DraftKings Inc. has been getting a rough ride recently in its home state.
The Boston-based online sportsbook operator is facing possible punishment from regulators after accepting funds in Massachusetts deposited elsewhere via credit card, as well as a proposed class action lawsuit over an allegedly misleading promotion.
Those issues were discussed Thursday by the Massachusetts Gaming Commission (MGC), the state’s legal sports betting regulator.
Commissioners heard DraftKings notified the regulator in late May that it had allowed funds deposited by credit card in other jurisdictions to be used in the Bay State since its launch of mobile wagering in early March.
This was despite DraftKings telling the commission before it received its mobile sports wagering license that it had proprietary wallet technology and used geolocation services to disable certain financial accounts depending on where a user is located. But when DraftKings notified the commission on May 31 about the mistake, it said “appropriate safeguards” were not in place when it launched in Massachusetts.
Swing and a miss
The company told Massachusetts regulators in June that a software update was now blocking out-of-state credit card funding. However, the following month, DraftKings said the earlier update was "ineffective," the MGC heard, and out-of-state credit card funding availability continued until July 13, when another software patch fixed the issue.
DraftKings ultimately reported that 218 users placed 242 wagers totaling $83,663.92 involving out-of-state credit card funding. DraftKings chalked up the mistakes to internal miscommunications and insufficient testing, but the company also told the commission that it implemented several fixes to avoid similar issues.
Still, the above didn’t sit right with commissioners, such as Eileen O’Brien, who called it “egregious” and said an adjudicatory hearing would be needed to resolve the matter, to which her fellow commissioners agreed.
“And I just would add that this is a violation of the statute,” commissioner Jordan Maynard said. “Not a [regulation], the statute.”
I read the news today, oh boy
The credit card issue is not the only matter the MGC discussed Thursday involving DraftKings. The company is facing the prospect of a class action lawsuit over an allegedly misleading sportsbook promotion, and commissioners and regulatory staff plan to keep an eye on the situation.
“This is litigation that doesn't involve the commission directly,” MGC chair Cathy Judd-Stein noted. “But there could be implications around our regulations where we might need to even add clarity.”
DraftKings is accused of dangling a $1,000 sign-up bonus for customers that would require $25,000 worth of gambling to unlock in full. The company, however, disagrees with the allegations and plans to defend itself in court.
The MGC did not get too in-depth into the ongoing legal matter. However, some commissioners voiced an interest in clarity about when a company must inform the commission about an issue like the one DraftKings is confronting.
“I, for one learned about it in the press, which I didn't love,” O’Brien said during Thursday’s meeting. “I'd like them to notify us at the same time something might hit the newspapers, if possible.”
Today's agenda for the Massachusetts Gaming Commission includes an item about the possible class action lawsuit DraftKings could face in the state over an allegedly misleading promo. Wrote a little bit about it here:https://t.co/k17mQfhmHI pic.twitter.com/vKeEd8AXpV
— Geoff Zochodne (@GeoffZochodne) December 14, 2023
The MGC heard about another, relatively smaller matter of alleged noncompliance on Thursday as well, this time involving Fanatics Sportsbook. According to a memo to the commission, Fanatics mistakenly took a $50 wager earlier this month on the Boston College football team's upcoming bowl game against Southern Methodist University on Dec. 28.
Betting on in-state college teams is forbidden in Massachusetts sports betting unless those teams are in a tournament like March Madness. Casino operators have been reprimanded in the state for violating this rule.
Fanatics notified regulators about the mistake and refunded the customer their stake. This "error," the memo noted, was caused by a Fanatics trader mistakenly turning the futures market for the game "on," allowing the single wager to be placed before it was turned “off” again after almost 19 hours of availability.
A more fulsome report on the matter will come before the MGC at a future meeting (and perhaps Fanatics will face a fine), although it sounded like commissioners viewed the alleged violation as a lesser one.
“We were notified very quickly,” commissioner Brad Hill said. “It was a game in the future. It was shut down immediately. The bet was taken back. That's a civil penalty, in my view.”
