Virginia Penalizes Betr Over Failure To Disclose Jake Paul SEC Investigation

September 5, 2023
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The Virginia Lottery has released settlement agreements with Betr and PointsBet over self-reported violations of state gaming regulations.
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The Virginia Lottery has released settlement agreements with Betr and PointsBet over self-reported violations of state gaming regulations.

Betr was fined $25,000 in mid-August after the company notified the lottery that, in the license application of co-founder Jake Paul, he had neglected to disclose the existence of a U.S. Securities and Exchange Commission (SEC) inquiry into an issue unrelated to gaming or sports betting.

Subsequent to this self-report on the problem, the lottery informed Betr of its concern that the failure to disclose this fact allegedly violated Virginia's sports-betting law and the lottery’s related regulations.

Paul, a professional boxer, social media influencer and co-founder of the sportsbook operator, reached a settlement with the SEC earlier this year for promoting cryptocurrency without disclosing he was paid to do so. 

Paul, 26, agreed to pay $101,887 to settle the SEC’s charge that he violated securities laws by promoting on Twitter a crypto-asset security that was being offered by Tron Foundation Limited called Tronix tokens.

In exchange for promoting the crypto-asset security, Paul was paid approximately $25,019, according to the six-page SEC order. Paul, at the time of his promotion, had approximately 3.8m Twitter followers.

Paul did not disclose that he was being paid to give publicity to a security by the entity offering and selling it to the public.

Paul’s failure to disclose this compensation violated Section 17(b) of the Securities Act of 1933, which makes it unlawful for any person to promote a security without fully disclosing the receipt and amount of such compensation from an issuer.

According to a four-page settlement, Virginia Lottery director Kelly Gee asserted that the failure to disclose the SEC’s investigation violated the state’s Sports Betting Law and gaming regulations, and “that these actions were sanctionable.” 

The lottery noted that Betr has taken corrective measures to ensure future compliance with the state law and gaming regulations.

In a separate settlement agreement, PointsBet has agreed to a $21,000 fine after self-reporting that the company had improperly accepted wagers on known results or unauthorized sporting events. 

PointsBet is licensed as a sports-betting supplier operating on behalf of permit holder Colonial Downs Group, which owns and operates Colonial Downs racetrack and Rosie’s Gaming Emporium.

PointsBet and Colonial Downs were issued licenses in November 2021, and PointsBet began accepting wagers in Virginia on December 15, 2021. 

Fanatics Betting and Gaming, a subsidiary of Fanatics Holdings, announced on Thursday (August 31) it had closed on Virginia and seven other states in its $225m acquisition of the U.S. business of PointsBet USA. The company did not announce plans for its operations in Virginia. 

Both settlements, signed by Gee, make it clear that if either company violates a term of their settlement agreement, the lottery may impose a sanction or penalty for the violation.

Betr received a sports-betting permit in Virginia earlier this year but its platform remains under review ahead of a forthcoming launch.

Gee, who has been director since June 2022, was appointed last week by Republican Governor Glenn Youngkin to serve as Secretary of the Commonwealth. She succeeds Kay Coles James, according to the governor’s office.

As of Monday (September 4), Youngkin has not named a new director of the Virginia Lottery.

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