DraftKings self-reported a regulatory breach of allowing customers to fund their accounts using credit cards between March 10, 2023, through July 13, 2023.
Wrath of Mass
Boston-based DraftKings is getting no break from its home state regulators after allowing 218 DraftKings customers to place 242 wagers in the combined amount of over $83,000 funded by “out-of-state credit card funds.”
Massachusetts sports betting regulations prohibit any account from being funded through credit cards. Debit cards are fine as the cash must be available to deposit, but credit cards allow a bettor to use funds they are borrowing and could lead to problem gambling and suffocating debt.
DraftKings had convinced the Massachusetts Gaming Commission before the launch that its proprietary wallet service and geolocation tracking system would ferret out any funds that had been deposited via a credit card.
This mechanism was supposed to be in place for all online sportsbooks operating in the Bay State, but DraftKings first reported the breach on May 31st, stating it began on March 10th. However, the first fix didn’t work and the breaches continued until July 13th when the second coding patch corrected the error.
Needless to say, the powers that be were not happy and made no bones about expressing their displeasure. “For me this is egregious, and I think it should be an adjudicatory hearing,” Commissioner Eileen O’Brien said.
Commissioner Jordan Maynard noted: “I just would add that this is a violation of the statute. Not just the regs — the statute.”
DraftKings staff attorney Zachary Mercer, who presented the report to the commission, acknowledged that “appropriate safeguards were not, in fact, in place, upon launch.”
Class Action Suit Against DraftKings
DraftKings has not only been taken to task regarding the credit card fiasco but is also the defendant in a class action suit about its advertising practices. The Public Health Advocacy Institute (PHAI) announced they had filed a class-action lawsuit against DraftKings in Massachusetts’s Middlesex Superior Court on behalf of two Massachusetts bettors, Shane Harris and Melissa Scanlon, stating the online sportsbooks’ advertising was misleading and deceptive.
The crux of the lawsuit is that the advertising led bettors to believe they would receive a $1000 bonus after depositing into their DraftKings account.
“Shane and Melissa are typical of many thousands of people in Massachusetts who were misled by the bonus offer and would not have signed up had they understood DraftKings’ unfair and deceptive requirements,” PHAI Executive Director Mark Gottlieb said in a release.
The $1000 bonus is predicated on a customer depositing $5000 with a 5x rollover (wagering $25,000 in incremental bets) that must be fulfilled within 90 days of the deposit.
But that stipulation was not made clear according to the lawsuit, which states, “DraftKings knew, or should have known, that its advertisement and promotion was deceptive to their target customers, who were new to sports betting and were extremely unlikely to understand the gambling lingo in the fine print.”
According to a DraftKings spokesperson, the company intends to “vigorously defend” itself against the allegations.
“As a customer-first organization, DraftKings takes consumer protection and responsible gaming seriously,” DraftKings said in a statement. “Regrettably, the institute ignored our multiple attempts to engage in an in-person dialogue to carefully examine their concerns and, instead, filed suit.”