The Securities and Exchange (SEC) announced today it charged DraftKings (NASDAQ: DKNG) with divulging nonpublic, material information over CEO Jason Robins’ social media accounts. The gaming company agreed to pay $200,000 civil penalty to settle the charges.
On July 27, 2023, Robins posted on his personal X (formerly Twitter) account that the company he co-founded continued to see “really strong growth” in the states in which it was offering iGaming and sports betting. Later that day, a public relations firm representing DraftKings posted similar remarks to Robins’ LinkedIn profile. Problem was those posts occurred a week prior to the gaming company releasing its second-quarter results.
“According to the order, even though Regulation FD required DraftKings to promptly disclose the information to all investors after it was selectively disclosed to some, DraftKings did not disclose the information to the public until seven days later when it announced its financial earnings for the second quarter of 2023,” said the SEC in the statement.
While LinkedIn and X are widely trafficked forums, public companies cannot fulfill SEC disclosure guidelines simply by posting information relevant to investors on those sites because in the eyes of regulators, not all of a company’s shareholders rely on social media for investing information.
The SEC charged DraftKings “with violations of Section 13(a) of the Exchange Act and Regulation FD.” The gaming company neither admitted nor denied the findings in the order, but it pledged to refrain from future violations of those protocols.
The case added to an increasingly hefty workload for DraftKings lawyers. Last week, the Major League Baseball Players Association (MLPBA) sued four gaming companies, including DraftKings, claiming those operators are using player names and images without the consent of those athletes or the union.
That litigation arrived just weeks after the NFL Players Association (NFLPA) sued DraftKings, claiming the sportsbook operator potentially owes it tens of millions of dollars for using player names and images in its now defunct Reignmakers nonfungible tokens (NFTs) game.
DraftKings previously faced a class action complaint in which plaintiffs claim those NFTs were investable securities and that they suffered losses when the NFT market collapsed. In July, DraftKings shuttered its NFT marketplace and halted Reignmakers, pledging to provide some compensation to those that played the fantasy game.
The posts that drew the ire of the SEC aren’t the first instances of Robins flirting with controversy on social media. In an eight-tweet thread on X on March 28, 2023, the DraftKings chief executive officer commented on his bullishness about the company’s long-term outlook.
He didn’t explicitly mention the stock in those tweets and it’s a good thing, too, because that same day he sold 300,000 shares.
The SEC made no mention of the March 2023 posts. Under regulations set forth by the commission, any publicly traded company disseminating material information via social media must first tell investors on which platforms that data will be released.
