DraftKings Fined $100,000 Over Reporting Errors by New Jersey Gaming Authorities

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Sports betting juggernaut DraftKings has been slapped with a hefty $100,000 penalty by the New Jersey Division of Gaming Enforcement (DGE) for a series of reporting mishaps that resulted in incorrect data being filed with state sporting authorities. The error is the first of its kind since 2011, marking the first reported instance after the Professional and Amateur Sports Protection Act (PAPSA) was instated.

The errors were traced back to December 2023 and the initial two months of this year when Resorts Digital, the technologically enhanced unit of Resorts Atlantic City, filed damaged data in their sports wagering tax returns. Resorts Atlantic City had initially become DraftKings’ sports wagering ally post the Supreme Court’s landmark ruling on the PAPSA in 2018.

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The errors were not a minor oversight. Interim Director of DGE, Mary Jo Flaherty, reprimanded DraftKings in a letter, emphatically stating that the New Jersey gaming authorities wouldn’t tolerate any such mistakes. On review, it was discovered that DGE’s press releases for December and January also contained erroneous information due to DraftKings’ incorrect reporting.

“This displays clear weaknesses in DraftKings’ operational skills and performance, reflecting poorly on their experience in the casino industry and their unacceptable compliancy in reporting and financial systems,” wrote Flaherty.

Meanwhile, DraftKings, the Boston-based sports titan, disclosed to various news outlets that they had remedied the root issue that had caused the reporting discrepancies.

The inaccuracies reportedly originated from miscategorizations of parlays and other bets. According to DraftKings, these mistakes were due to a coding error in a new database. In response, the company stated that it installed additional control measures to guard against future issues.

Flaherty didn’t stop at just reprimanding DraftKings. In her letter, she expressed her disappointment that DraftKings only made the effort to rectify the issue when notified of the problem by DGE’s Office of Financial Investigations (OFI).

Despite statistical data not directly influencing gross revenue or gross revenue taxes, Flaherty emphasized that such data is essential to a monthly tax return’s integrity. Her letter rejected DraftKings’ lax response to the matter, emphasizing that such failings needed immediate attention and remediation.

While DraftKings has not contested their downfall and has agreed to pay the $100,000 penalty, it’s important to note that per the New Jersey Casino Control Act, DGE had the authority to issue penalties up to $20,000 per reporting violation. As a result, DraftKings, in theory, could have faced a much larger fine.

In the wake of the ordeal, DraftKings has submitted a comprehensive remediation plan to DGE. Flaherty’s letter also notes that DGE’s revenue division will be in contact with the operator regarding the matter and any future reporting errors from DraftKings will result in regulatory consequences.