DraftKings has agreed to pay a $200,000 civil penalty after being charged by the US Securities and Exchange Commission (SEC) for selectively disclosing material, nonpublic information to investors via CEO Jason Robins’ social media accounts.
Within its release, the SEC noted that since the same information wasn’t disclosed to all investors, this violated Regulation Fair Disclosure, so a civil penalty was issued to DraftKings to settle the charges.
In an order dated 26 September, the SEC stated that on 27 July 2023, DraftKings’ public relations firm published a post on Robins’ personal X and LinkedIn accounts.
The X post read: “There’s massive potential for growth in new markets — but we’re still seeing really strong growth in existing states. Our 2018-2019 state vintage grew over 80% on the revenue basis year-over-year in Q1. With those numbers, we expect robust growth even without new states opening.”
A similar statement was also published on the DraftKings CEO’s personal LinkedIn account on the same day. Yet, at the time of those posts, the operator hadn’t published its second quarter 2023 financial results, nor had it otherwise publicly disclosed certain information contained in the posts.
Shortly after the posts were published, the public relations firm removed both posts at the request of DraftKings.
Following an SEC investigation, DraftKings was charged with violations of Section 13(a) of the Exchange Act and Regulation FD.
The order stated that even though DraftKings was required by Regulation FD to promptly disclose the information to all investors after it was selectively disclosed to some, the information was not disclosed to the public until seven days later when the operator’s Q2 2023 financials were published.
“Information about growth in sales as a public company can be extremely important to investors,” commented John Dugan, Associate Director for Enforcement in the SEC’s Boston Regional Office.
“It is essential that, when companies disseminate material, nonpublic information, they do so fairly to all investors.”
The SEC added that “while companies can use social media outlets to announce key information in compliance with Regulation FD, investors must first have been alerted about which social media will be used to disseminate such information”.
“Without admitting or denying the order’s findings, DraftKings agreed to cease and desist from future violations of the charged provisions, pay the civil penalty referenced above, and comply with certain undertakings, including required Regulation FD training for employees who have corporate communications responsibilities,” read the SEC’s statement.
Betting and Gaming Council CEO Grainne Hurst has rallied against ‘fantasy economics’ driving the calls for tax hikes on the gambling sector.
A Guardian report revealed that Rachel Reeves, Chancellor of the Exchequer, is seriously considering the proposals of two think tanks to raise gambling taxes as the search for extra funding continues for the embattled government
Underlining just how significant the hike would be on the sector, Hurst said: “The current speculation around taxes is being driven by anti-gambling campaigners, based on fantasy economics, and are simply not credible.
“I want to be very clear with the government, any further tax rises now will not only slam the brakes on growth for our sector, but it will threaten jobs and completely derail horse racing.
“Our industry is at a crossroads as we seek to implement the measures contained in the White Paper, measures that will cost our sector over £1bn. We also can’t ignore the new levy on research, prevention and treatment for problem gambling, which will raise £100m a year from bookmakers.
“After so many years of uncertainty, we need stability to deliver sustainable investment, not further change which threatens to undo that contribution.”
Online casino games are thought to be at the centre of potential tax hikes, as part of a campaign pushed by multimillionaire Labour donor, Derek Webb.
The Institute for Public Policy Research (IPPR), which put forward the proposals, said as much as £2.9bn could be raised now, a figure growing to £3.4bn by 2030 through an increase in remote gaming duty to 50%, more than double the 21% it currently sits at.
Additionally, another think tank backed by Webb, the Social Market Foundation, is reportedly looking at a proposal that would have a smaller impact on the industry, but still strengthen government finances.
However, Hurst also issued a stark warning on the black market: “Any new taxes now risks giving a leg-up to the lurking menace of the black market, which is hoovering up disaffected customers with eye-catching offers but none of the protections that are in place in the regulated market.
“Customers have been hit hard for years, with increasing pressure on the cash people have available to spend on the hobbies they enjoy, once bills and taxes are paid. Now is not the time to ramp up that pressure.
“Betting and gaming remains a hugely popular pastime in this country, with around 22.5 million people having a flutter each month, and it is enjoyed safely by the overwhelming majority. Our members are a Great British export and genuine global leaders, delivering enormous economic goods in city centres, on high streets and in the growing online sector.
“We want to partner with the government to see the right, proportionate regulations, and a stable tax regime, which doesn’t hit customers, doesn’t raise the attraction of illegal operators and doesn’t derail the horseracing industry, but instead delivers on the government’s growth agenda.”
