, indemnification and other matters;
• the nature, quality and pricing of services Bally’s agrees to provide to us;
• sales or other disposals by the Holding Company of all or a portion of the Holding Company’s Class B Interests and
Class A-4 Interests; and
• business combinations involving us.
We may not be able to resolve any potential conflicts, and even if we do, the resolution may be less favorable to us than if we
were dealing with an unaffiliated party. While we are controlled by the Holding Company, we may not have the leverage to
negotiate amendments to our agreements with Bally’s, if required, on terms as favorable to us as those we would negotiate with
an unaffiliated third party.
The interests of Bally’s major shareholders may differ from your interests.
As of December 31, 2025 (Successor), Standard RI Ltd (“Standard”) and SG CG Gaming LLC (“Standard Gaming”) together
owned 67.07% of Bally’s shares of common stock and Noel Hayden owned 10.21% o f Bally’s shares of common stock.
Standard General L.P. serves as investment manager to both Standard and Standard Gaming and, in that capacity, exercises
voting and investment control over the shares held by both entities. Soohyung Kim, Chairman of Bally’s, is the managing
partner and chief investment officer of Standard General L.P. As a result, Standard, Standard Gaming, Standard General L.P.,
Soohyung Kim and Noel Hayden (the “Bally’s majority shareholders”) have the ability to directly or indirectly exert significant
influence over certain aspects of Bally’s business and affairs through the election of directors and vote on corporate actions
requiring shareholder approval.
This concentration of ownership could also deter a change in control of our Company and make the approval of some
transactions difficult without the support of the Bally’s majority shareholders. The relationship between the Bally’s majority
shareholders and Bally’s may give rise to conflicts of interest with respect to, among other things, transactions and agreements
among other entities controlled by the Bally’s majority shareholders and us, issuances of additional securities and the election
of directors. To the extent the interests of the Bally’s majority stockholders diverge from our interests, they may exercise their
influence over us in favor of their own interests over our interests. Similarly, the interests of the Bally’s majority stockholders
may differ from or conflict with your interests as a holder of the Class A Interests.
Certain of our directors and officers may have actual or potential conflicts of interest because of their positions with Bally’s.
Certain of our directors and officers hold positions with Bally’s. In addition, they may own Bally’s stock, options to purchase
Bally’s stock or other Bally’s equity awards. These individuals’ holdings of Bally’s stock, options to purchase Bally’s stock or
other equity awards may be significant compared to their total assets. Their positions at Bally’s and the ownership of any
Bally’s equity or equity awards creates, or may create the appearance of, conflicts of interest when they are faced with decisions
that could have different implications for Bally’s than the decisions have for us.
Our second amended and restated certificate of incorporation limits the Holding Company liability to us or you for certain
breaches of fiduciary duty and could also prevent us from benefiting from corporate opportunities that might otherwise have
been available to us.
Our second amended and restated certificate of incorporation provides that, to the fullest extent permitted by the laws of the
State of Delaware, the Holding Company has no obligation to refrain from:
• engaging in the same or similar business activities or lines of business as we do; or
• competing, directly or indirectly, with us or any of our subsidiaries.
Under our second amended and restated certificate of incorporation, to the fullest extent permitted by law, the Holding
Company will not be liable to us, our subsidiaries or to our stockholders for certain breaches of any fiduciary duty solely by
reason of any of these activities.
Additionally, our second amended and restated certificate of incorporation includes a “corporate opportunity” waiver provision
in which we renounce any interests or expectancy in corporate opportunities which become known to any of our directors or
stockholders who are not employed by the Company or its subsidiaries. Generally, to the fullest extent permitted by law, neither
the Holding Company nor our directors will be liable to us or our stockholders for breach of any fiduciary duty by reason of the
fact that any such person (i) pursues or acquires any corporate opportunity for the account of the Holding Company or its
affiliates, (ii) directs, recommends, sells, assigns or otherwise transfers such corporate opportunity to the Holding Company or
its affiliates, or (iii) does not communicate information regarding such corporate opportunity to us unless the potential
transaction or corporate opportunity is expressly offered to our director in his or her capacity as a director of the Company. The
corporate opportunity provision may exacerbate conflicts of interest between Bally’s and us because the provision may permit
one of our directors who also serves as a director, officer, employee or other affiliate of Bally’s to choose to direct a corporate
opportunity to Bally’s instead of us.
Bally’s is not restricted from competing with us in our casino and resort business, including as a result of acquiring a company
that operates a casino and resort business. Due to the significant resources of Bally’s, including financial resources, name
recognition and know-how resulting from the management of our business, Bally’s could have a significant competitive
advantage over us should it decide to utilize these resources to engage in the type of business we conduct, which may cause our
operating results and financial condition to be materially adversely affected.
Third parties may seek to hold us responsible for liabilities of Bally’s, which could result in a decrease in our income.
Third parties may seek to hold us responsible for Bally’s liabilities. If those liabilities are significant and we are ultimately held
liable for them, we cannot assure that we will be able to recover the full amount of our losses from Bally’s.
We may not achieve some or all of the anticipated benefits of being a standalone public company.
We may not be able to achieve all of the anticipated strategic and financial benefits expected as a result of being a standalone
public company, or such benefits may be delayed or not occur at all. These anticipated benefits include the following:
• allowing investors to evaluate the distinct merits, performance and future prospects of our business, independent of
Bally’s other businesses;
• improving our strategic and operational flexibility and increasing management focus as we continue to implement our
strategic plan and allowing us to respond more effectively to different player needs and the competitive environment
for our business;
• allowing us to adopt a capital structure better suited to our financial profile and business needs, without competing for
capital with Bally’s other businesses;
• creating an independent equity structure that will facilitate our ability to effect future acquisitions utilizing our stock;
and
• facilitating incentive compensation arrangements for employees more directly tied to the performance of our business,
and enhancing employee hiring and retention by, among other things, improving the alignment of management and
employee incentives with performance and growth objectives of our business.
We may not achieve the anticipated benefits of being a standalone public company for a variety of reasons, and it could
adversely affect our operating results and financial condition.
We rely on our access to Bally’s brands and reputation and some of Bally’s relationships.
We believe the association with Bally’s will contribute to our building relationships with our players due to its recognized
brands and products. Any perceived loss of Bally’s scale, capital base and financial strength may prompt our business partners
to reprice, modify or terminate their relationships with us. In addition, any future reduction of Bally’s ownership of our
Company may affect our then current and future business relationships. We cannot predict with certainty the effect any of these
perceived loss and ownership reductions will have on our business.
The services that we receive from Bally’s subsidiary, BMG, may not be sufficient for us to operate our business, and we
would likely incur significant incremental costs if we lost access to BMG’s services.
