Evolution Prevails in US Securities Case After Court Dismisses Investor Lawsuit

Evolution AB has won a significant legal battle in the US after a federal judge dismissed a long-running securities fraud lawsuit against the Swedish gaming giant. The ruling, issued on September 5, 2023, by the US District Court for the Eastern District of Pennsylvania, marks the definitive end of months of legal battles.

Evolution Proved Its Subsidiaries Acted Independently

The lawsuit, initiated by investors in unsponsored American Depository Receipts (ADRs) linked to Evolution’s shares, listed on the Stockholm stock market, accused the company and its top management of deceiving investors about its business growth and regulatory compliance between 2019 and 2023. The plaintiffs further contended that Evolution’s American subsidiaries were its “alter egos,” making the Swedish company liable under the US securities law.

Earlier this year, the court dismissed all claims against Evolution CEO Martin Carlesund and former CFO Jacob Kaplan, leaving the corporate entity as the sole defendant. Judge Mia Roberts Perez has now dismissed the claims with prejudice, meaning that these complaints cannot be refiled. With the 30-day appeal period now expired, the case has reached a definitive closure. 

Plaintiffs have not established that defendant directed its activities at Pennsylvania. Consequently, this court does not have personal jurisdiction, and the motion to dismiss is granted.

Judge Mia Roberts Perez

In her ruling, the judge concluded that Evolution maintains a clear corporate separation from its subsidiaries in America and that the plaintiffs could not prove the kind of control required to overcome this barrier. Judge Perez also added that all subsidiaries managed their operations independently, maintaining direct contact with customers. Such facts reflected a typical parent-subsidiary relationship, rather than an “alter ego”.

The Company Faces Other Legal Challenges

With the distinction between Evolution and its subsidiaries clear, the court concluded that since Evolution did not authorize or participate in the distribution of the unsponsored ADRs, it faced no legal responsibility under US securities law. Judge Perez further commented that the presence of US subsidiaries was not enough to hold a foreign parent company liable.

Evolution AB does not exercise the type of day-to-day control necessary to satisfy the alter-ego standard.

Judge Mia Roberts Perez

While this victory closes one court saga, Evolution remains entangled in other legal battles. Its high-profile dispute with Light & Wonder continues in Nevada, where a federal court has just ruled that the companies must arbitrate claims related to trade secrets, while allowing patent infringement allegations to proceed separately. A status conference scheduled for October 30 will clarify how the dual-track process will unfold.

Despite ongoing legal challenges, the new ruling marks a decisive victory for Evolution as the company seeks to refute claims of misconduct from investors and critics and represents a moment of certainty amid an otherwise complicated landscape. The court decision could also serve as a precedent, preventing similar accusations in the future.