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DraftKings has agreed to pay a $200,000 penalty to settle charges from the U.S. Securities and Exchange Commission (SEC) that it selectively disclosed non-public information via social media.
The SEC announced the charge and the settlement last week after finding that, in July 2023, DraftKings’ public relations team posted content on CEO Jason Robins’s X account and LinkedIn page that violated federal regulations that govern disclosures from public companies.
“There’s massive potential growth in new markets — but we’re still seeing really strong growth in existing states,” the company posted on Robins’ X account on July 28, 2023.
“Our 2018-2019 state vintage grew over 80% on the revenue basis year over year in Q1,” the post continued. “With those numbers, we expect robust growth even without new states opening.”
A post with similar language was also posted to Robins’ LinkedIn page.
Both posts were quickly deleted, with the post on X being removed within a half-hour of posting, according to the SEC order on the decision. Still, the company did not make a prompt public disclosure of the information contained in the posts.
According to the SEC, that information violated Regulation FD, which prohibits public companies from selectively disclosing material non-public information to persons outside the company.
“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 regional office, in a statement. “It is essential that, when companies disseminate material, non-public information, they do so fairly to all investors.”
The SEC also added that DraftKings’ internal policies regarding Regulation FD prohibit employees from discussing financial or operational results during a quiet period that runs from the last day of a quarter through the first full trading day after the company files its quarterly or annual earnings report with the SEC.
The company agreed to pay a $200,000 civil penalty to settle the charges without admitting or denying the findings. It also resolved to undertake required training on Regulation FD for employees with corporate communications responsibilities.
“DraftKings is pleased to have this matter resolved,” a company spokesperson told Vixio Gambling°ϲʹ.
Meanwhile, DraftKings also still faces potential enforcement action in Massachusetts after an adjudicatory hearing before the Massachusetts Gaming Commission on September 19 on charges that the company allowed hundreds of users to bet with funds deposited with a credit card in the state.
Massachusetts does not permit customers to use credit cards to fund wagering accounts, but the company self-reported last year that it had permitted players who had funded wagering accounts in other states, where credit cards are permitted, to then place bets using those funds in Massachusetts.
The company thought it had addressed the issue, which initially spanned from March through July 2023, but then allowed two additional wagers to be placed using credit card funds in February 2024.
The Massachusetts regulator has yet to take action following the hearing.