In January 2023, the Operating Company and certain subsidiaries of Bally’s Corporation entered into the Permanent Services
Agreement with BMG, a subsidiary of Bally’s Corporation. Pursuant to the Permanent Services Agreement, BMG agreed to
provide us and certain subsidiaries of Bally’s Corporation with general business support services, including services relating to
external reporting obligations, internal audit, regulatory filings, design and construction, business development, human
resources, tax, accounting, treasury and capital related, risk management, legal, finance and marketing upon the opening of our
permanent casino and resort. Pursuant to the Permanent Services Agreement, we agreed to pay BMG an annual fee equal to the
salaries, burden, overhead and other operating costs for providing such services based on our share of those costs calculated by
reference to an appropriate common-size metric plus 6%, which fee may be reviewed and adjusted by the parties from time to
time to reflect current market rates for such services and as required by the Code. The initial term of the agreement is one year,
beginning upon the opening of our permanent casino and resort, and will be automatically renewed for successive one-year
terms, unless either party serves on the other a written notice of termination.
The Operating Company has a Corporate Services Agreement with BMG, a subsidiary of Bally’s Corporation. Pursuant to the
Corporate Services Agreement , BMG agreed to provide us with certain administrative and corporate services related to our
temporary casino. Pursuant to the Temporary Services Agreement, we agreed to pay BMG a monthly fee equal to $5.0 million,
which fee may be reviewed and adjusted by the parties from time to time to reflect current market rates for such services and as
required by the Code. The initial term of the agreement is two years, beginning August 30, 2023, was renewed in August 2025
through August 2026 and will be automatically renewed for successive one-year terms for as long as our temporary casino is
licensed to continue operations, unless BMG serves on the Operating Company a written notice of termination. The Temporary
Services Agreement shall automatically terminate when our temporary casino permanently closes and our permanent casino and
resort opens to the public.
If we lost access to the services provided to us by BMG under these agreements, we would need to replicate or replace certain
functions, systems and infrastructure. We may also need to make investments or hire additional employees to operate without
the same access to Bally’s existing operational and administrative infrastructure. These initiatives may be costly to implement.
The amount of total costs could be materially higher than our estimate, and the timing of the incurrence of these costs could be
subject to change.
We may not be able to replace the services or enter into appropriate third-party agreements on terms and conditions, including
cost, comparable to those that we will receive from BMG under the Permanent Services Agreement and the Corporate Services
Agreement. Additionally, if such agreements are terminated, we may be unable to sustain the services at the same levels or
obtain the same benefits as when we were receiving such services and benefits from BMG. If we have to operate these
functions separately, if we do not have our own adequate systems and business functions in place or if we are unable to obtain
them from other providers, we may not be able to operate our business effectively or at comparable costs, and our profitability
may decline. In addition, we have historically received informal support from Bally’s and BMG, which might not be addressed
in our services agreement. The level of this informal support could diminish or be eliminated.
While we are controlled by Bally’s, we may not have the leverage to negotiate amendments to our agreement with BMG and
any agreements with Bally’s, if required, on terms as favorable to us as those we would negotiate with an unaffiliated third
party.
We may have received better terms from unaffiliated third parties than the terms we have received and will receive in our
agreements with Bally’s and its affiliates.
The agreements that we have entered and will enter into with Bally’s and its affiliates, including the Permanent Services
Agreement and the Corporate Services Agreement, have been and will have been prepared while we were still a wholly-owned
subsidiary of Bally’s. As a result, the terms of those agreements may not reflect terms that would have resulted if we had
negotiated such terms with an unaffiliated third party.
We currently are dependent on Bally’s for various support services.
We are dependent on the services of Bally’s to provide us with various support services, including legal, accounting, finance,
operational support and oversight, marketing, employee management and customer support services.
Our ability to successfully develop our permanent casino and resort on time and on budget is dependent to a large degree on the
skills and efforts of employees of Bally’s. However, these individuals are not our employees and do not be devote all of their
time and attention to the development of our permanent casino and resort. If we or Bally’s are unable to retain the services of
our or its employees or if those employees do not devote sufficient time and attention to the development of our permanent
casino and resort, we may be unable to open our permanent casino and resort on time and within our estimated budget, or at all.
Bally’s involvement with other projects may adversely affect our permanent casino and resort.
As of February 28, 2026 , Bally’s Corporation owns and manages 20 casinos globally, including in the United Kingdom and in
11 states across the United States, along with a golf course in New York, and horse racetracks in Colorado and forthcoming in
Wyoming. Bally’s also has rights to developable land in Las Vegas at the site of the former Tropicana Las Vegas, has been
awarded a license to build a full-scale casino and resort in The Bronx, New York. As numerous regulatory approvals, licenses
and permits are required for the development and management of these other properties, Bally’s must devote significant funds,
in addition to human and other resources, to meet its obligations with respect to these properties. As resources are expended for
these other properties, the resources available for the development and management of our permanent casino and resort may be
diverted, which may have a material adverse effect on the development and construction of our permanent casino and resort and
our business, financial condition, results of operations and ability to make payments on the notes.
Various subsidiaries of Bally’s operate in the same industries and may in certain instances compete against each other and
us for customers and business.
In addition to our Company, as of February 28, 2026 , Bally’s owns and manages 19 other casinos globally. To the extent there
is an overlap regarding the customers which Bally’s targets and the markets in which it operates, the subsidiaries of Bally’s may
complete against each other for customers and business.
The interests of the Holding Company as the owner of the Subordinated Loans may differ from our and your interests.
The Subordinated Loans bear interest at a rate equal to 11% per annum, compounding quarterly. Principal and interest
payments on the Subordinated Loans will be paid by us by withholding discretionary distributions that would otherwise be
made by us to the investors with the corresponding Class A Interests, and applying such distributions to reduce amounts
outstanding under the applicable Subordinated Loans. In connection with the consummation of the Transactions.
The Subordinated Loans and the Holding Company’s ability to influence our business may give rise to conflicts of interest with
respect to, among other things, the timing and amount of payments on the Subordinated Loans. To the extent the interests of the
Holding Company’s diverge from our interests, the Holding Company may exercise their influence over us in favor of its own
interests over our interests. Similarly, the interests of the Holding Company may differ from or conflict with your interests as a
holder of Class A Interests.
We do not own Bally’s brands and expect to license the brands from an affiliate; if this license were to be terminated, it
could negatively impact our business.
We expect to enter into a license agreement with BMG, another subsidiary of Bally’s, granting us the right to use certain
trademarks and service marks, including the Bally’s marks. We expect that the license will be terminable in the event of an
uncured material breach or in the event we are no longer an affiliate of BMG. If this license were to be terminated, we would be
forced to rebrand, which could be costly, result in the loss of customers, and have a material adverse effect on the results of our
operations.
Our business depends on the quality and reputation of the Bally’s brands.
All of our products and services are offered under the Bally’s brand names, and we intend to continue to develop and offer
products and services under the Bally’s brands. The concentration of our products and services under these brands may expose
us to risks of brand deterioration or reputational decline, that are greater than if our portfolio were more diverse. Furthermore,
as we are not the owner of the Bally’s brands, any failure by Bally’s to protect the Bally’s brands could reduce their value and
also harm our business.
If third parties claim that we infringe upon their intellectual property rights, our operating results could be adversely
affected.
