DraftKings has been ordered to pay a $150,000 penalty by the New Jersey Division of Gaming Enforcement (DGE) after breaching the state’s gambling regulations relating to proxy betting.
The DGE released a report detailing its investigation into proxy betting violations that took place on multiple occasions throughout 2019 and 2020. The report also details how DraftKings created a process that allowed gamblers to circumvent proxy betting restrictions after first discovering the violations.
According to the report, the investigation mostly centered on one gambler from Florida who claimed that he had a verbal agreement with DraftKings sportsbook director Johnny Avello that would allow him to place bets in New Jersey via Proxy. This led to a dispute that saw the gambler’s account frozen and resulted in the threat of legal action against DraftKings.
At the time DraftKings stated:
“We never authorized the customer in question to engage in proxy betting. Any claim by this customer that he received a verbal agreement from Johnny Avello to place out of state wagers on his New Jersey mobile account through a proxy is patently false.”
However, the investigation has found that the company and Avello first discovered the proxy violations when a geolocation check noted a login in Florida followed by a bet placed in NJ just a few minutes later. The company then knowingly allowed the bettor to place regular bets via proxy despite this being a clear breach of NJ gambling regulations.
According to the gambler, DraftKings contacted him to warn him of the violations, but instead of requesting that he stop, he was told that he could continue to make wager via proxy once there was at least a couple of hours between login times and the wager.
It was also discovered that DraftKings hosted the gambler in a suite at the Super Bowl in Florida where he was placing wagers on the game via proxy. This was done in the presence of DraftKings employees.
DraftKings said of the penalty and subsequent investigation:
“We strive to continuously improve our systems to detect violations of our terms of use. In this instance, our systems failed to detect the violation of our terms of use. We have taken corrective action to address that.”
The company must also undertake to introduce ‘detailed training procedures’ to ensure that all employees understood the regulations surrounding proxy betting.
DraftKings also noted that the gambler’s account has been permanently closed.
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Ciaran has been working within the Gambling Industry as a deep analyst since 2019. His deep knowledge and understanding of all the gambling regulations, and processes makes him a true asset, and an always valuable point of view for Gambling Industry News, allowing us to cover every topics from a brand new perspective.