MA sports betting regulators held a lengthy hearing on Wednesday over bets DraftKings allowed users to place via out-of-state credit card funds, a practice they said was explicitly banned under Massachusetts law.
The hearing continued a previous meeting, revealing new details about internal missteps and misinterpretations from DraftKings that allowed prohibited Massachusetts sports betting transactions to persist for months.
Users circumvented ban
DraftKings first identified the issue in May 2023, when the company realized that while Massachusetts users were prevented from funding their accounts with credit cards directly, many were circumventing the ban.
Users deposited funds via credit cards in states where the practice is legal and then crossed into Massachusetts to place bets, executives with DraftKings testified.
From March 2023 to February 2024, 218 users placed 1,160 bets totaling over $83,000 using this loophole. Although DraftKings believed it had fixed the issue in July 2023, further violations occurred, culminating in pool entries funded by credit cards.
MA sports betting rules misinterpreted
DraftKings employees incorrectly interpreted the state’s regulations, according to Kevin Nelson, its senior manager of regulatory operations. He and others assumed the ban only applied to funds deposited while customers were physically located in Massachusetts.
The Massachusetts Gaming Commission sharply criticized this misinterpretation, with Commissioner Eileen O’Brien asking Nelson to identify language in the regulations supporting his claim.
“It’s not there, is it, Mr. Nelson?” O’Brien said.
Investigations and Enforcement Bureau counsel Zachary Mercer pointed out that despite ongoing communication with the MGC, the company did not address the interpretation that led to the violations.
DraftKings confident in correction
The company’s initial fix did not undergo “end-to-end testing,” which allowed the issue to persist, DraftKings Director of Product Jeremy McAuley said.
He outlined preventive measures DraftKings has implemented since, including stricter testing protocols and added oversight from responsible gaming teams.
“While we tried to address the issue quickly, we recognize now that assumptions and inadequate testing compounded the problem,” McAuley told the commission.
He expressed confidence that the system is now working as intended to prevent the issue.
Next steps in MA sports betting hearing
Before concluding the meeting, Commissioner Chair Jordan Maynard praised DraftKings for self-reporting the issue to the commission.
“We appreciate DraftKings and the self-reporting of this matter. I will be clear, across the board, we want to encourage self-reporting and good relationships with the gaming commission. I don’t care if it’s $4 or one penny, we appreciate it,”
The MGC adjourned without reaching a decision but asked DraftKings to submit a closing brief summarizing its compliance efforts and addressing issues raised during the hearing. An eventual ruling could include financial penalties, enhanced compliance requirements, and/or more severe actions.
DraftKings fined for Ohio violations
Also on Wednesday, the Ohio Casino Control Commission fined DraftKings $425,000 for multiple violations, including offering prohibited prop bets on NCAA athletes and allowing users to fund accounts through an unapproved method.
Ohio regulators stated that DraftKings had been made aware of the rules prohibiting player proposition wagers and noncompliant deposit methods before the violations occurred. Despite this, the company continued the practices until March 2024, when the commission implemented changes to the wagering catalog and enforced stricter compliance measures, according to a press release.
The deposit issue concerned DraftKings allowing accounts to be funded with cash at non-gaming locations nearly 41,000 times from January 2023 through March 5, 2024. Those deposits totaled more than $2.5 million.
In addition to the fine, DraftKings was required to ensure its personnel received training on Ohio’s sports gaming laws, policies, and approved internal controls to prevent future violations.
