• The Massachusetts Gaming Commission continued an adjudicatory hearing with DraftKings today
• The hearing was due to DraftKings incorrectly allowing customers to place bets with credit card funds
• An incorrect interpretation of the regulation led to DraftKings allowing the improper bets

The Massachusetts Gaming Commission held a nearly seven-hour continuation of an adjudicatory hearing with DraftKings today after the operator incorrectly allowed users to place more than a thousand bets with credit card funds in 2023.

The hearing was a continuation from an initial three-hour hearing that took place on Sept. 20, 2024.

No course of action or determination was taken by the MGC today. 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.

Improper Credit Card Funds Allowed For Months in 2023

The MGC today discussed the issue for more than seven hours, by far the longest adjudicatory hearing for an operator since the state launched sports betting in January 2023. Typically, a hearing will last about an hour, with operators accepting blame for the incident and having to pay a fine or accepting a penalty from the MGC.

However, this adjudicatory hearing spanned a total of two days and included numerous lawyers from both the MGC and DraftKings, resembling more of a court case at times with counsel questioning witnesses and employees as to the details of the incident.

From March 10, 2023, through Feb. 14, 2024, DraftKings mistakenly allowed 218 users to place 1,160 online sports bets through credit card funds for a total handle of $83,663.92. DraftKings correctly prohibited customers from using credit cards to fund online sports betting accounts in Massachusetts. 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.

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 make bets with credit card funds since the state’s sports betting launch on March 10, 2023.

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.

However, it was found in February 2024 that credit card funds had been used to enter several pool contests in Massachusetts, and a final fix had to be implemented yet again.

Incorrect Interpretation of Regulation Irks Commissioners

A common theme was evident from the various witnesses examined by the MGC and DraftKings counsel. The DraftKings employees who were interviewed all seemed to incorrectly interpret that the Massachusetts regulation, which prohibits the use of any credit card funds to place bets or enter contests on the platform, only applied to users while they were in the state’s boundary.

Kevin Nelson, Senior Manager of Regulatory Operations at DraftKings, today told the MGC that he read the credit card prohibition regulation as “specific to Massachusetts” and only banned the use of credit card funds to place bets or enter contests if the deposits were made by customers inside the state.

Nelson was not the only witness to attest to this assumption, as several employees of DraftKings made similar comments throughout the hearing.

At one point during the hearing, Commissioner Eileen O’Brien showed Nelson the specific regulations and asked him to point out where it said this was only specific to Massachusetts boundaries.

“It’s not there, is it Mr. Nelson?” she asked.

O’Brien also criticized Jeremy McAuley, Director of Products at DraftKings, and his team for never clarifying what the regulations meant with the MGC, only making the assumption that they only applied to Massachusetts.

As for the corrections to the platform that didn’t work? McAuley told the MGC that the emergency implementations were not “end-to-end tested” which allowed the use of credit card funds to enter a pool contest in the state to happen.

He noted that internal steps have been taken to ensure this does not happen again, including end-to-end testing for these software changes.

DraftKings Taking Steps to Implement Solutions

McAuley revealed that DraftKings has implemented three solutions to ensure something like this does not happen again. The solutions are as follows:

• An individual tester for responsible gaming controls will have to approve changes to software updates for financial platform services
• Responsible gaming control reviews will be introduced at key stages of the software development life cycle so the proper consideration is given as part of the project or feature change
• Every platform release will be subjected to a release criticality check which will consider the potential impact of the changes to the responsible gaming functionality

Commissioner Paul Brodeur asked the gaming company how confident they were of the solutions being installed so an incident like this does not occur again?

“I have a high degree of confidence the enforcement mechanism is working as intended. There have been other alerts set up by our analytics and engineering team to catch if we see any anomalies in that behavior, which would be the use of credit card funds to place a wager in the state,” McAuley said.

He also noted he would be confident in signing an attestation the DraftKings platform is now compliant with these regulations.

DraftKings will submit a closing brief to the commission by next week.

Commissioner Chair Jordan Maynard did compliment DraftKings for self-reporting the incident before concluding the hearing.

“We appreciate DraftKings and the self-reporting of this matter. I will be clear, across the board we want to encourage self-reporting and good relationships with the gaming commission. I don’t care if it’s $4 or one penny, we appreciate it,”

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