DraftKings Settles SEC Charges Over Selective Information Sharing

DraftKings has settled with the US Securities and Exchange Commission (SEC) for $200,000 after facing charges about the selective sharing of private information through CEO Jason Robins’ social media accounts. 

DraftKings’ CEO Posts Spark SEC Concerns Over Unequal Investor Information

The problem came from posts on Robins’ personal X (formerly Twitter) and LinkedIn profiles, which his followers could see breaking Regulation Fair Disclosure (Regulation FD). This rule says companies must tell all investors important information at the same time to stop certain groups from getting an unfair edge.

The posts in question appeared on July 27, 2023, before the company had shared its financial results for the second quarter of that year. DraftKings’ PR firm shared through CEO Jason Robins’ social media accounts messages about strong growth in existing markets. They pointed out big year-over-year revenue jumps from states where DraftKings already did business. The company did not share these facts with all investors until a week later when DraftKings put out its quarterly earnings report. The SEC did not like this delay. They stressed that companies need to make sure all investors get the same information at the same time.

DraftKings’ Regulatory Challenges Ignite Discussions on Fair Disclosure

Even though DraftKings asked for the posts to be taken down, the regulator pointed out that this did not fix the problem. The company did not tell the public about it soon enough. 

John Dugan, who works as the associate director for enforcement at the SEC’s Boston office, commented: “Information about growth in sales as a public company can be extremely important to investors. It is essential that, when companies disseminate material, nonpublic information, they do so fairly to all investors.”

The SEC issued an order accusing DraftKings of breaking Section 13(a) of the Securities Exchange Act and Regulation FD. DraftKings did not admit to or deny the findings, but it agreed to stop future violations and to train employees who handle corporate communications.

This penalty adds to DraftKings’ mounting legal problems, as the company faces lawsuits from major sports groups, including the NFL and MLB Players Associations, about using players’ names and images in its fantasy sports and NFT products. 

Even with these legal obstacles, DraftKings remains a key player in the sports betting world. Still, the company’s pick-and-choose approach to social media posts highlights the increasing attention on how businesses share information that could affect the market in today’s digital landscape.