Two social media posts by the CEO of DraftKings talking about the company’s “really strong growth” a week before a 2023 earnings release violated SEC regulations, the agency announced Thursday.
DraftKings was fined $200,000 for violating Section 13(a) of the Exchange Act and Regulation FD. The company did not admit or deny the findings but agreed to pay the fine, cease and desist from future similar violations, and comply with certain provisions including “required Regulation FD training for employees who have corporate communications responsibilities.”
Legal Sports Report first reported on the situation and potential fallout shortly after the incident, which took place in late July 2023. At the time, a securities expert described the message as “problematic.”
“DraftKings is pleased to have this matter resolved,” a spokesperson told LSR.
DraftKings violation explained
According to the SEC, DraftKings’ PR firm published a post first to Jason Robins‘ personal Twitter account and later to his LinkedIn account that commented on the company’s growth in the second quarter.
DraftKings asked for the posts to be removed shortly after they were published. Growth from vintage states was a significant part of the company’s earnings presentation made the following week.
“According to the order, even though Regulation FD required DraftKings to promptly disclose the information to all investors after it was selectively disclosed to some, DraftKings did not disclose the information to the public until seven days later when it announced its financial earnings for the second quarter of 2023,” according to the ruling.
Regulation FD, or Fair Disclosure, requires material nonpublic information to be made available to everyone at the same time.
SEC: essential info is shared ‘fairly’
Social media can be used to make material nonpublic information known, but only if investors know those accounts could or would share the information.
Neither Robins’ Twitter nor LinkedIn accounts were publicly identified as places to receive such updates.
“Information about growth in sales as a public company can be extremely important to investors,” said John Dugan, Associate Director for Enforcement in the SEC’s Boston Regional Office. “It is essential that, when companies disseminate material, nonpublic information, they do so fairly to all investors.”
