Published on: September 26, 2024, 05:57h.
Last updated on: September 26, 2024, 05:59h.
The Securities and Exchange Commission (SEC) announced today that DraftKings (NASDAQ: DKNG) was charged with sharing confidential, important information through CEO Jason Robins’ social media accounts. The gaming company has agreed to pay a $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. The issue was that these posts were made a week before the gaming company released 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 popular platforms, public companies cannot meet SEC disclosure guidelines simply by sharing information relevant to investors on these sites because not all shareholders rely on social media for investing information according to regulators.
DraftKings Lawyers Are Keeping Busy
The SEC charged DraftKings “with violations of Section 13(a) of the Exchange Act and Regulation FD.” The gaming company did not admit nor deny the findings in the order, but it committed to avoiding future violations of those protocols.
The case added to DraftKings lawyers’ growing workload. Recently, the Major League Baseball Players Association (MLPBA) sued four gaming companies, including DraftKings, alleging that these operators are using player names and images without the consent of the athletes or the union.
This legal action came shortly after the NFL Players Association (NFLPA) sued DraftKings, claiming that the sportsbook operator may owe tens of millions of dollars for using player names and images in its now discontinued Reignmakers nonfungible tokens (NFTs) game.
DraftKings previously faced a class action complaint where plaintiffs argued that these NFTs were investable securities and that they suffered losses when the NFT market collapsed. In July, DraftKings closed its NFT marketplace and ceased Reignmakers, promising to provide some compensation to participants in the fantasy game.
Not the First Time Robins’ Social Media Posts Stirred Controversy
The posts that led to the SEC’s action were not the first instances of Robins causing a stir on social media. In a series of eight tweets on X on March 28, 2023, the DraftKings CEO expressed optimism about the company’s long-term prospects.
He did not specifically mention the stock in those tweets, which was fortunate since he sold 300,000 shares on the same day.
The SEC did not mention the March 2023 posts. According to regulations set by the commission, any publicly traded company sharing material information through social media must first inform investors on which platforms this data will be released.