Rush Street sheds one tax in Colombia, gains another
Although a value-added tax in Colombia expired at the end of 2025, that country has imposed a new one on igaming providers, taxing gross gaming revenue at 19%.
Even so, Jefferies Equity Research analyst James Wheatcroft remained upbeat on Rush Street Interactive (RSI). But he pivoted from estimating a 2026 cash-flow gain to RSI of US$25 million to a tailwind of US$11 million on the basis of the latest Colombian impost.
Keeping a “Buy” rating on RSI, Wheatcroft wrote that it “remains easiest to own in Online Gaming as Colombia, the World Cup, and solid execution should all act as tailwinds.” He lowered his per-share price target from US$30 apiece to US$29. The stock was trading at US$17.17 per share at the time of the 25 January investor note.
Despite the new tax in Colombia, Wheatcroft expected RSI to realize an extra US$70 million in revenue from the cessation of the VAT. “Importantly, the imposition of the new GGR tax will not impact [revenue], and our revenue estimates are mostly unchanged vs. prior,” he penned.
“We expect more impact in 1H26 than 2H26, as we are accounting for the potential removal of the tax by 2H26 given either a court decision ruling it unconstitutional, or a change in administration from the upcoming election,” Wheatcroft hoped. He added that any additional propulsion would be “modest.”
Colombia also remained RSI’s primary driver for revenue growth, followed by the Mexico market. The latter was expected to be additionally juiced by this year’s World Cup. Wheatcroft’s revenue estimates for 2026 and 2027 were, he said, 4% and 6% above Wall Street expectations, respectively.
For cash flow, Wheatcroft projected US$217 million in 2026, escalating to US$277 million in 2027. Those numbers were, again, ahead for Wall Street consensus projections.
Wheatcroft also was optimistic about Maine, where igaming was recently legalized through gubernatorial inaction. However, he didn’t bake any Maine-derived numbers into his forecast.
The analyst’s reasoning was twofold. For one, RSI does not have any relationships with Maine’s tribes, who will enjoy igaming exclusivity. Also, no inception date for igaming has been set in the Pine Tree State. Wheatcroft thought it might go live by the end of year.
Additionally, potential catalysts for RSI were seen to be possible igaming legalization in New York State, Maryland and Illinois. Wheatcroft concluded that “strong execution by [RSI] management remains a key positive force.”
David McKee is an award-winning journalist who has three decades of experience covering the gaming industry.
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The Backstory
A shifting tax landscape in Colombia
Colombia’s online gambling regime has been a moving target for operators and investors. Over the past year, companies faced a surprise value-added tax created during a state of emergency, a policy that executives at Rush Street Interactive and rivals warned would dent growth and muddle unit economics. On an earnings call, RSI said it was absorbing the levy by tweaking bonusing rather than pushing costs onto players, while noting the measure had been partially upheld in court and remained under constitutional review (RSI said Colombia tax hit growth but was manageable). Codere, meanwhile, issued a stark warning: if Colombia persisted with a deposit-based VAT, the company would stop new investment in the market, calling the approach counterproductive and hoping for a post-election policy reset (Codere pressed Colombia to drop the deposit VAT).
The new phase is a pivot from taxing deposits to taxing gross gaming revenue, a framework that operators contend is more aligned with industry norms even if the rate is stiff. RSI has framed the broader tax environment as “dynamic and fluid,” signaling it would adapt quickly as courts and the next administration weigh in (RSI detailed contingency planning for Colombian levies). The immediate effect is reduced near-term upside from the sunset of the old VAT, but a clearer path to modeling margins than under the emergency decree, which carried legal and political uncertainty.
The stakes are high because Colombia has been a growth engine. RSI said international revenue rose 55% in Colombia during the first quarter despite the drag from taxes, underscoring both market momentum and the cost of policy whiplash (International growth held up despite the levy). A transition to a GGR-based regime could stabilize decision-making for operators, even as the rate squeezes profitability, and will influence where marketing and product spend is deployed in Latin America this year.
Wall Street’s recalibration meets RSI’s execution
Analysts and investors have been revising models in real time as Colombia’s rules change. That recalibration has unfolded against stronger operating results from RSI, which posted a 31% year-over-year revenue surge to $254.2 million and a modest profit in the fourth quarter of 2024, then followed with first-quarter revenue of $262.4 million and $11.2 million of profit in 2025 (RSI capped 2024 with a revenue jump and profit; Q1 2025 kept the momentum going). The company reiterated full-year revenue guidance of $1 billion to just under $1.1 billion and targeted cash flow of $115 million to $135 million, with management emphasizing consistency of its online casino business.
In calls with investors, RSI said Latin America user growth materially outpaced North America, though average revenue per user in the region dipped as promotional strategies adjusted to tax headwinds (Latin America users surged while ARPU eased). That profile matters to the models: higher user counts can offset lower ARPU when coupled with disciplined marketing and improved retention, particularly in markets nearing scale.
The company has also highlighted a stronger cash position, repurchasing shares and finishing the first quarter with $228 million on hand and no debt (RSI ended Q1 with ample liquidity). That balance sheet gives RSI flexibility to weather tax volatility and selectively invest in product and market entries without relying on dilutive capital or forced cost cutting in core geographies.
Playbook for a fluid regulatory map
RSI has laid out a pragmatic approach to policy shocks: adjust bonusing, tune marketing pace and lean on proprietary technology to optimize promotions and player value. Management said its bonusing engine is a competitive advantage in responding to tax changes, letting the company preserve engagement while protecting margins (Proprietary bonusing as a tax shock absorber). Marketing spend, RSI added, will stay disciplined and skew toward higher-return markets, with the company ready to invest more when unit economics justify it (Marketing allocations follow returns, not volume).
This tactical flexibility showed up in results. In the first quarter, marketing grew just 3% year over year while revenue climbed 21%, and cash flow jumped 95% to $33.2 million (Q1 2025 delivered operating leverage). The company says its focus remains on efficient acquisition and retention of high-value players, an approach designed to smooth out periods when external factors—sports results, tax resets or legal delays—introduce volatility.
RSI has also stressed product strategy as a hedge. In Pennsylvania, the operator is preparing to capitalize on the state joining a multi-state compact for online poker, treating poker as a gateway to cross-sell customers into casino and sports betting (Poker as a cross-sell flywheel). That model may broaden as more states enable liquidity sharing or expand iGaming verticals.
Latin America’s growth story extends beyond Bogotá
Even as Colombia’s rules evolve, RSI argues Mexico will ultimately surpass Colombia in size for the company. International revenue rose 50% in Mexico during the first quarter as the market matures and product localization improves (Mexico is tracking ahead of Colombia’s early curve). The 2026 World Cup is a tailwind for both markets, with operators expecting engagement and acquisition to step up into the tournament cycle.
Tax momentum in Mexico is a watch item. Codere has said a planned increase in the gambling tax could chill new entrants but may also create a more rational competitive set, while the company explores ways to share the impact across its partnerships (Codere sees a tighter, more rational Mexico post-tax). For RSI, management has indicated that potential tax moves outside Colombia were not baked into its 2025 outlook, signaling it will evaluate and adapt as details are finalized (RSI left room to adjust for future tax changes).
Elsewhere in the region, RSI says Peru remains in optimization mode before a broader marketing ramp, and it continues to assess inorganic opportunities, especially in Latin America, with no timetable for deals (Scanning for LATAM opportunities, patiently; Prioritizing sustainable growth over speed).
Policy momentum in the U.S. and Canada
RSI has argued that state fiscal gaps and the proliferation of untaxed sweepstakes-style products are pushing iGaming up legislative agendas. Management said more effort is going into legalization than at any point in recent years and sees expanding regulated online casino play as a logical response to budget stress and consumer protection concerns (RSI sees stronger U.S. iGaming tailwinds). The company is tracking bills in multiple states, while also calling out Maine’s newly legal framework, which grants tribal exclusivity but lacks a launch date.
In Canada, Alberta is moving a bill to open up online casino and sports betting, with RSI expecting operations could start by 2026 if the process stays on track (Alberta regulation advances through the legislature). Closer to home, RSI reported strong early results in Delaware after taking over the state’s iGaming program and sees a long runway for growth, while Pennsylvania’s poker compact could add incremental cross-sell over time (Delaware traction and a poker catalyst).
Why the policy turn matters now
The switch from a deposit VAT to a GGR tax in Colombia reframes a key market just as RSI is delivering steadier profits and cash generation. Clarity on the court’s stance and on post-election policy will shape whether operators lean into the market or rebalance toward Mexico and North America. For investors, the near-term effect is a modest trim to Colombian upside but a cleaner line of sight than the emergency tax era provided.
RSI’s response—tight marketing discipline, product-led engagement, and selective investment—has so far offset regulatory headwinds without stalling growth. The company’s guidance implies confidence that Latin America’s expansion, coupled with a potential U.S. iGaming opening and Canadian progress, can more than cover the margin compression from new taxes. If Colombia settles on a durable, industry-standard framework, the region’s thesis remains intact. If not, RSI has signaled it will shift spend to where the returns are clearer.
Either way, the next few months of legal and political decisions in Bogotá will ripple through 2025 playbooks. With user growth skewing toward high-value segments and liquidity to fund product and market bets, RSI is positioning to ride the upside of regulatory clarity—and to navigate the downside if it doesn’t arrive on schedule.
