DraftKings will face a hearing in Massachusetts after the company admitted to accepting over $83,000 in credit card wagers in violation of the state law.
The Massachusetts Gaming Commission (MGC) agreed to schedule an adjudicatory hearing for the Boston-based sportsbook operator after the company reported that it had allowed 218 players to wager $83,663 via credit card deposits between the company’s launch on March 10 through to July 23.
Wagering on credit cards is prohibited in the state under sports-betting legislation adopted in 2022.
During the licensing process, DraftKings had informed the commission that its shared wallet technology would prevent players from using credit card funds deposited outside of Massachusetts from being used in the state.
Zachary Mercer, enforcement counsel for the commission, said DraftKings notified the commission on May 31 that the appropriate safeguards were not in place upon launch.
In a further report filed on June 21, the company informed the commission that the issues had been corrected by a May 31 software update.
However, Mercer said, the company sent a new update on July 14 that explained the first software update was ineffective, and that DraftKings had continued to allow players to use credit card deposited funds until a new software update was implemented on July 13.
Mercer said the company attributed the mistake that led to the initial error as “internal miscommunication”, and that safeguards promised during the licensing process were based on capabilities in other jurisdictions, while guidance had not been provided to the company’s launch team.
The error on the software update, he said, was the result of a lack of complete functionality testing.
“DraftKings explained that the failed update required a change to three internal functions: the financial platform, the account platform and the sportsbook product,” Mercer said.
“However, the sportsbook product remedy was changed in process so that it would not have to rely upon the other two functions.
“Despite a change to the sportsbook remedy, the changes to the other two platforms were completed as initially planned,” he continued. “Due to a lack of corresponding change in the other processes, the remedy was rendered ineffective.
“This was not immediately detected due to lack of end-to-end functionality testing of the complete sportsbook product.”
For enforcement matters, the five-member commission can decide between issuing a civil penalty, sending the matter to its Investigations and Enforcement Bureau (IEB) for further investigation, or scheduling an adjudicatory hearing.
Several commissioners made their displeasure known in the process of calling for a hearing.
“For me, this is egregious,” said commissioner Eileen O’Brien. “I think it needs to be an adjudicatory hearing.”
O’Brien added that she wanted the unidentified person, whether a licensed individual or company qualifier, who made the initial representations to the commission to be notified of a potential non-compliance issue.
“This is a violation of the statute,” added Commissioner Jordan Maynard. “Not a [regulation]; the statute.”
No timeline was given for when a hearing will be scheduled, although commission chair Cathy Judd-Stein requested that the issue be prioritized, and asked that one of the issues in which the commission staff should look at is whether there would be potential recourse for the impacted players.
“I would suggest that at this point, we allow the IEB to do its work to prepare,” said the commission's interim executive director Todd Grossman. “As described, we will start to gather the evidence and begin to prepare the notices and schedule and see where we are consistent with this conversation.”
“If there's anything that is inconsistent, of course, we'll bring it back to [the commission’s] attention,” he continued.
“But I can envision that by looking at the materials we'll be able to schedule this including the witness lists and the exhibits, as we customarily have, and we'll be able to move forward.”