DraftKings Fined, Under Fire For Compliance Issues In Ohio And Massachusetts

DraftKings is under scrutiny from multiple state regulatory bodies following new compliance issues on top of those the major sports betting and iGaming operator has already been fined for this year.

The Massachusetts Gaming Commission (MGC) and the Ohio Casino Control Commission (OCCC), two of the strictest commissions in the regulated space, both held hearings this week to address incidents where DraftKings reportedly violated state-specific betting and funding regulations, and in one of the two cases so far, a large fine was levied.

On Wednesday, the MGC convened a second adjudicatory hearing with DraftKings to examine allegations that the operator permitted over 1,000 sports bets funded by credit cards — an act prohibited under Massachusetts law. This marked a continuation of a hearing initially held in September, with proceedings spanning two days and featuring extensive questioning of DraftKings employees and legal representatives.

The format bore the hallmarks of a courtroom trial, complete with cross-examinations and detailed witness testimonies.

The issue stems from DraftKings allowing 218 users to place 1,160 bets totaling more than $83,000 between March 10, 2023, and Feb. 14, 2024. While the MGC bans funding online sports betting accounts with credit cards, users were able to bypass this restriction by depositing funds in states where credit card usage is legal before placing bets within Massachusetts.

DraftKings self-reported the issue to the MGC in May 2023, initially asserting that the error had been resolved. However, subsequent findings revealed that the prohibition remained ineffective due to incomplete software testing, allowing credit card-funded bets to continue until July 2023.

Even after corrective measures were taken, additional violations were identified in early 2024, prompting another round of fixes.

DraftKings ‘misunderstood’ Massachusetts regs

Throughout the hearing, DraftKings employees testified that they misinterpreted the regulation as applying only to credit card deposits made within Massachusetts. Senior Manager of Regulatory Operations Kevin Nelson and other staff expressed a shared misunderstanding of the geographic scope of the rule. Commissioner Eileen O’Brien challenged this interpretation, highlighting the absence of such language in the regulation text.

In response to the compliance lapses, DraftKings says it has implemented a series of procedural changes. These include mandating individual testing of responsible gaming controls, integrating compliance reviews during software development, and introducing release-criticality checks to assess potential impacts on regulatory adherence.

Despite these assurances, the MGC has yet to issue a final ruling, leaving the potential for fines or other penalties unresolved.

Ohio fines DraftKings for separate violations

While DraftKings was under review in Massachusetts, the company also faced regulatory action in Ohio. On the same day as the MGC hearing, the OCCC approved a settlement agreement imposing a $425,000 fine on the bookmaker for two significant compliance breaches.

The first violation involved accepting bets on college player prop markets, which Ohio prohibited as of March 1, 2023. DraftKings reportedly processed these bets between March 14 and March 19, despite the ban.

The second issue concerned the use of unapproved funding sources, with bettors depositing cash into accounts at non-gaming retail locations without proper authorization. Between January 2023 and March 2024, over 40,000 such transactions occurred, totaling more than $2.5 million.

Under Ohio regulations, cash deposits for sports betting accounts are permitted only at approved venues. DraftKings’ failure to adhere to this rule highlights ongoing challenges for the operator in meeting state-specific requirements, even as it expands its presence across regulated markets.