We face the risk of claims that we have infringed third parties’ intellectual property rights. Any claims of trademark or other
intellectual property infringement, even those without merit, could (i) be expensive and time consuming to defend; (ii) require
us to rebrand or otherwise modify our operations; (iii) divert management’s attention and resources or (iv) require us to enter
into royalty or licensing agreements in order to obtain the right to use a third party’s intellectual property. Any royalty or
licensing agreements, if required, may not be available to us on acceptable terms or at all. A successful claim of infringement
against us of third party intellectual property infringement could result in our being required to pay significant damages, enter
into costly license or royalty agreements, or cease the infringing activity, any of which could have a material adverse effect on
the results of our operations.
Cybersecurity and Technology Risks
We rely on information technology and other systems and platforms, and any failures, errors, defects or disruptions in our
systems or platforms 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.
We currently engage, and intend to continue to engage, a number of third parties to provide gaming operating systems for our
temporary casino and our permanent casino and resort. As a result, we currently rely, and will continue to rely, on such third
parties to provide uninterrupted services in order to run our business efficiently and effectively. In the event one of these third
parties experiences a disruption in its ability to provide such services (whether due to technological or financial difficulties or
power problems), this may result in a material disruption to the wagering activity at our temporary casino and our permanent
casino and resort, which could have a material adverse effect on our business, operating results and financial condition.
As we finalize construction and commence operating our permanent casino and resort, we expect the amount and types of
product and services offerings to continue to grow and evolve, which will require an increasing amount of technical
infrastructure, including network capacity and computing power, to continue to satisfy our customer’s needs. Such
infrastructure expansion may be complex, and unanticipated delays or limited availability of components may lead to increased
project costs, operational inefficiencies or interruptions in the delivery or degradation of the quality of our 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 only become evident after we have started to fully use the underlying equipment or software, that
could further degrade the customer experience or increase our costs. As such, we could fail to continue to effectively scale and
grow our technical infrastructure to accommodate increased customer demands. Any unscheduled interruption in our
technology services is likely to result in an immediate, and possibly substantial, loss of revenues due to a shutdown of our
gaming operations, cloud computing and lottery systems.
We believe that if our users have a negative experience with our offerings, or if our brand or reputation is negatively affected,
users may be less inclined to continue or resume utilizing our products or recommend our platform to other potential users. As
such, a failure or significant interruption in our service would harm our reputation, business and operating results.
We are reliant on the reliability and viability of Internet infrastructure, which is out of our control, and the proper
functioning of our own network systems.
The growth of Internet usage has caused interruptions and delays in processing and transmitting data over the Internet. There
can be no assurance that Internet infrastructure or our own network systems will continue to be able to support the demands
placed on them by the continued growth of the Internet, the overall gambling industry or that of our customers. The Internet’s
viability could be affected by delays in the development or adoption of new standards and protocols to handle increased levels
of Internet activity or by increased government regulation. The introduction of legislation or regulations requiring Internet
service providers in any jurisdiction to block access to our websites and products may restrict the ability of our customers to
access products and services offered by us. Such restrictions, should they be imposed, could have a material adverse effect on
our business, financial condition and results of operations.
If critical issues concerning the commercial use of the Internet are not favorably resolved (including security, reliability, cost,
ease of use, accessibility and quality of service), if the necessary infrastructure is not sufficient or if other technologies and
technological devices eclipse the Internet as a viable channel, this may negatively affect Internet usage, and our business,
financial condition and results of operations will be materially adversely affected. Additionally, the increasing presence of
viruses and cyber-attacks may affect the viability and infrastructure of the Internet and/or the proper functioning of our network
systems and could materially adversely affect our business, financial condition and results of operations.
Our business may be harmed from cybersecurity incidents, and we may be subject to legal claims if there is loss, disclosure
or misappropriation of or access to our customers’, business partners’ or our own information or other breaches of
information security.
We make extensive use of online services and centralized data processing, including through third-party service providers. The
secure maintenance and transmission of customer information is a critical element of our operations. Our information
technology and other systems, or those of service providers and business partners, that maintain and transmit customer or
employee information may be compromised by a malicious third-party penetration of our network security, or that of a third-
party service provider or business partner, or impacted by intentional or unintentional actions or inactions by our employees, or
those of a third-party service provider or business partner. As a result, our customers’ or employee’s information may be lost,
disclosed, accessed or taken without our customers’ or employees’ consent.
In addition, third-party service providers and other business partners process and maintain proprietary business information and
data related to our employees, customers, suppliers and other business partners. The information technology and other systems
that we design and implement to maintain and transmit this information, or those of service providers or business partners, may
also be compromised by a malicious third-party penetration of our network security or that of a third-party service provider or
business partner, or impacted by intentional or unintentional actions or inactions by our employees or those of a third-party
service provider or business partner. As a result, our business information or customer, supplier and other business partner data
may be lost, disclosed, accessed or taken without consent.
Any such loss, disclosure or misappropriation of, or access to, customers’ or business partners’ information or other breach of
our information security can result in legal claims or legal proceedings, including regulatory investigations and actions, may
have a serious impact on our reputation and may adversely affect our business, operating results and financial condition.
Furthermore, the loss, disclosure or misappropriation of our business information may adversely affect our reputation, business,
operating results and financial condition.
We may use artificial intelligence (“AI”) in our business, and challenges with properly managing its use could result in
reputational harm, competitive harm, and legal liability, and adversely affect our results of operations.
We may incorporate AI solutions into our business, offerings, services and features, and these applications may become
important in our operations over time. Our competitors or other third parties may incorporate AI into their products more
quickly or more successfully than us, which could impair our ability to compete effectively and materially adversely affect our
results of operations. Additionally, if the content, analyses, or recommendations that AI applications assist in producing are or
are alleged to be deficient, inaccurate, or biased, our business, financial condition, and results of operations may be adversely
affected. The use of AI applications may result in cybersecurity incidents that implicate the personal data of end users of such
applications. Any such cybersecurity incidents related to our use of AI applications could adversely affect our reputation and
results of operations. AI also presents emerging ethical issues and if our use of AI becomes controversial, we may experience
brand or reputational harm, competitive harm, or legal liability. The rapid evolution of AI, including potential future regulation
of AI, may also result in additional costs associated with compliance with emerging regulations. The rapid evolution of AI,
including potential government regulation of AI, may require significant resources to develop, test and maintain our business,
offerings, services, and features to help us implement AI ethically in order to minimize unintended, harmful impact.
Risks Related to Our Indebtedness
Our existing and future indebtedness may limit our operating and financial flexibility.
