DraftKings Faces $100,000 Fine for Reporting Errors in New Jersey

DraftKings facing a $100,000 fine
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DraftKings has agreed to pay a $100,000 fine imposed by the New Jersey Division of Gaming Enforcement (DGE) due to reporting inaccuracies that led to erroneous data being submitted to the state. The errors, which were made by DraftKings, affected the sports wagering tax returns filed by Resorts Digital, the online gaming division of Resorts Atlantic City, for December 2023 and the first two months of this year. Resorts Digital was DraftKings’ initial sports wagering partner in New Jersey following the 2018 Supreme Court ruling on the Professional and Amateur Sports Protection Act (PASPA).

In a letter to DraftKings, DGE Interim Director Mary Jo Flaherty expressed strong disapproval of the errors, emphasizing that such mistakes are unacceptable to New Jersey regulators. She noted that the inaccuracies led to material mistakes in the division’s December and January press releases due to the erroneous data reported by DraftKings.

“These errors evidenced weaknesses in DraftKings’ business abilities and casino experience and unacceptable conduct in dealing with regulations and requisite reporting and financial systems,” Flaherty wrote.

Boston-based DraftKings assured media outlets that it has addressed and resolved the reporting issue in New Jersey.

First Reporting Errors in Post-PASPA New Jersey

Flaherty highlighted in her letter that such reporting errors had not occurred in New Jersey “since at least 2011,” indicating that DraftKings’ mistakes are the first of their kind in the state in the post-PASPA era.

The errors were due to parlays and other wagers being miscategorized, a problem that DraftKings attributed to a coding issue in a new database. The company stated that the problem has been resolved and additional controls are being implemented. However, Flaherty pointed out that DraftKings was aware of a potential reporting issue in mid-January and only addressed it after a query from the DGE’s Office of Financial Investigations (OFI).

Flaherty also mentioned that DraftKings’ communication to the DGE on March 29 did not treat the matter with urgency because the company did not internally understand the need to report the irregularities to the DGE and Resorts.

“The Division rejects this notion,” Flaherty wrote. “While the Division recognizes that the changes to the statistical data did not impact gross revenue and gross revenue taxes, the statistical data is a critical component of the monthly tax return. In this regard, the industry statistical data has been made public by the Division and has been relied upon by the public and the press since the inception of sports betting in 2018.”

Potential for Larger Fine

Under the New Jersey Casino Control Act, the DGE can issue penalties of up to $20,000 per reporting violation. Given that the OFI uncovered dozens of errors, the DGE could have imposed a much larger fine on DraftKings.

DraftKings offered to pay $100,000, which the DGE accepted, according to Flaherty’s letter.

DraftKings has also submitted a remediation plan to the DGE. Flaherty noted in the letter that the division’s revenue unit would be contacting the sportsbook operator regarding the fine and warned that any future reporting errors would result in regulatory penalties.

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