DraftKings has agreed to pay a $200,000 penalty to settle a Securities and Exchange Commission (SEC) charge that found the company selectively disclosed non-public information to investors via the social media accounts of CEO Jason Robins.
In an order dated Sept. 26, the SEC stated that on July 27, 2023, DraftKings’ public relations firm published a post on Robins’ personal X and LinkedIn accounts.
“There’s massive potential for growth in new markets – but we’re still seeing really strong growth in existing states,” read the X post, while the SEC noted that the LinkedIn post used similar wording. “Our 2018-2019 state vintage grew over 80% on the revenue basis year-over-year in Q1. With those numbers, we expect robust growth even without new states opening.”
However, at the time of those posts, DraftKings had not yet disclosed its Q2 2023 financial results and had not otherwise publicly announced certain information included in the posts.
The SEC said that by only making this information accessible on Robins’ accounts rather than disclosing it officially to all investors, DraftKings was in violation of Regulation Fair Disclosure. That policy stipulates that while companies can use social media outlets to announce key information, investors must first have been alerted about which social media will be used to disseminate such information.
Shortly after the PR company published the posts, it removed them at the request of DraftKings. Seven days after the posts, DraftKings announced the information to the public in its Q2 2023 earnings statement.
The SEC says DraftKings agreed to pay a $200,000 civil penalty to settle the charge. In addition, the SEC said that without admitting or denying the order’s findings, DraftKings agreed to cease and desist from future violations and comply with certain undertakings, including required Regulation Fair Disclosure training for employees with corporate communications responsibilities.
“Information about growth in sales as a public company can be extremely important to investors,” said John Dugan, associate director for enforcement in the SEC’s Boston office. “It is essential that, when companies disseminate material, nonpublic information, they do so fairly to all investors.”
SBC Americas reached out to DraftKings for comment and was told that the company “is pleased to have this matter resolved.”
The $200,000 is the latest payment made by DraftKings in light of a violation, after multiple state-specific incidents over the last few months.
In early July, the New Jersey Division of Gaming Enforcement fined DraftKings $100,000 for reporting inaccurate sports betting data under the Resorts Digital online sports betting license, which the regulator said amounted to “gross errors and failures” by the operator.
Corrected data filed to the DGE showed that 52 of 60 individual data points regarding win and handle from December 2023 to February 2024 were incorrect, representing an error rate of 87%.
Two months later, the Connecticut Department of Consumer Protection’s (DCP) Gaming Division fined both DraftKings and White Hat Gaming after finding that a glitch had temporarily rendered an online slot game impossible to win.
The DCP fined DraftKings $19,000 and the game’s supplier White Hat $3,500 after Deal or No Deal Banker’s Bonanza ran more than 20,000 plays without producing a single win over the course of seven days in August 2023, following the game’s launch. A total of 522 players in Connecticut wagered a combined $24,000 without a single win being handed out.
DraftKings’ higher fine reflected the fact it had not notified the DCP of the incident until more than two weeks after the issue began, more than a week after it was fixed and two days after customers were refunded. DraftKing was also found to have unsatisfactorily addressed customers’ concerns about the game’s lack of wins.
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