Massachusetts Regulators Grill DraftKings Over Credit Card Funds For Bets

• The Massachusetts Gaming Commission held an adjudicatory hearing for DraftKings
• DraftKings incorrectly allowed customers to place bets with credit card funds
• The commonwealth does not allow users to fund sports bets through the use of a credit card

DraftKings errors that allowed users to place bets through credit card funds for several months in 2023 triggered an adjudicatory hearing with the Massachusetts Gaming Commission this week.

For nearly three hours on Sept. 19, the gaming commission grilled DraftKings representatives on the operator mistakenly allowing hundreds of users to place thousands of bets funded through “out-of-state credit card funds” throughout 2023.

The commonwealth does not allow sports betting customers to place bets with funds from a credit card, even if the funds were deposited into an account in a state that allows the use of credit cards.

DraftKings Erred Several Times

DraftKings self-reported the incident to Bruce Band, former director of sports wagering for the Massachusetts Gaming Commission (MGC), on May 31, 2023. The sports betting operator notified Band that they had mistakenly been allowing customers to fund bets with credit card funds since the state’s sports betting launch on March 10, 2023.

From March 10, 2023, through Feb. 14, 2024, DraftKings mistakenly allowed 218 users to placed 1,160 online sports bets through credit card funds for a total handle of $83,663.92.

The use of credit cards to fund online sports betting accounts in Massachusetts is prohibited. However, in this instance customers were funding accounts through credit cards in other states where the practice is legal and then coming into the commonwealth to place bets.

After notifying the gaming commission that the error had been corrected, DraftKings again notified the MGC that its update was ineffective due to a “lack of complete functionality testing” and the prohibition never went into place. Bets with credit card funds were allowed through July 13, 2023, until DraftKings noticed the error. DraftKings again updated its software on that date, which they believed to be successful.

The commission scheduled an adjudicatory hearing for the operator on Feb. 14, 2024, but one day prior to the hearing it was discovered that two additional entries into a DraftKings pool contest had been used with credit card funds. The MGC directed the Investigations and Enforcement Bureau (IEB) to investigate the incident further.

DraftKings Emails Showed Confidence in Solving Error

Zachary Mercer, general counsel for IEB, presented several emails sent from DraftKings representatives to the Massachusetts Gaming Commission prior to the launch of sports betting and at various points in 2023 that showed confidence the operator had fixed the error.

According to an email sent to former MGC Executive Director Karen Wells by Rebecca K. Hoffman, DraftKings licensing specialist, on Jan. 26, 2023, the operator believed it had a “system in place to ensure that funds from a credit card deposited in another state (legally) into a patron’s account cannot be used to wager in Massachusetts.”

It would become a pattern during the hearing, with the MGC presenting evidence throughout the timeline showing DraftKings believed it had fixed the problem several times only to find that users were still able to place bets or entries through credit card funds.

On July 26, 2023, after believing the error in its software allowing the use of credit card funds deposited legally in other states had been fixed, DraftKings President Paul Liberman signed a document attesting to the best of his knowledge that the operator had solved the problem.

Despite the meeting being held in a public setting, most of the information on how DraftKings noticed the error and fixed the problem was presented in an executive session to safeguard the company’s trade secrets.

No Conclusion Reached

After three hours, MGC representatives noted it still had several questions that likely could not be answered during the day’s hearing. The commissioners concluded the day’s hearing but reported it would continue the hearing at a later date.

The MGC will eventually deliver a ruling on the incident, which could result in a monetary fine for the operator, a loss of its license in the state (unlikely), or another penalty that has yet to be determined.