DraftKings will be fined by the Massachusetts Gaming Commission a total of $450,000 for its acceptance of banned credit card wagers in 2023 - 2024. In addition, DraftKings will be asked to reimburse 218 bettors to the tune of over $83K.

The Massachusetts Gaming Commission has imposed a $450,000 fine on DraftKings for accepting more than a thousand online sports bets funded by credit cards - a clear violation of state betting regulations. The fine marks the largest ever given against a licensed online sportsbook in Massachusetts since sports betting became legal in 2023.

The infractions, which occurred between the 10th of March, 2023, and the 14th of February, 2024, involved 1,160 wagers totaling $83,667.92. According to the commission, these bets were funded with credit cards despite a state law that prohibits such transactions for sports betting.

Customer refunds and mandatory audit ordered

In addition to the financial penalty, DraftKings must reimburse the full $83,667.92 to the 218 customers who placed the illegal wagers. The commission has also ordered the sportsbook to develop a corrective action plan to ensure compliance going forward.

An independent third-party audit has also been mandated. DraftKings is required to retain an approved auditor within 90 days, with the audit to be completed within another 90 days. This audit will determine whether any additional credit card transactions slipped through the cracks.

We are committed to meeting the regulatory standards of every state in which we operate, a DraftKings spokesperson stated. We appreciate the collaborative relationship we have with the Massachusetts Gaming Commission and thank them for recently granting us a permanent license in the Commonwealth, DraftKings added.

Misstep rooted in out-of-state transactions

The noncompliance issue stems from a software oversight that allowed users to fund their DraftKings accounts with credit cards in other states - where the practice is legal - and then place wagers while physically located in Massachusetts, where credit card funding is banned.

DraftKings first reported the issue to the Massachusetts Gaming Commission on the 31st of May, 2023. The company believed the problem had been resolved through a software update, but later admitted that the fix failed due to insufficient testing. Bets continued to be placed with credit card funds until the 13th of July, 2023, when the issue was finally resolved.

Yet even after the software correction, the commission discovered that two more bets were placed using credit card funds - just one day before DraftKings was scheduled for a formal hearing on February 14, 2024. This further exacerbated the company's regulatory troubles and contributed to the harsh penalties handed down last week.

Long adjudication culminates in historic fine

The road to resolution was extensive. The Massachusetts Gaming Commission held a nearly 10-hour hearing over two days in late 2024 to investigate the full scope of the violations and DraftKings' response. Commissioners examined whether the company had taken appropriate steps to prevent the prohibited conduct and whether its internal controls were sufficient to catch such errors in a timely manner. Ultimately, the commission determined that DraftKings' actions - though self-reported - fell short of the state's compliance standards and warranted the substantial fine.

The ruling sends a strong message to the growing sports betting industry: Massachusetts regulators will not tolerate violations of its carefully crafted rules, particularly when it comes to financial protections for consumers.

Despite the fine and the compliance missteps, DraftKings' permanent license in Massachusetts remains intact. The company's response and cooperation with regulators were key factors in preserving its operating status, but the incident has undoubtedly placed the sportsbook giant on stricter notice.