Company: RSI
Filing Date: 2025-02-28
Form Type: 10-K
Source: 0001793659-25-000047
Chunk: 116

Company: Rush Street Interactive, Inc.
Filing Date: 2025-02-28
Form: 10-K
Item: Item 8
Chunk 116
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 assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the entity’s assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Valuation of Restricted Stock Units with Market-Based Conditions

Critical Audit Matter Description

As described in Note 8 to the consolidated financial statements, during the year ended December 31, 2024, the Company issued 1.2 million Restricted Stock Units (“RSUs”) with market-based conditions that had a total fair value of $10.4 million. Specific vesting conditions for these RSUs are based on the Company’s total shareholder return relative to a peer group as defined in the grant agreement. The fair value of RSUs with market conditions was determined using a Monte Carlo simulation with the assistance of the Company’s third-party valuation specialist. The Monte Carlo simulation requires the Company to make certain key assumptions, including expected volatility, expected term, and risk-free interest rate. Given the inherent uncertainties and application of judgment involved in the valuation of RSUs with market conditions, our audit procedures required a high degree of subjective auditor judgment and involvement from our valuation specialists.

Response

To address this matter, through our integrated audit approach, we performed both control testing as well as substantive audit procedures. We obtained an understanding, evaluated the design, and tested the operating effectiveness of management’s controls over share-based compensation. We tested controls over management’s review of the assumptions used with regards to the valuation of the RSUs with market-based conditions. We also tested management's controls to validate that data used in management’s estimates in the valuation was complete and accurate. Our substantive audit procedures included,