In connection with the closing of our initial public offering, we incurred $77.6 million of Subordinated Loans in connection
with the issuance of the Class A Interests. Our current and future indebtedness may have important negative consequences for
us, including:
• limiting our ability to satisfy obligations;
• increasing vulnerability to general adverse economic and industry conditions;
• limiting flexibility in planning for, or reacting to, changes in our businesses and the markets in which we conduct
business;
• increasing vulnerability to, and limiting our ability to react to, changing market conditions, changes in industry and
economic downturns;
• limiting our ability to obtain additional financing to fund working capital requirements, capital expenditures, debt
service, general corporate or other obligations;
• subjecting us to a number of restrictive covenants that, among other things, limit our ability to pay dividends and
distributions, pay principal or interest on junior indebtedness, including the Subordinated Loans, make acquisitions
and dispositions, borrow additional funds and make capital expenditures and other investments;
• limiting our ability to use operating cash flow in other areas of our business because we must dedicate a significant
portion of these funds to make principal and/or interest payments on outstanding debt;
• causing our failure to comply with the financial and restrictive covenants contained in our current or future
indebtedness could cause a default under such indebtedness (or our other indebtedness) and which, if not cured or
waived, could adversely affect us; and
• affecting our ability to renew gaming and other licenses necessary to conduct our business.
Though we have significant amounts of indebtedness outstanding, we may issue or incur additional indebtedness to fund our
operations, including as necessary to execute on our growth strategy. Further, we may incur other liabilities that do not
constitute indebtedness. The risks that we face based on our outstanding indebtedness may intensify if we incur additional
indebtedness or financing obligations in the future.
Servicing our indebtedness and funding our other obligations requires a significant amount of cash, and our ability to
generate sufficient cash depends on many factors, some of which are beyond our control.
Our ability to make payments on and refinance our indebtedness and to fund our operations and capital expenditures is
dependent upon our ability to generate cash flow and secure financing in the future. Our ability to generate future cash flow
depends, among other things, upon:
• the timing of finalizing construction and development of our permanent casino and resort;
• our ability to obtain regulatory licenses to operate our temporary casino and our permanent casino and resort;
• our temporary casino’s operating performance and our permanent casino and resort’s future operating performance
once it begins operations;
• general economic conditions;
• competition;
• legislative and regulatory factors affecting our operations and businesses; and
• our future operating performance.
While we believe our current capital commitments are sufficient until the opening of our permanent casino and resort,
unforeseen events could impact our capital needs, and some of these factors will be beyond our control. There can be no
assurance that our temporary casino or our permanent casino and resort will generate cash flow from operations or that future
debt or equity financings will be available to us to enable us to pay our indebtedness or to fund other needs. If our operating
results and available cash are insufficient to meet our debt service obligations, we could face substantial liquidity problems and
might be required to dispose of material assets or operations to meet our debt service and other obligations. We may not be able
to consummate those dispositions or to obtain the proceeds that we could realize from them, and these proceeds may not be
adequate to meet any debt service obligations then due. The inability to generate cash flow could result in us needing to
refinance all or a portion of our indebtedness on or before maturity, including through the issuance of additional debt or equity
securities. If needed, there can be no assurance that we will be able to refinance any of our indebtedness on favorable terms, or
at all. Any inability to generate sufficient cash flow or refinance our indebtedness on favorable terms could adversely affect our
financial condition.
We and the Operating Company guarantee Bally’s Corporation’s indebtedness, the amount of which is significant.
In connection with the Holding Company’s commitment to guarantee the GLP Lease Agreement and GLP Development
Agreement, and in partial consideration for certain investments by Bally’s Corporation and its subsidiaries into the Operating
Company, we and the Operating Company intend to guarantee all of Bally’s Corporation’s indebtedness upon Bally’s
Corporation’s (or its Parent Company’s (as defined in Bally’s Corporation’s existing master lease agreement with GLP), if any,
following a Control Transaction (as defined in the GLP Term Sheet)) guaranteeing the GLP Lease Agreement and the GLP
Development Agreement or upon request from Bally’s Corporation; provided that, at any time after such guarantee by Bally’s
Corporation (or its Parent Company) or such request from Bally’s Corporation, upon request of the Operating Company,
Bally’s Corporation will guarantee the Operating Company’s obligations under any lease obligations outstanding at such time,
including any obligations under the Oak Street Lease Agreement or, if entered into, the GLP Lease Agreement and the GLP
Development Agreement, to the maximum extent permitted under the instruments governing Bally’s Corporation’s
indebtedness (assuming full borrowing of all outstanding commitments under Bally’s Corporation’s revolving credit facilities
outstanding at such time). Furthermore, we and the Operating Company intend to enter into the Guarantee Agreement with
Bally’s Corporation, pursuant to which, at any time in the future, upon request from Bally’s Corporation, we and the Operating
Company will guarantee, and cause each of our wholly-owned subsidiaries to guarantee, any additional indebtedness that
Bally’s Corporation enters into at any time in the future. The amount of Bally’s Corporation’s indebtedness guaranteed by us
and the Operating Company is significant, and the failure of Bally’s to service its indebtedness and comply with the covenants
thereunder, or refinance such indebtedness on favorable terms, could adversely affect our financial condition.
If Bally’s Corporation or its subsidiaries are unable to generate sufficient cash to service all of its obligations, including,
without limitation, indebtedness and lease obligations, they may default, and we, as guarantors of its obligations, may be
forced to take other actions to fund the satisfaction of our obligations as guarantors, which may not be successful.
If the cash flow of Bally’s Corporation or its subsidiaries is insufficient to fund its obligations, including, without limitation,
indebtedness and lease obligations, then Bally’s Corporation and/or its subsidiaries will be in default and holders of those
obligations could declare all outstanding principal and interest to be due and payable. As guarantors, we would be required to
repay such obligations. As a result, we could face substantial liquidity problems and could be forced to reduce or delay
investments and capital expenditures or to dispose of material assets or operations, raise additional debt or equity capital or
restructure or refinance our indebtedness. However, we may not be able to implement any such alternative measures on
commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our
scheduled debt service obligations. Even if new financing were available, it may be on terms that are less attractive to us than
our then existing indebtedness or it may not be on terms that are acceptable to us. In addition, the new agreements may restrict
our ability to dispose of assets and use the proceeds from those dispositions and may also restrict our ability to raise debt or
equity capital to be used to repay other indebtedness when it becomes due. Thus, we may not be able to consummate those
dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations then due. Moreover, pursuant to
our and the Operating Company guarantee of the obligations, including, without limitation, indebtedness and lease obligations
of Bally’s Corporation and its subsidiaries, we will pledge our LLC Interests in the Operating Company as collateral and the
Operating Company will mortgage the Chicago casino project to secure Bally’s Corporation’s obligations. If we are unable to
generate enough cash to repay the obligations, including, without limitation, indebtedness and lease obligations of Bally’s
Corporation or its subsidiaries, in the event of a default, the lenders under such obligations could foreclose against our assets
securing such obligations and we could be forced into bankruptcy or liquidation.
Risks Related to Our Organizational Structure
Our principal asset are our interest in the Operating Company, and, as a result, we are dependent on distributions from the
Operating Company to pay our taxes and expenses. The Operating Company’s ability to make such distributions may be
subject to various limitations and restrictions.
