DraftKings Fined $150,000 for Proxy Betting Incident
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It appears that DraftKings engaged in some suspicious behavior in the past, as it was found to have knowingly allowed a VIP customer to proxy bet during Super Bowl LIV in 2020. On Thursday, DraftKings was ordered by the New Jersey Division of Gaming Enforcement (DGE) to pay a $150,000 penalty. The DGE reported that DraftKings had knowingly allowed the bettor to break the rules repeatedly in the past.
Detailing the Incident
The New Jersey Attorney General published a five-page report on Thursday detailing several incidents of DraftKings breaching proxy betting rules throughout 2019 and 2020. The primary incident of note was the company enabling a man sitting in a suite in Florida at Super Bowl LIV to place bets on the mobile DraftKings Sportsbook.
Under the New Jersey sports betting law, proxy betting is defined as bets taken from anyone who is an “agent or proxy for any other person.” In this case, Florida customer Eric Stevens claims he had a verbal agreement with DraftKings sportsbook director Johnny Avello allowing him to place bets via proxy in New Jersey. DraftKings initially identified this proxy betting through a geolocation check as there had been a login from Florida followed by the placement of bets moments later in New Jersey.
DraftKings had previously been adamant that these claims were false, saying they had “never authorized the customer in question to engage in proxy betting” and called the claims “patently false.” However, the AG report concluded that DraftKings had knowingly broken the proxy rules as Stevens had wagered up to $50,000 on individual games while using Avello as a proxy.
DraftKings initially issued a warning to Stevens in October 2019. Still, the operator reportedly told him he could continue with proxy betting so long as there was a two-hour delay from when he logged in and when the bet was placed, roughly the flight time between Florida and New Jersey.
DraftKings Takes Corrective Action
On February 18, DGE director David Rebuck authorized the $150,000 penalty for DraftKings. Since the DGE made that ruling, DraftKings voided 21 bets that the Florida man had made that were still pending, closed his account, and reportedly promised to train its employees in recognizing and preventing proxy betting in the future.
In a statement to LegalSportsReport on Thursday, DraftKings said it wants to “strive to continuously improve our systems to detect violations of our terms of use.” Hence, the “detailed training procedures” for staff around proxy betting.
This isn’t the first time DraftKings has been penalized, as, in 2019, the DGE gave the company a $2,000 civil penalty for sending promotional emails to self-excluded customers. Last year, DraftKings paid a $10,000 civil penalty in New Jersey for doing the same thing.
Warning Flag to Other Sportsbooks?
As online sports betting grows in popularity while launching in some states but not others, governing entities will continue to focus on potentially illegal activity from sportsbooks. Significant states in Florida and California have yet to launch full-scale legal sports betting, so they are at high risk for proxy betting incidents like this one.
This incident is the highest-profile proxy betting scandal with the largest fine on the table that we’ve seen, but it would be naive to think this doesn’t happen with other sportsbooks, perhaps with even more money. That’s especially true with so many “big-money” bettors across the country taking more of an interest in the new legal sportsbooks.
While the $150,000 fine is a drop in the bucket for DraftKings compared to its revenue guidance for 2022, which falls in the range of $1.7 billion to $1.9 billion, other sportsbooks would be wise to tighten up their proxy betting procedures and monitoring to avoid future fines.
