Regulators in Massachusetts Show Favorable Response Towards DraftKings' Application
DraftKings Faces Regulatory Scrutiny in Massachusetts and Ohio
In a series of executive sessions, the Massachusetts Gaming Commission (MGC) has been reviewing the applications of several companies seeking tethered digital sports wagering licenses, with DraftKings being one of them. The review, which started on Wednesday and continues through next week, has covered various aspects of DraftKings' operations, including its partnership with the UFC and ex-fighter Conor McGregor, its consumer database in Massachusetts, diversity, and responsible gaming practices.
During the review, Commission Eileen O'Brien raised concerns about the "free bet" language used in DraftKings' advertising and marketing, questioning whether these offers come with additional conditions for consumers. In response, DraftKings Marketing Director Stephanie Sherman stated that anything labeled a "free bet" is truly free, with no additional conditions on the consumer.
The review has also delved into DraftKings' past regulatory violations. In New Jersey, the company was fined $100,000 for submitting inaccurate data on parlay bets to regulators and an additional $20,000 for accepting bets on unapproved Russian basketball games during 2020–2021. In Colorado, DraftKings was fined $90,000 for allowing illegal bets on the Mike Tyson vs. Jake Paul fight and for offering prohibited college player prop wagers. The company also failed to promptly disclose the incident, resulting in a $50,000 additional fine. DraftKings acknowledged these issues and stated that it has taken steps to strengthen compliance processes in coordination with the respective commissions.
In Connecticut, DraftKings paid a $3 million penalty for lack of transparency related to promotional bonus wagering requirements impacting over 7,000 customers between October 2021 and January 2023.
The Ohio Casino Control Commission last week flagged DraftKings and two other operators around failures related to responsible gaming messaging and the use of the term "risk-free" for bets. This is not the first time DraftKings has faced scrutiny in Ohio, as it will also update the Investigations Enforcement Bureau about a pending violation.
Despite these regulatory issues, DraftKings, as the only Massachusetts-based operator applying for a license, expects to hire 25 new employees in the state should it get licensed, and it expects to add more than three times that number of new jobs in the company at large. DraftKings' chief people officer, Graham Walters, mentioned that increasing the presence of women on staff is a "significant focus" and that the company has been investing in hiring more women.
The MGC has reviewed applications from Bally's, FanDuel, Betr, DraftKings, Digital Gaming, and PointsBet. Under the new state law, the commission can issue up to seven standalone mobile licenses, but only six companies have applied. The commission will not vote during the review period, which extends through next week.
It is important to note that DraftKings currently holds licenses and operates in several regulated states such as New Jersey, Michigan, Pennsylvania, Connecticut, and West Virginia, adhering to their respective regulatory requirements and maintaining compliance with strict legal and security standards. However, the company has faced multiple state-specific regulatory violations and fines indicating past compliance issues. There is no publicly available information from these results about a recent data breach affecting DraftKings.
[1] New Jersey Division of Gaming Enforcement [2] Colorado Division of Gaming [3] Connecticut Department of Consumer Protection
- The review of DraftKings' application by the Massachusetts Gaming Commission (MGC) has also investigated their partnerships, such as the one with the UFC and ex-fighter Conor McGregor.
- DraftKings' advertising and marketing strategies, including the use of "free bet" language, have come under scrutiny during the MGC's executive sessions.
- In various states, DraftKings has faced regulatory violations beyond Massachusetts; one example is the $100,000 fine in New Jersey for inaccurate data submission and unapproved bets on Russian basketball games.
- The company has faced additional regulatory fines in Colorado for failures related to responsible gaming practices and illegal bets.
- In the Ohio Casino Control Commission, DraftKings and two other operators have been flagged for problems with responsible gaming messaging and the use of the term "risk-free" in their promotions.
- Overcoming regulatory issues, DraftKings plans to hire 25 new employees in Massachusetts and increase the presence of women on staff if they obtain the license.
- Despite past regulatory violations and fines in states like New Jersey, Colorado, and Connecticut, DraftKings continues to operate in a number of regulated states, underscoring the casino-and-gambling industry's significant responsibility to adhere to legal requirements and maintain high standards of security.
