DraftKings Fined by SEC for Selective Information Sharing
DraftKings has agreed to pay a $200,000 fine to the US Securities and Exchange Commission (SEC) following charges related to the selective disclosure of private information through social media.
DraftKings to pay SEC $200,000 for selective information sharing.
LISTEN TO THIS ARTICLE:The information was posted by Jason Robins, the company CEO who recently sold shares for over $7 million. The issue revolved around posts shared on Robins’ personal accounts on X and LinkedIn, which the SEC said breached Regulation Fair Disclosure (Regulation FD). The regulations mandate that companies must release important information to all investors simultaneously, to prevent anyone from gaining an unfair advantage.
Social Media Follows Received Info a Week Earlier
The controversy began with posts on July 27, 2023, before DraftKings had released its second-quarter financial results for the year. The company’s public relations team, using Robins’ social media profiles, highlighted strong revenue growth in existing markets and large year-over-year gains in states where DraftKings operates.
However, this information was not shared with the broader public until a week later, when the company issued its official quarterly earnings report. The SEC raised concerns about this delay, underscoring the necessity for companies to provide equal access to material information for all investors.
Although DraftKings quickly requested the removal of the posts, SEC emphasized that this did not address the issue in a timely manner and noted that the company failed to adequately inform the public about the situation.
More Regulation News
Controversy Adds to DraftKings Legal Troubles
The SEC issued an order accusing DraftKings of violating Section 13(a) of the Securities Exchange Act and Regulation FD. While DraftKings did not admit to or deny the allegations, it agreed to avoid future violations and committed to training employees responsible for corporate communications.
Information about growth in sales as a public company can be extremely important to investors. It is essential that, when companies disseminate material, nonpublic information, they do so fairly to all investors.
This penalty adds to DraftKings’ growing legal challenges, as the company is also facing lawsuits from major sports organizations, including the NFL and MLB Players Associations, regarding the use of players’ names and likenesses in its fantasy sports and NFT offerings.
RELATED TOPICS: Regulation
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