DraftKings faces hearing in Massachusetts over loan deposit violations
DraftKings faces a Massachusetts court hearing for violating laws regarding how bettors deposit and fund their sports betting accounts. All parties involved in the legal review of the alleged breach will attend the court hearing.
In late May, DraftKings self-reported to the Massachusetts Gaming Commission (MGC) that it inadvertently allowed sports betting customers to deposit funds into their accounts using foreign credit cards. Massachusetts sports betting laws prohibit sportsbooks from allowing the use of credit cards for wagering. Casinos are also prohibited from allowing individuals to use credit cards to play games.
DraftKings told the state betting agency that it mistakenly allowed customers to fund bets on credit between March 10 and July 13, 2023. On March 10, online sports betting became legal in Massachusetts on six platforms.
On May 31, DraftKings notified sportsbook MGC Director Bruce Band that the company failed to block the use of the credit card. The company told Band it has installed a software solution.
It was later discovered that the software update did not resolve the issue and credit cards continued to be accepted until another fix was implemented on the evening of July 13th.
Request for Hearing
On August 1, DraftKings submitted a report to the MGC’s Bureau of Investigations and Enforcement detailing the extent of its regulatory deficiencies. The sportsbook said a credit card error resulted in 218 customer accounts being able to make deposits using credit cards. These customers placed 242 bets totaling $83,663.92.
Zachary Mercer, an attorney with MGC's Bureau of Investigations and Enforcement, said DraftKings attributed the incident to "internal miscommunication." Since the issue could not be resolved immediately upon discovery, DraftKings representatives attempted to explain to the state why the internal communication glitch persisted.
[DraftKings] determined that the root cause of the failed update was a lack of complete functional testing," Mercer told MGC on Thursday. "DraftKings explained that the failed update required changes to three internal functions - the financial platform, the account platform and the sports betting product. "
Mercer said DraftKings' in-house technology team only charges credit cards for sports bets. After learning that the problem persisted, the team discovered the error and updated the software on the finance and accounting platform.
To me, this is outrageous. “This has to be a judicial hearing,” MGC Commissioner Eileen O’Brien said.
Four of O'Brien's fellow commissioners agreed, voting unanimously to refer the matter to a court hearing.
The Massachusetts Gaming Expansion Act of 2011 gave the MGC “all necessary powers” to “conduct judicial proceedings and make regulations.”
DraftKings also faces a Massachusetts class action lawsuit alleging that the sportsbook deceived customers into signing up through a "$1,000 bonus" promotion.
Unprecedented Violation
MGC President Cathy Judd-Stein agreed with O’Brien that DraftKings has serious flaws in allowing the use of credit cards. She asked Bender if there had been any previous cases of sports betting or casino licensees violating credit card requirements, and Bender responded: "No."
"I'm asking that this be prioritized," Judd-Stein told her staff as the court hearing schedule was set.
As a government agency, the MGC has the power to impose financial penalties for regulatory failures and violations.
In April 2019, the MGC fined Wynn Resorts a staggering $35.5 million for failing to notify the MGC that its eponymous founder, Steve Wynn, had been accused of sexual misconduct when he applied for a casino license. . MGC spent $85 million to allow Wynn Resorts to retain its casino license. Wynn opened Encore Boston Harbor, a $2.6 billion casino in Everett in June.
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Source: www.casino.org
