DraftKings Has A Problem It Can’t Seem To Fix In Massachusetts

DraftKings continues to allow customers to fund some online sports betting accounts with funds that originated from credit card deposits in other states, Massachusetts Gaming Commission staff revealed Wednesday.

The news came at what should have been the start of an adjudicatory hearing on the issue, but commissioners decided to delay the hearing until the Investigations Enforcement Bureau (IEB) could complete a look into the latest transgressions.

The issue first came to light last May, when the IEB was alerted that DraftKings, which is based in Boston, had allowed Massachusetts accounts to be funded with credit card deposits made outside of the state beginning the first day online betting was allowed. The breach lasted almost three months, from March 10 to May 30, 2023. It is illegal to fund a wagering account with a credit card in Massachusetts.

Following the initial breach, DraftKings assured the MGC that it had rectified the problem with a software update, but last July, the company discovered the update was “ineffective.” DraftKings attempted to fix the issue again in July and continues to struggle with the issue. MGC deputy counsel Justin Stempeck shared Wednesday that DraftKings reported two additional breaches, one in the “August-September range” and one in January 2024.

After sharing the news, Stempeck told the commission on Wednesday it could move forward and “get as far down the road as we can,” with the understanding that the hearing would have to be paused and completed at a later date so IEB could investigate the latest breaches or postpone. No vote was needed, and commissioners were unanimous in their decision to delay the hearing.

Continued violations ‘troubling’

During the first three-month breach, DraftKings had shared that 218 customers placed 243 bets totaling $83,663.92 using funds that resulted from its error pertaining to credit cards. The details of the latest violation were not shared — and possibly aren’t yet known — during the meeting.

“It makes the most sense to me to put this to bed all at once,” Commissioner Jordan Maynard said, when asked his thoughts. “I don’t even think it’s in the best interests of our licensee even to come in and do this over and over again.”

Massachusetts Gaming Commission was made aware Thurs that DraftKings allowed credit card deposits made in other states to be used to fund Massachusetts sports betting accounts. Funding accounts with credit cards is illegal in the Bay State. (click pic)https://t.co/7Xt0i3OgB9

— Sports Handle (@sports_handle) December 14, 2023

Maynard’s fellow commissioners echoed his sentiments, and added that they are very concerned about the continued breaches.

“It is troubling. We first learned about this issue about a year ago … and over the course of the year, there have just been new and frequent developments,” Commissioner Nakisha Skinner said. “So I want to be assured that we are having all the facts before us at once, so we can consider them all at once rather than piecemeal.”

Commissioner Eileen O’Brien suggested involving the MGC’s information technology department in the current investigation, so commissioners could better understand what has been happening and how DraftKings could come into compliance.

No date for a new adjudicatory hearing was set.

Compliance in state a struggle for DK

At a December meeting, O’Brien called the credit-card violations “egregious.” The violations are the first by any operator that break the law rather than run afoul of regulations. Lawmakers made it illegal to use credit cards to fund accounts, and while it is currently unclear why or how the violations continue to happen, DraftKings is clearly having an issue with its digital wallet.

Operators tout the ease of having one wallet that can be used in multiple legal jurisdictions, but DraftKings’ challenges make it clear that the technology also comes with challenges for operators.

DraftKings has struggled to stay in compliance with Bay State regulations since mobile operators went live last March. In October, the company mispriced an NBA prop, then asked for and was granted relief from the MGC because of the “obvious error.” Prior to that, DraftKings went before the commission in May 2023 after it was revealed that it had accepted wagers on a little-known tennis league that is not part of the state’s bet menu.