DraftKings knowingly allowed a VIP customer to proxy bet from its suite at the Super Bowl in Florida in 2020, according to a complaint from the NJ sports betting state regulator.
The operator has been ordered by the New Jersey Division of Gaming Enforcement (DGE) to pay a $150,000 penalty after breaching New Jersey rules around proxy betting.
The report also indicated DraftKings created a way for the bettor to skirt the rules repeatedly after first discovering proxy betting violations.
In a five-page report by the NJ Attorney General‘s office, DraftKings was found to have breached proxy betting rules on multiple occasions across 2019 and 2020. The penalty was authorized by New Jersey DGE director David Rebuck in an order dated February 18.
What is proxy betting?
Under New Jersey sports betting law, sportsbooks must reject bets from anyone “who is an agent or proxy for any other person.”
DraftKings was first implicated in the proxy betting dispute in November 2020. A Florida customer named Eric Stevens claimed he had a verbal agreement with DraftKings sportsbook director Johnny Avello that allowed him to bet with DraftKings in New Jersey via proxy.
DraftKings said at the time there was no verbal agreement in place.
“We never authorized the customer in question to engage in proxy betting,” the DraftKings spokesperson said. “Any claim by this customer that he received a verbal agreement from Johnny Avello to place out of state wagers on his New Jersey mobile account through a proxy is patently false.”
AG report find DraftKings wanting
However, the AG report, shared with LSR, concluded the operator knowingly broke proxy rules.
Per the report, Avello brought Stevens as a high-staking customer to DraftKings from his previous role at Wynn.
In 2019, Stevens had knee surgery, meaning he was unable to travel from Florida. However, he sent a proxy to New Jersey to bet with his account, wagering up to $50,000 on individual games.
DraftKings initially identified the proxy because a geolocation check noted the login from Florida, followed by bet placement minutes later in NJ.
Initial warnings, then more violations
DraftKings subsequently issued a written warning to Stevens in October 2019. However, the operator verbally told Stevens he could continue as long as there was a two-hour gap between the login and bet, according to the report.
Coincidentally, two hours is the rough flight time between Florida and New Jersey.
In a subsequent incident, the operator hosted Stevens in a suite at the Super Bowl in Florida. There, he was betting on the game via proxy “in the presence of, and with knowledge of, DraftKings employees,” the report said.
Stevens later sent his proxy to bet in Pennsylvania to qualify for special bonuses.
DraftKings has taken corrective actions
On Thursday, DraftKings said in a statement to LSR:
“We strive to continuously improve our systems to detect violations of our terms of use. In this instance, our systems failed to detect the violation of our terms of use. We have taken corrective action to address that.”
Along with the $150,000 fine, DraftKings was ordered to install “detailed training procedures” for staff around proxy betting.
The operator also closed Stevens’ account permanently.
DraftKings slip-ups
The Nasdaq-listed operator has been rapped across the knuckles a few times by the DGE in recent times.
Last year, the sportsbook paid a $10,000 civil penalty in New Jersey for sending “promotional mailings” to 11 self-excluded individuals.
Similarly, in 2019, the DGE gave DK a $2,000 civil penalty for sending promotional emails to self-excluded customers.