We are a holding company and have no material assets other than our ownership of LLC Interests. As such, we have no
independent means of generating revenue or cash flow, and our ability to pay our taxes and operating expenses or declare and
pay dividends in the future, if any, are dependent upon the financial results and cash flows of the Operating Company and
distributions we receive from the Operating Company. There can be no assurance that the Operating Company will generate
sufficient cash from operations, which, among other things, may be impacted by debt service payments on our or the Operating
Company’s senior indebtedness, capital expenditures, potential expansion opportunities and the availability of financing
alternatives, the need to service any future indebtedness or other liquidity needs and general industry and business conditions,
including the pace of the construction and development of our permanent casino and resort in Chicago. In addition, any debt we
or the Operating Company may incur in the future is likely to restrict our and the Operating Company ability to pay dividends
or distributions, and such restriction may prohibit us and the Operating Company from making distributions. The Operating
Company reports as a partnership for U.S. federal income tax purposes and, as such, generally is not subject to any entity-level
U.S. federal income tax. Instead, any taxable income of the Operating Company is allocated to holders of LLC Interests,
including us. Accordingly, we incur income taxes on our allocable share of any net taxable income of the Operating Company.
Under the terms of the the Operating Company LLC Agreement, the Operating Company is obligated to make tax distributions
to holders of LLC Interests, including us, to the extent it has distributable cash. In addition to tax expenses, we also incur
expenses related to our operations, which can be significant. We, as its managing member, cause the Operating Company to
make cash distributions to the owners of LLC Interests in an amount sufficient to (1) fund all or part of their tax obligations in
respect of taxable income allocated to them and (2) cover our operating expenses. However, the Operating Company’s ability to
make such distributions may be subject to various limitations and restrictions, such as restrictions on distributions that would
either violate any contract or agreement to which the Operating Company is then a party, including any debt or financing
agreements, or any applicable law, or that would have the effect of rendering the Operating Company insolvent. If we do not
have sufficient funds to pay tax or other liabilities or to fund our operations, we may have to borrow funds, including
potentially from Bally’s and its affiliates if available, which could materially adversely affect our liquidity and financial
condition and subject us to various restrictions imposed by any such lenders. In addition, if the Operating Company does not
have sufficient funds to make distributions, our ability to declare and pay cash dividends will also be restricted or impaired.
Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax
returns could adversely affect our results of operations and financial condition.
We are subject to taxes by the U.S. federal, state and local tax authorities. Our future effective tax rates could be subject to
volatility or adversely affected by a number of factors, including:
• changes in the valuation of our deferred tax assets and liabilities;
• expected timing and amount of the release of any tax valuation allowances;
• tax effects of stock-based compensation;
• costs related to intercompany restructurings;
• changes in tax laws, tax treaties, regulations or interpretations thereof; or
• lower than anticipated future earnings in jurisdictions where we have lower statutory tax rates and higher than
anticipated future earnings in jurisdictions where we have higher statutory tax rates.
In addition, we may be subject to audits of our income, sales and other taxes by U.S. federal, state and local taxing authorities.
Outcomes from these audits could have an adverse effect on our operating results and financial condition.
If we were deemed to be an investment company under the Investment Company Act of 1940, as amended, or the 1940 Act,
including as a result of our ownership of the Operating Company, applicable restrictions could make it impractical for us to
continue our business as contemplated and could have a material adverse effect on our business.
Under Sections 3(a)(1)(A) and (C) of the 1940 Act, a company generally will be deemed to be an “investment company” for
purposes of the 1940 Act if (1) it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the
business of investing, reinvesting or trading in securities or (2) it engages, or proposes to engage, in the business of investing,
reinvesting, owning, holding or trading in securities and it owns or proposes to acquire investment securities having a value
exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated
basis. We do not believe that we are an “investment company,” as such term is defined in either of those sections of the 1940
Act.
We and the Operating Company intend to conduct our operations so that we will not be deemed an investment company. As the
sole managing member of the Operating Company, we control and operate the Operating Company. On that basis, we believe
that our interest in the Operating Company is not an “investment security” as that term is used in the 1940 Act. However, if we
were to cease participation in the management of the Operating Company, or if the Operating Company itself becomes an
investment company, our interest in the Operating Company could be deemed an “investment security” for purposes of the
1940 Act.
If it were established that we were an unregistered investment company, there would be a risk that we would be subject to
monetary penalties and injunctive relief in an action brought by the SEC, that we would be unable to enforce contracts with
third parties and that third parties could seek to obtain rescission of transactions undertaken during the period it was established
that we were an unregistered investment company. If we were required to register as an investment company, restrictions
imposed by the 1940 Act, including limitations on our capital structure and our ability to transact with affiliates, could make it
impractical for us to continue our business as contemplated and could have a material adverse effect on our business.
Risks Related to Ownership of our Class A Interests
Our Class A Interests do not have an active trading market and are subject to restrictions on transferability and redemption
provisions, and you may find it difficult to sell your Class A Interests.
Our Class A Interests are not listed on an active trading market, and we do not plan to list or display the Class A Interests on
any securities exchange or interdealer market quotation system. There is no trading market for our Class A Interests and, due to
transferability restrictions, an active market for our Class A Interests will not likely develop in the future. As such, our Class A
Interests have limited liquidity and holders of our Class A Interests may not be able to monetize their full investment in our
Class A Interests, if at all.
In addition, our Class A Interests are also subject to restrictions on transferability and redemption provisions, each of which
individually and in the aggregate materially impacts the ability of holders of our Class A Interests to transfer their Class A
Interests. Our Class A Interests can only be transferred without our consent to Permitted Transferees. Additionally, our Class
A-1 Interests, Class A-2 Interests and Class A-3 Interests can be transferred with our consent only after the Subordinated Loan
attributable to such class of Interests has been paid in full and such Interests are converted to Class A-4 Interests. All Class A-1
Interests will be converted into Class A-4 Interests upon the full repayment of the Class A-1 Subordinated Loans, all Class A-2
Interests will be converted into Class A-4 Interests upon the full repayment of the Class A-2 Subordinated Loans and all Class
A-3 Interests will be converted into Class A-4 Interests upon the full repayment of the Class A-3 Subordinated Loans. If a
holder of Class A-1 Interests, Class A-2 Interests and/or Class A-3 Interests would like to transfer their Interests before the
Subordinated Loans attributable to such class of Interests are paid off, such holder or the transferee may repay in full the pro
rata amount of the remaining balance of the Subordinated Loans then outstanding attributable to such Interests before or
substantially concurrently with such transfer and conversion. These transfer and redemption provisions could materially and
adversely impact the value of your Class A Interests.
State securities laws may further limit secondary trading, which may restrict the states in which and conditions under which
you can sell our Class A Interests.
Secondary trading in our Class A Interests is not possible in any state until our Class A Interests are qualified for sale under the
applicable securities laws of such state or there is confirmation that an exemption is available for secondary trading in the state.
As a result of this, the liquidity for our Class A Interests could be significantly further affected, resulting in a potential loss on
your investment.
An investment in the Class A Interests is not an FDIC insured deposit.
