SEC Charges DraftKings with Disclosure Violations Over Robins Tweet

The Securities and Exchange Commission (SEC) announced today that it has charged DraftKings (NASDAQ: DKNG) for revealing nonpublic, significant information through CEO Jason Robins' social media platforms. The gaming firm consented to pay a civil penalty of $200,000 to resolve the allegations. 

On July 27, 2023, Robins shared on his personal X (formerly Twitter) account that the firm he co-founded was still experiencing “very robust growth” in the states where it provided iGaming and sports betting. Later that day, a PR firm working for DraftKings shared comparable comments on Robins’ LinkedIn profile. The issue was that those posts happened a week before the gaming company announced 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.

Although LinkedIn and X are popular platforms, public companies cannot meet SEC disclosure requirements merely by sharing investor-related information on these sites, as regulators believe not all shareholders depend on social media for their investment insights. 

DraftKings Attorneys Have Been Active 

The SEC filed charges against DraftKings "for breaches of Section 13(a) of the Exchange Act and Regulation FD." The gaming company did not acknowledge or reject the findings in the order, but it committed to avoiding any future breaches of those protocols. 

The situation contributed to a growing burden for the attorneys at DraftKings. Last week, the Major League Baseball Players Association (MLBPA) filed a lawsuit against four gaming companies, such as DraftKings, alleging that these operators are utilizing player names and images without obtaining consent from the athletes or the union. 

The lawsuit surfaced merely weeks after the NFL Players Association (NFLPA) filed a suit against DraftKings, alleging that the sportsbook may owe it tens of millions of dollars for utilizing player names and images in its now-defunct Reignmakers nonfungible tokens (NFTs) game. 

DraftKings previously encountered a class action lawsuit where plaintiffs asserted that those NFTs qualified as investable securities and that they incurred

Robins' Post Has Previously Caused Controversy 

The posts that sparked the anger of the SEC are not the initial cases of Robins engaging with controversy on social media. In a series of eight tweets on X dated March 28, 2023, the CEO of DraftKings expressed his optimism regarding the company’s future prospects. 

He didn't directly refer to the stock in those tweets, which is fortunate, as he sold 300,000 shares that same day. 

The SEC did not reference the posts from March 2023. According to rules established by the commission, any publicly traded company sharing important information through social media must initially inform investors about the platforms where that information will be shared.