DraftKings faces a $200,000 fine from the Securities and Exchange Commission (SEC) following a social media post by its CEO. Jason Robins, DraftKings’ CEO, shared business information on his personal X (formerly Twitter) and LinkedIn accounts, which triggered the penalty. The SEC stated that the company violated its guidelines on fair disclosure of financial information.
The SEC’s concern centered on the fact that DraftKings’ public relations team allowed sensitive financial updates to be shared on Robins’ personal accounts. According to the SEC, these platforms are not considered official channels for company disclosures, and the information should not have been shared to a limited audience. Instead, such updates must be accessible to all investors simultaneously, in line with the regulator’s Fair Disclosure rules.
In the post, Robins highlighted the company’s strong performance in existing markets, stating, “There’s massive potential for growth in new markets – but we’re still seeing really strong growth in existing states. Our 2018-2019 state vintage grew over 80% on the revenue basis year-over-year in Q1. With those numbers, we expect robust growth even without new states opening.” This message went out a week before DraftKings’ scheduled earnings release, which raised concerns about selective disclosure.
After the post went live, the SEC quickly notified DraftKings. The company’s PR team took down the updates within half an hour of their publication. However, the damage was done, as the premature release of financial information potentially gave some investors an unfair advantage.
Regulation Fair Disclosure, implemented by the SEC, mandates that companies share material information with all investors at the same time. This regulation aims to ensure a level playing field, preventing selective disclosure that could benefit specific groups. By sharing this financial update on personal social media channels, DraftKings breached this principle, according to the SEC.
DraftKings has agreed to pay the $200,000 fine without admitting or denying the SEC’s claims. This approach is typical in regulatory settlements, allowing the company to move forward without a formal acknowledgment of wrongdoing. For DraftKings, the incident serves as a reminder of the importance of adhering strictly to disclosure rules, especially in a fast-paced digital world where information can spread rapidly.
https://igaming.org/sports-news/draftkings-agrees-to-200k-penalty-after-ceos-social-media-misstep/