The Class A Interests are not savings accounts, deposits or other obligations of any bank or non-bank entities and are not
insured or guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) or any other governmental agency or
instrumentality. Any such investment is subject to investment risk and investors may experience loss with respect to your
investment.
The Class A Interests are equity and are subordinate to our existing and future indebtedness.
The Class A Interests are shares of stock in Bally’s Chicago, Inc. and do not constitute indebtedness. As such, the Class A
Interests rank junior to all indebtedness and other non-equity claims on our business with respect to assets available to satisfy
claims, including in a liquidation of the Company. Additionally, unlike indebtedness, where principal and interest would
customarily be payable on specified due dates, in the case of our Class A Interests:
• pursuant to the terms of our second amended and restated certificate of incorporation, so long as there are
Subordinated Loans outstanding that are attributable to each of our various Class A-1 Interests, Class A-2 Interests and
Class A-3 Interests, any cash available for distribution that would otherwise be paid to holders of our Class A-1
Interests, Class A-2 Interests and Class A-3 Interests as applicable, will be required to be used for the repayment of
principal and accrued interest on the corresponding Subordinated Loans owed by us;
• as a corporation, we are subject to restrictions on payments of dividends and redemption price out of lawfully available
funds; and
• as a regulated gaming company, our ability to declare and pay dividends is subject to additional restrictions imposed
by law.
You may not receive dividends or other distributions on the Class A Interests.
Any debt we may incur in the future is likely to restrict our ability to pay dividends, and such restriction may prohibit us from
making payments on the Subordinated Loans or distributions, or reduce the amount of cash available for distribution. In
addition, Delaware law imposes requirements that may restrict our ability to pay dividends to holders of our shares. Dividends
on the Class A Interests are discretionary and non- cumulative. Consequently, if our Board (or a duly authorized committee of
our Board) does not authorize and declare a dividend, holders of our Class A Interests will not be entitled to receive any such
dividend.
We have no obligation to pay dividends with respect to the Class A Interests or any other shares we may issue. In addition, if
and to the extent such act would cause us to fail to comply with applicable contractual restrictions (including our indebtedness),
laws, rules and regulations (including applicable gaming rules in Illinois), we may not declare, pay or set aside for payment
dividends on our Class A Interests.
Even if we pay dividends on our Class A Interests, pursuant to the terms of our amended and restated certificate of
incorporation, so long as there are Subordinated Loans outstanding that are attributable to each of our various Class A-1
Interests, Class A-2 Interests and Class A-3 Interests, any cash available for distribution that would otherwise be paid to
holders of our Class A-1 Interests, Class A-2 Interests and Class A-3 Interests, as applicable, will be required to be used for
the repayment of principal and accrued interest on the corresponding Subordinated Loans owed by us until such time as
such Subordinated Loans are fully paid and discharged, which means you may never directly receive a cash dividend on
your Class A-1 Interests, Class A-2 Interests and Class A-3 Interests.
Given the capital intensity of developing, constructing, opening and operating a casino resort project of this scale, we currently
expect that the Operating Company will not have any cash available for distribution until approximately three to five years after
our permanent casino and resort begins operations. However, this may fluctuate depending on the Operating Company’s ability
to generate cash from operations and its cash flow needs, which, among other things, may be impacted by debt service
payments on its senior indebtedness, capital expenditures, potential expansion opportunities and the availability of financing
alternatives, the need to service any future indebtedness or other liquidity needs and general industry and business conditions,
including the pace of the construction and development of our permanent casino and resort in Chicago. Pursuant to the terms of
our amended and restated certificate of incorporation, so long as there are Subordinated Loans outstanding that are attributable
to each of our various Class A-1 Interests, Class A-2 Interests and Class A-3 Interests, any cash available for distribution that
would otherwise be paid to holders of our Class A-1 Interests, Class A-2 Interests and Class A-3 Interests will be required to be
used for the repayment of principal and accrued interest on the corresponding Subordinated Loans owed by us. Therefore, even
if our Board (or a duly authorized committee of our Board) authorizes and declares a dividend on our shares of stock, holders of
our Class A-1 Interests, Class A-2 Interests and Class A-3 Interests will not be entitled to receive any such dividend until such
time as the corresponding Subordinated Loans associated with such Class A Interests are paid in full, which may take a
prolonged period of time to occur, if at all.
Our Subordinated Loans accrue interest at a rate of 11% per annum, compounding quarterly, and accrued and unpaid interest
will be added to the outstanding principal amount thereof on a quarterly basis. As a result, the amount of Subordinated Loans
that are to be paid with a percentage of the amounts that would otherwise be paid on account of Class A-1 Interests, Class A-2
Interests and Class A-3 Interests will increase until the date, if any, on which dividends are to be paid on the Class A-1
Interests, Class A-2 Interests and Class A-3 Interests.
In addition, given the Class A-3 Subordinated Loans attributable to each Class A-3 Interest will be lower than the Class A-1
Subordinated Loans and Class A-2 Subordinated Loans attributable to the Class A-1 Interests and Class A-2 Interests,
respectively, the Class A-3 Subordinated Loans are expected to be fully repaid prior to the Class A-1 Subordinated Loans and
the Class A-2 Subordinated Loans, to the extent they are fully repaid. Similarly, the Class A-2 Subordinated Loans are expected
to be fully repaid prior to the Class A-1 Subordinated Loans, to the extent they are fully repaid. However, due to the significant
amount of indebtedness (including both principal and interest) owed on the Subordinated Loans, we do not expect to fully repay
the Subordinated Loans for an extended period of time, if at all. As such, holders of Class A-1 Interests, Class A-2 Interests and
Class A-3 Interests may not directly receive the cash dividends or other distributions that otherwise would have been payable
on such Class A-1 Interests, Class A-2 Interests and Class A-3 Interests for an equivalently long period of time, if at all, or
realize any accretion in value above the initial amount invested. Moreover, the value of the principal and accrued interest on the
Subordinated Loans could exceed the value of the Class A-1 Interests, Class A-2 Interests and Class A-3 Interests otherwise
payable upon a sale of the business, resulting in holders of the Class A-1 Interests, Class A-2 Interests and Class A-3 Interests
receiving nothing upon such a sale.
Our second amended and restated bylaws provide that, subject to limited exceptions, the state and federal courts (as
appropriate) located within the State of Delaware will be the sole and exclusive forum for certain stockholder litigation
matters, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors,
officers, employees or stockholders.
Our second amended and restated bylaws provide that, unless we consent in writing to the selection of an alternative forum,
(A)(i) any derivative action or proceeding brought on behalf of us, (ii) any action asserting a claim of breach of a fiduciary duty
owed by any of our current or former directors, officers, other employees or stockholders to us or to our stockholders, (iii) any
action asserting a claim arising pursuant to any provision of the DGCL, our second amended and restated certificate of
incorporation or second amended and restated bylaws (as either may be amended or restated) or as to which the DGCL confers
exclusive jurisdiction on the Court of Chancery of the State of Delaware or (iv) any action asserting a claim governed by the
internal affairs doctrine of the law of the State of Delaware, shall be exclusively brought in the Court of Chancery of the State
of Delaware or, if such court does not have subject matter jurisdiction thereof, the federal district court of the State of Delaware,
and (B) the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting
a cause of action arising under the Securities Act. Notwithstanding the foregoing, the exclusive forum provision shall not apply
to claims seeking to enforce any liability or duty created by the Exchange Act.
