DraftKings In Regulatory Trouble In Home-State Massachusetts

DraftKings, one of our best sports betting apps, is facing the wrath of regulators in its home state of Massachusetts after two separate incidents of breaching the state's legal sports betting rules were reported.

On Thursday, it was reported that the Massachusetts Gaming Commission (MGC) had found incidents of DraftKings customers using credit cards to fund their sports betting accounts. It is against the law to fund Massachusetts sports betting apps with credit cards.

The latest trouble comes after a report last week of a possible class action lawsuit in the Bay State over what has been called misleading promotions from the sports betting behemoth. Advocacy groups are calling out the structure of DraftKings’ typical welcome bonus.

The latest issue

The Massachusetts Gaming Commission has agreed to hold an adjudicatory hearing for DraftKings Massachusetts in the new year after it was found that the legal sports betting provider allowed users to fund sports betting accounts in the state with credit cards from March 10, 2023, through July 13, 2023. 

Placing sports wagers or funding a sports betting account with credit cards is prohibited by Massachusetts sports betting rules. Before being licensed in the state, DraftKings had assured Massachusetts regulators that it had the technology to stop such practices from happening.

DraftKings self-reported the issues to the Massachusetts Gaming Commission on May 31st. The company admitted that 218 DraftKings customers could make 242 bets to the tune of $83,663.92 thanks to what is being called “out-of-state credit card funds.”

It appears safeguards against such activity were never enacted in the Massachusetts market at first launch. Once safeguards were installed with DraftKings software, they were ineffective and still allowed some to fund and ultimately place sports wagers from accounts funded by credit cards.

A second attempt to close the software loophole was eventually effective, but not after a host of bettors slipped through the cracks.

According to Eileen O’Brien, Massachusetts Gaming Board, the DraftKings error was more than a slip-up.  “For me, this is egregious. It needs to be an adjudicatory hearing. I just would add that this is a violation of the the statute. Not just the regs — the statute,” she said. 

As mentioned, the adjudicatory hearing is slated to take place early next year.

Promotional issue

DraftKings Massachusetts also found itself in hot water at Thursday's Massachusetts Gaming Commission meeting over a possible class action lawsuit over what has been deemed misleading promotions. Many bettors in the state have undoubtedly taken advantage of Massachusetts sportsbook promos.

This issue surrounds DraftKings' $1,000 sign-up bonus for new customers in the Massachusetts market. The fine print in the offer is what is being challenged. To take advantage of the $1,000 bonus, customers would have to deposit at least $5000 over 90 days and bet at least $25,000 on bets of -300 or longer.

The potential suit questions DraftKings’ lack of transparency about the steps new customers would take to realize the full gravity of the Bonus.

The $1,000 Bonus structure is fairly common for DraftKings in the American market. The Massachusetts challenge will be heavily scrutinized across the country and will be of interest to sportsbooks in the Massachusetts market and around the nation.

And while they were at it....

Fanatics Sportsbook Massachusetts also came under fire at Thursday's MGC meeting. The company briefly allowed bets for the Fenway Bowl between Boston College and Southern Methodist on Dec. 28, breaking the rule surrounding bets on local college teams.

The wagers were only taken for one day after an employee manually included the game on Massachusetts' sports betting menu. One bet for $50 was taken and refunded after the error was noticed by DraftKings staff.

No action was taken but acknowledgement of the mistake may have had a desired affect.