Nearly 15 months after New Jersey regulators launched an investigation into messenger betting activities by a Florida customer of DraftKings, the state has issued a $150,000 fine to the prominent sportsbook operator.
The settlement stems from a series of out-of-state wagers placed by a customer in Florida — where DraftKings has no operations and sports betting is not legal — through a proxy bettor located in New Jersey. In November 2020, Sports Handle broke an exclusive story of the illicit activity several days after the bettor had his New Jersey account suspended by DraftKings.
The pattern of out-of-state messenger betting ran afoul of New Jersey gaming regulations and is a violation of DraftKings’ terms and conditions. Messenger betting transpires when an out-of-state bettor transmits information through a proxy, typically located in a state with legal sports betting.
Election coverage has dominated the news cycle over the last 72 hrs but yesterday @sports_handle published a fairly extensive story on allegations of proxy betting at DraftKings Interested to see how prevalent proxy betting is among whales as we dig deeper https://t.co/OJpYTzuuX5
— Matt Rybaltowski (@MattRybaltowski) November 6, 2020
New Jersey legalized sports betting in 2018, shortly after the Supreme Court’s historic PASPA decision.
“We strive to continuously improve our systems to detect violations of our terms of use. In this instance, our systems failed to detect the violation of our terms of use,” DraftKings said in a statement. “We have taken corrective action to address that.”
Risking $3 million on a parlay try
While it was not uncommon for the Florida bettor to make out-of-state wagers of at least $50,000, according to the investigation, one bet drew headlines nationally for the scale and creativity of the wager.
Sports Handle reported that the bettor placed two identical wagers on a 3-leg parlay, risking $3 million in total. The wager featured a futures bet on the Green Bay Packers to win the NFC North, along with futures on Alabama and Georgia to win their respective divisions in the college football regular season. The bet lost when Florida captured the 2020 SEC East division title. Had the two parlays won, the bettor would have pocketed more than $8.5 million in pre-tax winnings.
On another occasion, the customer actively wagered on Super Bowl LIV through the New Jersey proxy while he attended the game at Hard Rock Stadium near Miami. The customer, identified as Eric Stevens, placed the wagers in the presence of several DraftKings personnel, who had knowledge of the wagering activity, the investigation found.
While the customer told Sports Handle in 2020 that he actively made the wagers in the presence of DraftKings CEO Jason Robins and DraftKings Director of Race and Sports John Avello, Sports Handle was unable to independently confirm the claims. As a VIP customer of DraftKings, the customer was provided with access to the DraftKings suite at the Super Bowl, according to court documents.
New Jersey DGE Eric Stevens Civil Action
DraftKings did not make Robins available for comment.
Avello, meanwhile, told Sports Handle in 2020 that he did not have any knowledge that the two parlays may have been placed through a proxy.
The New Jersey Division of Gaming Enforcement’s judgment requires DraftKings to submit internal controls with detailed training procedures for detecting and preventing future bettor attempts to place wagers via proxy. DraftKings agreed on a stipulation of settlement with the state on Feb. 18, according to court documents. The settlement was reached on the same day DraftKings disclosed net losses of $1.52 billion in Fiscal Year 2021, up from $1.2 billion over the prior year.
DrafKings also set 2022 revenue guidance in the range of $1.85-$2.0 billion after reporting 2021 fourth-quarter revenue of $473 million, more than double the amount from the prior year. On Thursday, DraftKings plunged 11% to close at $20.91 a share, hours after the company’s annual Investor Day presentation. Although DraftKings has rebounded from 52-week lows last month when the stock traded below $17 a share, the company is still down more than 60% over the last year.
This is a developing story