The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for
disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors,
officers and other employees, although our stockholders will not be deemed to have waived our compliance with federal
securities laws and the rules and regulations thereunder. Alternatively, if a court were to find the choice of forum provision
contained in our second amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we
may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of
operations and financial condition. Any person or entity purchasing or otherwise acquiring or holding any interest in our equity
securities shall be deemed to have notice of and consented to the forum provisions in our second amended and restated
certificate of incorporation. Our exclusive forum provision shall not relieve the Company of its duties to comply with the
federal securities laws and the rules and regulations thereunder, and our stockholders will not be deemed to have waived our
compliance with these laws, rules, and regulations.
Holders of our Class A-1 Interests, Class A-2 Interests and Class A-3 Interests may be subject to taxes as the Subordinated
Loans corresponding to such shares of stock are repaid, even though such holders do not receive a corresponding cash
distribution.
Section 305 of the Internal Revenue Code provides that if a corporation distributes property to some shareholders and other
shareholders have an increase in their proportionate interests in the assets or earnings and profits of the corporation, such other
shareholders may be deemed to receive a distribution that could be a taxable dividend. In this case, because we and Bally’s treat
the Subordinated Loans as “stock” for U.S. federal income tax purposes, “property” distributions are considered to be made to
“some shareholders” of Bally’s Chicago, Inc. as payments are made on the Subordinated Loans, and equivalent cash
(“property”) distributions will be made with respect to the Class A-4 Interests. In addition, as payments are made on the
Subordinated Loans, particularly those that repay the original principal amount of such Subordinated Loans, the proportionate
interests of holders of our Class A-1 Interests, Class A-2 Interests and Class A-3 Interests in the assets or earnings and profits of
Bally’s Chicago, Inc. may be viewed as increasing. Accordingly, it is possible that such increase could be treated as a deemed
distribution under Section 305 of the Code or otherwise as taxable income to such holders under other theories. However, under
the Treasury Regulations relating to Section 305 of the Code and other IRS administrative guidance, certain financing
arrangements in the form of preferred stock investments that fund a corporation and then are systematically eliminated through
property distributions until they are fully retired, and are designed to facilitate the ownership of a business with an effect of
increasing another stockholder’s proportionate interests in the assets or earnings and profits of a corporation over such period,
do not result in a deemed distribution to such other stockholder. The applicability of these authorities to the holders of our Class
A-1 Interests, Class A-2 Interests and Class A-3 Interests in this situation is uncertain.
We take the position that holders of applicable series of Class A Interests are not be treated as receiving a deemed distribution
from us or otherwise realizing income as a result of repayment of the Subordinated Loans corresponding to such shares.
However, there can be no assurance that the U.S. Internal Revenue Service will not take a contrary position, for example,
treating the proportionate interest in our earnings and profits owned by holders of the applicable series of Class A Interests as
having increased upon repayment of the Subordinated Loans corresponding to such shares, and treating such holders as having
received a distribution. In that case, such deemed distribution may be treated as a dividend subject to U.S. federal income tax,
without the receipt by holders of any cash. In addition, for any holder that is a “Non-U.S. Holder” (as defined in “Material U.S.
Federal Income Tax Consequences”), any deemed distribution could be subject to U.S. federal withholding tax at a 30% rate, or
such lower rate as may be specified by an applicable treaty. Because deemed distributions received by a holder would not give
rise to any cash from which any applicable withholding tax could be satisfied, if we (or an applicable withholding agent) pay
withholding (including backup withholding) on behalf of a holder, we (or an applicable withholding agent) may set off any such
payment against, or withhold such taxes from, payments of cash payable to such holder or sales proceeds received by, or other
funds or assets of, such holder, or require alternative arrangements with respect to such withholding taxes.
Investors should consult their own tax advisors about the application of Code Section 305 and any other potential deemed
receipt of income risk with respect to our Class A Interests.
If non-U.S. persons acquire our Class A Interests, such non-U.S. persons may be subject to material adverse U.S. federal
income and/or withholding tax consequences, including if we are considered a United States real property holding corporation.
Such adverse tax consequences may limit transferability and impact the value of our Class A Interests.
If a non-U.S. person acquires our Class A Interests and we are considered a “United States real property holding corporation” (a
“USRPHC”) for U.S. federal income tax purposes, such non-U.S. person may be subject to material adverse U.S. federal
income or withholding tax consequences, or both, in respect of certain distributions on, and payments in connection with a sale,
exchange, redemption, repurchase or other disposition of, our Class A Interests. Such adverse U.S. federal income and/or
withholding tax consequences may limit transferability of our Class A Interests and have a negative impact on the value of our
Class A Interests.
General Risk Factors
Our ability to continue as a going concern depends upon the funding by Bally’s Corporation.
We have incurred losses and negative cash flows from operations, excluding funds from Bally’s Corporation, since our
inception. Our ability to continue as a going concern depends upon the funding by Bally’s Corporation. Our temporary casino
began operations on September 9, 2023 and there can be no assurance that we will be able to be successful in the planned
operations therein. If we are unable to obtain sufficient funding, we could be forced to change or delay our planned operating
activities, and our liquidity, results of operations and financial condition could be materially and adversely affected, and we
may be unable to continue as a going concern. If we seek additional financing to fund our business activities in the future and
there is substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling
to provide additional funding to us on commercially reasonable terms or at all.
While we expect to have sufficient capital to sustain our business until our permanent casino and resort is open, it is possible
that the amount of capital we have raised may not be enough to sustain our current business plan.
Based on Bally’s equity commitments to the Operating Company and the financing we have received from GLP, we believe
that we are sufficiently capitalized until the opening of our permanent casino and resort. However, unforeseen events could
necessitate us to raise additional capital. In order to achieve our near and long-term goals, it is possible that we may need to
procure funds in addition to the amount previously raised in our initial public offering and the concurrent private placements.
There is no guarantee we will be able to raise such funds on acceptable terms or at all. If we are not able to raise sufficient
capital in the future, we will not be able to execute our business plan, our continued operations will be in jeopardy and we may
be forced to cease operations and sell or otherwise transfer all or substantially all of our remaining assets, which could cause
you to lose all or a portion of your investment.
Our management team has limited experience managing a public company, and the requirements of being a public company
may strain our resources, divert management’s attention, and affect our ability to attract and retain qualified board
members.
As a public company listed in the United States, we incur significant additional legal, accounting and other expenses. In
addition, changing laws, regulations and standards relating to corporate governance and public disclosure, including regulations
implemented by the SEC and the State of Illinois, may increase legal and financial compliance costs, and make some activities
more time consuming. These laws, regulations and standards are subject to varying interpretations, and as a result, their
application in practice may evolve over time as new guidance is provided by regulatory and governing bodies.
Most members of our management team have limited or no experience managing a publicly traded company, interacting with
public company investors and complying with the increasingly complex laws pertaining to public companies. Our management
team may not successfully or efficiently manage our transition to being a public company that is subject to significant
regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny of securities
analysts and investors. Furthermore, we are committed to maintaining high standards of corporate governance and public
disclosure, and our efforts to establish the corporate infrastructure required of a public company and to comply with evolving
laws, regulations and standards are likely to divert management’s time and attention away from revenue-generating activities to
compliance activities, which may prevent us from implementing our business strategy and growing our business. Moreover, we
may not be successful in implementing these requirements. If we do not effectively and efficiently manage our transition into a
public company and continue to develop and implement the right processes and tools to manage our changing enterprise and
maintain our culture, our ability to compete successfully and achieve our business objectives could be impaired, which could
negatively impact our business, financial condition and results of operations.
Additionally, as a public company, we may from time to time be subject to proposals by stockholders urging us to take certain
corporate actions. If activist stockholder activity ensues, we may be required to incur additional costs to retain the services of
professional advisors, management time and attention will be diverted from our core business operations, and perceived
uncertainties as to our future direction, strategy or leadership may cause us to lose potential business opportunities and impair
our brand and reputation, any of which could materially and adversely affect our business, financial condition and results of
operations.
In addition to increasing our legal and financial compliance costs, the additional rules and regulations described above might
also make it more difficult for us to obtain certain types of insurance, including director and officer liability insurance, and we
might be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar
coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our Board, on committees
of our Board or as members of our senior management team.
If our estimates or judgments relating to our critical accounting policies are based on assumptions that change or prove to
be incorrect, our results of operations could fall below the expectations of our investors and securities analysts, resulting in
a decline in the value of our Class A Interests.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that
affect the amounts reported in our consolidated financial statements and accompanying notes. We base our estimates on many
factors, including historical experience and various other assumptions that we believe to be reasonable under the circumstances,
as discussed in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
included elsewhere in this Annual Report on Form 10-K, the results of which form the basis for making judgments about the
carrying values of assets, liabilities, equity and expenses that are not readily apparent from other sources. Our results of
operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions,
which could cause our results of operations to fall below our publicly announced guidance or the expectations of securities
analysts and investors, resulting in a decline in the value of our Class A Interests.
Our reported financial results may be negatively impacted by changes in GAAP and financial reporting requirements.
GAAP and related financial reporting requirements are complex, continually evolving and may be subject to varied
interpretation by the relevant authoritative bodies, including the Financial Accounting Standards Board (“FASB”), the SEC and
various bodies formed to promulgate and interpret appropriate accounting principles. FASB has in the past issued new or
revised accounting standards that superseded existing guidance and significantly impacted the reporting of financial results.
Any future change in GAAP and financial reporting requirements or interpretations could also have a significant effect on our
reported financial results, and may even affect the reporting of past transactions completed before the announcement or
effectiveness of a change if retrospective adoption is required. It is difficult to predict the impact of future changes to
accounting principles or our accounting policies, any of which could negatively affect our reported results of operations.
The estimates of market opportunity and forecasts of market growth included herein may prove to be inaccurate, and even if
the markets in which we compete achieve the forecasted growth, our business could fail to grow at similar rates, or at all.
The estimates of market opportunity and forecasts of market growth included herein may prove to be inaccurate. Market
opportunity estimates and growth forecasts are subject to significant uncertainty and are based on assumptions and estimates
that may not prove to be accurate, including as a result of any of the risks described herein.
The variables that go into the calculation of our market opportunity are subject to change over time, and there is no guarantee
that any particular number or percentage of addressable customers covered by our market opportunity estimates will purchase
our products at all or generate any particular level of revenue for us. In addition, our ability to expand in any of our target
markets depends on a number of factors, including the cost, performance and perceived value associated with our products.
Even if the markets in which we compete meet the size estimates and growth forecasted herein, our business could fail to grow
at similar rates, or at all. Our growth is subject to many factors, including our success in implementing our business strategy,
which is subject to many risks and uncertainties. Accordingly, the forecasts of market growth included herein should not be
taken as indicative of our future growth.
We are an emerging growth company and a smaller reporting company, and the reduced disclosure requirements applicable
to emerging growth companies and smaller reporting companies may make our Class A Interests less attractive to investors.
We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and
may remain an emerging growth company until December 31, 2030. However, if certain events occur prior to the end of such
period, including if we become a “large accelerated filer,” as defined under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), our annual gross revenue exceeds $1.235 billion or we issue more than $1.0 billion of non-convertible
debt in any three-year period, we will cease to be an emerging growth company prior to the end of such period. For so long as
we remain an emerging growth company, we are permitted and intend to rely on exemptions from certain disclosure
requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include:
• not being required to comply with the auditor attestation requirements in the assessment of our internal control over
financial reporting pursuant to the Sarbanes-Oxley Act of 2002 (the “Sarbanes- Oxley Act”);
• not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight
Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information
about the audit and the financial statements, unless the SEC determines the new rules are necessary for protecting the
public;
• reduced disclosure obligations regarding executive compensation; and
• exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder
approval of any golden parachute payments not previously approved.
We have taken advantage of reduced reporting burdens in this Annual Report on Form 10-K. In particular, in this Annual
Report on Form 10-K, we have not included all of the executive compensation-related information that would be required if we
were not an emerging growth company. We cannot predict whether investors will find our Class A Interests less attractive if we
rely on these exemptions.
Emerging growth companies can also take advantage of the extended transition period provided in Section 13(a) of the
Exchange Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay
the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have
irrevocably elected not to use this extended transition period. As a result, our consolidated financial statements are comparable
to the financial statements of companies that comply with new or revised accounting pronouncements as of public company
effective dates.
We are also a smaller reporting company as defined in the Exchange Act. We may continue to be a smaller reporting company
even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available
to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as our voting and non-
voting shares of stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal
quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and our voting and
non-voting shares of stock held by non-affiliates is less than $700.0 million measured on the last business day of our second
fiscal quarter.
We will incur significant additional costs as a result of being a public company.
We incur increased costs associated with corporate governance requirements that are applicable to us as a public company,
including rules and regulations of the SEC, under the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Customer
Protection Act of 2010 and the Exchange Act. These rules and regulations are expected to significantly increase our accounting,
legal and financial compliance costs and make some activities more time consuming. We expect such expenses to further
increase after we are no longer an “emerging growth company” or a “smaller reporting company.” We also expect these rules
and regulations to make it more expensive for us to maintain directors’ and officers’ liability insurance. If we fail to maintain
sufficient levels of such insurance, it may be more difficult for us to attract and retain qualified persons to serve on our Board or
as executive officers. We cannot predict or estimate the amount of additional costs we will incur as a public company or the
timing of such costs.
