DraftKings hit with $100,000 fine in New Jersey for "unacceptable" reporting errors
Operator parts with six-figure penalty after the DGE determined DraftKings had provided inaccurate data for three months between December 2023 and February 2024
DraftKings has paid a $100,000 (£78,105) fine to the New Jersey Division of Gaming Enforcement (DGE) for “providing materially inaccurate sports wagering data”.
The Boston-based operator provided incorrect data regarding the amount of money wagered on parlay bets, with the information filed under the Resorts Digital online sports betting licence.
In turn, the incorrect data sparked Resorts Digital to file inaccurate tax returns from December 2023 to February 2024.
DraftKings and Resorts signed a market access agreement to allow the former to go live in the Garden State with online sports betting in 2018.
In a letter sent to DraftKings on 17 June, DGE interim director Mary Jo Flaherty wrote: “DraftKings’ inaccuracies and failures were the direct cause of incorrect reporting to the Division and the subsequent publication of erroneous information.”
The letter continued, with Flaherty adding an emphatic statement that read: “These types of gross errors and failures cannot be tolerated in the New Jersey gaming regulatory system.
“They evidenced weaknesses in DraftKings’ business abilities and casino experience and unacceptable conduct in dealing with regulations and requisite reporting and financial systems.”
Flaherty’s letter, which was sent to DraftKings senior director of regulatory operations Jacob List, revealed the DGE had to post an amended version of its monthly press release documenting sports betting wagering statistics as a result of the incorrect data.
The regulator noted this was the first time the body has had to do so since 2011.
DraftKings rectified the error after being prompted by a follow up investigation from the DGE’s Office of Financial Investigations (OFI) in early March.
The DGE said it had become aware of sports betting statistic reporting issues by DraftKings in Illinois and Oregon and so notified the operator it suspected similar shortcomings in New Jersey.
DraftKings was notified in March that the DGE had discovered errors in the operator’s parlay reporting, with the DGE adding it was not notified of these inaccuracies by the firm but instead had to identify them itself.
When asked by the OFI for an explanation regarding the inaccurate reporting of sports betting revenue, DraftKings claimed the errors were a result of coding issues following an update to a “newly created database”, which generated the mis-categorisation of certain wagers.
As a result, DraftKings overstated parlay handle and understated other categories of wagers, according to the DGE.
New Jersey’s regulator also voiced its concern that DraftKings may have been aware of the issue as far back as mid-January but opted against informing the DGE.
In correspondence between the two parties from the end of March, DraftKings claimed the issue was not given “urgent prioritisation” and not reported in a timely fashion because it was not understood internally that the errors would impact taxable revenue.
April saw DraftKings inform the DGE that further amendments were required for the data for December 2023 through to February 2024.
The new filings were subsequently sent by Resorts Digital to the DGE and showed that DraftKings had revised 52 of the 60 data points relating to total win and handle, reflecting an error rate of 87% in the initial forms.
The DGE did note that DraftKings had reported an update to correct the coding error and also discussed the significance of reporting inaccuracies internally, along with the provision of further training for staff.
As made clear in Flaherty’s letter, the DGE wields the power to issue fines of up to $20,000 per violation, but in this instance DraftKings voluntarily offered to pay $100,000 – a proposal that was accepted by the DGE.
A DraftKings spokesperson told EGR: “We value our relationship with the DGE and are committed to ensuring compliance with all regulatory guidelines. There was an error in the reporting of our wagering mix breakdown to the state that we have corrected by implementing additional controls.”