DraftKings has agreed to pay a $200,000 civil penalty after being charged by the US Securities and Exchange Commission (SEC) for selectively disclosing material, nonpublic information to investors via CEO Jason Robins’ social media accounts.
Within its release, the SEC noted that since the same information wasn’t disclosed to all investors, this violated Regulation Fair Disclosure, so a civil penalty was issued to DraftKings to settle the charges.
In an order dated 26 September, the SEC stated that on 27 July 2023, DraftKings’ public relations firm published a post on Robins’ personal X and LinkedIn accounts.
The X post read: “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.”
A similar statement was also published on the DraftKings CEO’s personal LinkedIn account on the same day. Yet, at the time of those posts, the operator hadn’t published its second quarter 2023 financial results, nor had it otherwise publicly disclosed certain information contained in the posts.
Shortly after the posts were published, the public relations firm removed both posts at the request of DraftKings.
Following an SEC investigation, DraftKings was charged with violations of Section 13(a) of the Exchange Act and Regulation FD.
The order stated that even though DraftKings was required by Regulation FD to promptly disclose the information to all investors after it was selectively disclosed to some, the information was not disclosed to the public until seven days later when the operator’s Q2 2023 financials were published.
“Information about growth in sales as a public company can be extremely important to investors,” commented John Dugan, Associate Director for Enforcement in the SEC’s Boston Regional Office.
“It is essential that, when companies disseminate material, nonpublic information, they do so fairly to all investors.”
The SEC added that “while companies can use social media outlets to announce key information in compliance with Regulation FD, investors must first have been alerted about which social media will be used to disseminate such information”.
“Without admitting or denying the order’s findings, DraftKings agreed to cease and desist from future violations of the charged provisions, pay the civil penalty referenced above, and comply with certain undertakings, including required Regulation FD training for employees who have corporate communications responsibilities,” read the SEC’s statement.
