DraftKings Paying $100,000 New Jersey Fine Due to Erroneous Data Reporting

Posted on: July 8, 2024, 05:46h. 

Last updated on: July 8, 2024, 05:46h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

DraftKings agreed to pay a $100,000 penalty levied by the New Jersey Division of Gaming Enforcement (DGE) stemming from reporting errors that led to the wrong data being filed to the state.

New Jersey iGaming tax online sports betting
DraftKings will pay $100,000 in fines to New Jersey due to reporting errors that created in accuracies in statewide sports betting data. (Image: NJ.com)

Reporting snafus by DraftKings led to Resorts Digital — the online gaming arm of Resorts Atlantic City — filing sports wagering tax returns with New Jersey for December 2023 and the first two months of this year that contained errors. Resorts was DraftKings’ initial sports wagering partner in the state following the 2018 Supreme Court ruling on the Professional and Amateur Sports Protection Act (PASPA).

In a letter to the gaming company DGE Interim Director Mary Jo Flaherty chided the operator, saying such mistakes cannot be accepted by New Jersey regulators while noting the division’s December and January press releases contained material mistakes due to the DraftKings reporting problems.

They evidenced weaknesses in DraftKings’ business abilities and casino experience and unacceptable conduct in dealing with regulations and requisite reporting and financial systems,” she wrote.

Boston-based DraftKings told some media outlets today that is has addressed and fixed the New Jersey reporting issue.

First Online Sports Betting Errors in New Jersey in Post-PAPSA Error

In her letter to the DraftKings, Flaherty noted that such reporting error hadn’t occurred in New Jersey “since at least 2011,” implying that the mistakes made by the gaming company are the first in the state in the post-PAPSA era.

The reporting issue stems from parlays and other wagers being miscategorized – a scenario the sportsbook operator told the DGE stemmed from a coding problem in a new database. DraftKings told press outlets that the problem has been dealt with and additional controls are being implemented. In her letter, Flaherty pointed out that DraftKings was a aware of a possible reporting problem in mid-January and that the issue was only addressed following a query by DGE’s Office of Financial Investigations (OFI).

She added that in communication to DGE delivered by DraftKings on March 29, the gaming company didn’t urgently deal with the matter because it was not understood internally that reporting irregularities needed to be brought to the attention of DGE and Resorts.

“The Division rejects this notion,” wrote Flaherty. “While the Division recognizes that the changes to the statistical data did not impact gross revenue and gross revenue taxes, the statistical data is a critical component of the monthly tax return. In this regard, the industry statistical data has been made public by the Division and has been relied upon by the public and the press since the inception of sports betting in 2018.”

New Jersey Could Have Pressed for Larger Fine

Under the New Jersey Casino Control Act, DGE can issue penalties of up to $20,000 per reporting violation. Given that OFI uncovered dozens of errors, DGE could have levied a significantly larger fine against DraftKings.

The gaming company offered to pay $100,000, which was accepted by the Division, according to Flaherty’s letter.

DraftKings has also submitted a remediation plan to DGE. Flaherty said in the letter the division’s revenue unit will be contacting the sportsbook operator regarding the fine and that any future reporting errors will draw regulatory penalties.