The Massachusetts Gaming Commission has just handed down its biggest sports betting penalty yet, hitting DraftKings with a $450,000 fine for letting customers fund bets with credit cards, which is against state law.
According to the body, DraftKings failed to stop this kind of funding between March 10, 2023, and February 13, 2024. In that time, 218 customers placed a total of 1,160 improper wagers, using $83,667.92 in credit card deposits.
The decision comes as Connecticut also investigated the company, with DraftKings agreeing to return $3 million to 7,000 Connecticut consumers who participated in certain bonus offers.
DraftKings slapped with largest sports gambling fine in Massachusetts
“This series of non-compliance incidents was a serious violation of statute and regulations upon which the Commission provided express advance instruction to DraftKings,” the commission wrote in its July 25 decision. Even though the rule against using credit cards was clearly spelled out and discussed publicly more than once, DraftKings still allowed it to happen.
It’s been 1 year since we launched @DKSportsbook in Massachusetts, and we’re still celebrating!
Since January 2023, we have launched in Vermont, Ohio, Kentucky, Massachusetts, and Maine and will launch in North Carolina tomorrow. pic.twitter.com/pQuag7HKXO
— DraftKings News (@DraftKingsNews) March 10, 2024
The issue came down to ongoing communication failures inside the company and technical fixes that didn’t work as promised. DraftKings first told the commission about the problem on May 31, 2023, admitting it had been happening since their launch in March. Two more incidents were later reported on July 14, 2023, and again on February 13, 2024.
In July 2023, Paul Liberman, DraftKings’ president and co-founder, signed a sworn statement claiming the company “is prohibiting any use of credit cards to place Sports Wagers on its sports wagering platform in Massachusetts, including without limitation funds deposited into a player wallet using a credit card while located outside of Massachusetts.” Still, the issue didn’t go away, and credit card-funded wagers kept slipping through.
‘Internal communication breakdown’
DraftKings said the problem started with “an internal communication breakdown” and claimed that an email from MGC Executive Director Karen Wells was misunderstood. But the commission didn’t buy that. They stated, “Despite framing the matter as a ‘misunderstanding’ or an ‘anomalous series of events,’ it is undisputed that DraftKings’ actions and inactions constitute both statutory and regulatory violations.”
What really raised eyebrows was the fact that DraftKings already had a system in place to block credit card use in Tennessee but didn’t apply it in Massachusetts. “This structure appears to have permeated these non-compliance events,” the commission noted.
Besides the fine, DraftKings now has a list of tasks to complete. They have to show proof that the $83,667.92 was returned to the 218 customers affected. They must also create a corrective action plan to improve internal communication and prevent this kind of violation from happening again.
And on top of that, they’re required to hire an independent third-party auditor to examine any credit card-funded activity between February 23, 2023, when DraftKings got its temporary license, and March 10, 2023, when betting officially launched in the state.
The commission acknowledged that DraftKings “self-reported to the Commission” each time it discovered a problem, but stressed that these reports came “after repeated representations by DraftKings that fixes they had implemented were later reported to have failed.”
The ruling was signed off by all five commissioners: Jordan Maynard, Bradford R. Hill, Eileen M. O’Brien, Nakisha L. Skinner, and Paul Brodeur. In its conclusion, the commission said, “Information [must] be promptly and widely shared internally within the operator’s organization.” It added, “The Commission is further seriously troubled by the level of internal miscommunication at DraftKings.”
The fine is said to be the largest enforcement action since sports wagering became legal in Massachusetts in 2023.
ReadWrite has reached out to DraftKings for comment.
Featured image: DraftKings
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