Massachusetts Sports Betting Regulators Investigating DraftKings

DraftKings Sportsbook is beginning the 2024 calendar year under scrutiny from Massachusetts sports betting regulators.

The news comes following reports that the company allowed “out-of-state credit card funding” to bankroll wagers inside The Bay State. The laws for sports betting in Massachusetts strictly prohibits this practice. And DraftKings has drawn plenty of criticism for what regulators deem an “egregious” error on their part.

It’s not hard to understand the importance and intrigue of this issue. DraftKings is among the top online sportsbooks in the United States, so any controversy, however seemingly minor, is bound to make headlines. The company is also headquartered in Boston, Massachusetts. That means they should be even more intimately familiar with the state’s operations. 

Of course, multiple outlets report the total dollar amount of these transactions is relatively low, checking in under six figures. But the error raises a number of questions. 

First and foremost: Will DraftKings Sportsbook in Massachusetts face any significant repercussions for violating the state’s gambling policy? And on a broader scale: Does this investigation, as well as countless others, prove that sports betting in the United States has a long way to go when it comes to safe implementation?

Massachusetts Sports Betting Regulators Have Yet to Announce Timeline for the Completion of Their DraftKings Investigation

Massachusetts announced the investigation into DraftKings just before the New Year. As of mid-January 2024, the regulators in charge of the matter have yet to announce any concrete findings or provide a timeline for the completion of the case. Here is Legal Sports Report’s Mike Mazzeo with the full details:

“DraftKings Sportsbook is facing a potential non-compliance review from state regulators after making an ‘egregious’ error in allowing out-of-state credit card funding of Massachusetts sports betting wagers. Credit card funding of Massachusetts sports betting wagers is prohibited in the Commonwealth. Commissioner Eileen O’Brien called the error ‘egregious,’ and believed an adjudicatory hearing is necessary. The Investigations and Enforcement Bureau (IEB) will be putting together its review, and scheduling on the matter is to be determined. 

“Overall, DraftKings Sportsbook allowed 218 users to make 242 wagers totaling $83,663 in handle from March 10, 2023 through July 13, 2023. Despite telling the MA Gaming Commission during its initial license review that its universal wallet would not be an issue upon March 10 launch, the proper safeguards were not in place. ‘This is a violation of the statute, not a (regulation), the statute,’ Commissioner Jordan Maynard said.”

Some will not take much issue with under $100,000 in total wagers making it through. Gamblers spent over $3 billion on Massachusetts sports betting during the 2023 calendar year, according to PlayMassachusetts.com. The rogue wagers represent an infinitesimal fraction of the state’s betting business.

Still, when Massachusetts legislators first legalized sports betting, they harped on the out-of-state credit ban. It was a non-negotiable inclusion as part of the passage. Regulators naturally aren’t going to take any violation lightly—no matter how small.

This is the Second Time DraftKings Sportsbook’s Universal Wallet has Acted Up in Massachusetts

Also at issue with the investigation in DraftKings Sportsbook: This isn’t the first time the error has been made. The company had the issue crop up earlier in the year and told the Massachusetts Gaming Commission about it. As Mazzeo noted in his dispatch: 

“After self-reporting it to the MGC, DraftKings thought the issue had been resolved in late May. However, its initial software update proved ineffective. A second software update resolved the matter. DraftKings said the errors were caused by miscommunication.”

Allowing out-of-state credit card funding to slip through the cracks on numerous occasions could prompt regulators to come down pretty hard on DraftKings. Again, the dollar amount being bandied about isn’t seismic, but we’re talking about one of the two biggest legal online sports betting operators in the United States. They will be held to a higher standard than smaller sites who account for much smaller shares of the state’s betting handle.

It remains to be seen what any disciplinary action will look like. Substantial fines are pretty standard in online sports betting investigations these days. But Massachusetts is among the states that have invested heavy amounts of time and resources into refining sports gambling regulation. The terms of any punishment, even if it’s just a fine, could prove surprising. They might even exceed the total amount of money that was funneled through out of state credit cards.

Does the United States Have a Sports Betting Regulation Problem?

Coverage of gambling in North America is starting to shift now that sports betting in the United States is legal, in some form, throughout the majority of the country. Rather than focus on which states have or could approve sports betting next, media outlets and state officials themselves are more sensitive to industry regulation. 

If you feel like you’ve seen, heard and read more about United States sports betting scandals, investigations and fines, this is no doubt why. To that end, DraftKings is far from the only potential offender. Fanatics Sportsbook is also being investigated by Massachusetts sports betting regulators for violating the out-of-state credit card policy.

Beyond that, we have seen other areas of concern rise to the forefront. 

More and more states are now trying to address problem gambling and predatory or egregious advertising and marketing practices. Meanwhile, a Daily Fantasy Sports betting bill is now on the table in Florida after key officials insisted the practice could no longer operate in that gray area outside general sports betting but inside overall legality.

Expect to see plenty of other stories and reports like this moving forward. Especially when it comes to any issues of access that could increase the number of problem or underage gambling cases. 

That’s the nature of newer industries. Sports betting in the United States was once a novel concept. Now that it’s a staple, its flaws and imperfections and imposed dangers will take center stage.

Take a look at this list of the top online sportsbooks so you can find one that works for all of your sports betting needs: