DraftKings Under Fire for Alleged State Law Violation in Massachusetts
The leading US sports wagering operator, DraftKings, is facing allegations of violating a Massachusetts state law that governs the use of credit cards for placing bets with operators across the state. The Massachusetts Gaming Commission (MGC) is set to hold an adjudicatory hearing in the near future to determine the penalty for the alleged breach.
According to reports by Sports Handle, DraftKings allegedly allowed credit card deposits made in other states to fund sports betting accounts active with its operations in Massachusetts. The MGC believes that this activity constitutes a violation of both gambling regulations and state law. Commissioner Eileen O’Brien called the situation “egregious” and expressed her belief that it warrants an adjudicatory hearing. Commissioner Jordan Maynard added that it is not just a violation of regulations, but also of the statute itself.
The allegations state that DraftKings permitted the use of credit card deposits for sports betting in the state from March 10 to May 30, 2023. The operator assured the commission on May 31 that its proprietary wallet and geolocation services would lock credit card funds from other states, but failed to follow through. It wasn’t until June 21 that the software was updated, and the out-of-state funds were reportedly locked, only to be discovered as ‘ineffective’ on July 13.
DraftKings reported that the software update failure was a result of internal communication failures. It acknowledged that appropriate safeguards were not in place upon the launch of the wagering campaign and identified the root cause as a lack of complete functionality testing. The company has since taken comprehensive corrective action, including complete functionality testing after software updates.
During the four-month window, DraftKings accepted 243 bets from 218 customers, totaling $83,663.92, which allegedly referred to the company’s failure related to credit card deposits.
In a separate incident, the MGC was made aware of a self-reported failure by Fanatics Sportsbook, which had mistakenly accepted bets for a game between Boston College and Southern Methodist outside of the permitted hours. The commission did not take immediate action, but announced that it will take these violations into consideration in the future.
As the MGC prepares for an adjudicatory hearing to address the alleged violations, DraftKings is facing scrutiny for its failure to comply with state gambling regulations, potentially leading to significant penalties for the operator.