DraftKings has agreed to pay a $200,000 fine to the US Securities and Exchange Commission (SEC) for violating the regulator’s fair disclosure policies. On September 26, the SEC charged DraftKings with violations stemming from two social media posts made using the account of DraftKings CEO Jason Robins in July 2023. While it agreed to settle with the SEC, DraftKings did not admit or deny the findings.
The fair disclosure regulations prohibit publicly traded companies like DraftKings from revealing previously non-public information unless all investors have equal and simultaneous access to the information.
Under DraftKings’ compliance policies, the company observes a “quiet period” following the end of each financial period. During that time, employees are prohibited from discussing financial and operational results. The period runs until the first full day after DraftKings’ quarterly or annual report filing with the SEC.
Social Media Posts Allegedly Revealed Info Prematurely
According to the Commission, DraftKings’ public relations firm published two posts on July 27, 2023, on Robins’ X and LinkedIn accounts. A 5:52 p.m. post on X stated:
There’s massive potential for growth in new markets—but we’re still seeing really strong growth in existing states. 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.
A similar message appeared on Roberts’s LinkedIn account shortly afterward. Within half an hour of the X post, DraftKings’ communication team instructed the public relations firm to remove the posts. They were removed shortly after.
However, according to the SEC, even though DraftKings recognized the error, the company did not immediately disclose the information through proper channels to correct the selective sharing. Instead, it allegedly waited until August 3 to release the information officially alongside its Q2 results. That delay is what the SEC considered to be a violation of the fair disclosure rules.
The Latest Fine For DraftKings
The SEC settlement is one in a series of fines that DraftKings has paid to regulators in the past several months. About a month ago, the Connecticut Department of Consumer Protection fined DraftKings $19,000 for failing to report a slot glitch quickly enough. White Hat Gaming, the developer of the affected slot, Deal or No Deal: Banker’s Bonanza, also received a smaller fine of $3,500.
Meanwhile, DraftKings had to pay a $100,000 fine in July in New Jersey. That was because the operator had reported inaccurate sports betting data to the state. The errors involved overstating the amount of revenue from parlay bets while understating other wager categories. As a result, Resorts Digital, the online arm of Resorts Casino, made errors in its tax returns from December 2023 to February 2024.
Social Media is a Compliance Minefield
DraftKings is not alone in getting in trouble with the SEC over posts on X.
In fact, the platform’s owner is himself among those who’ve fallen victim to the pitfalls of oversharing. In 2018, Elon Musk landed himself in hot water with the regulator after posting his plans (on what was then called Twitter) that he had secured funding to take Tesla private. According to the SEC, Musk had not discussed specific terms with potential financial partners and knew the transaction was uncertain. However, his tweet resulted in a jump in Tesla’s stock price. Musk eventually settled the investigation, agreeing to pay $20 million and step down as Tesla Chairman. Tesla also had to pay a $20 million penalty.
Meanwhile, in 2022, the SEC accused eight social media influencers over a $100 million securities fraud scheme for manipulating stock prices through X and Discord. According to the regulator, the seven defendants had promoted stocks to their followers on X. While encouraging followers to buy, they secretly sold their shares once prices rose.
Gambling operators also sometimes get pushback from the community for tweets that cross—or appear to cross—the lines of responsible gambling messaging. And DraftKings’ co-founder Matt Kalish once made his company’s rivalry with FanDuel Sportsbook a little too personal.
About the Author
