SEC Has Subpoenaed DraftKings
Major US sportsbook provider DraftKings has revealed that it recently received a subpoena from the US Securities and Exchange Commission (SEC), following allegations made in a report by short-sellers Hindenburg Research. The operator said that it initially received the subpoena on July 9th, 2021, a couple of weeks after the report was first published.
DraftKings has received a subpoena from the US Securities and Exchange Commission (SEC), following allegations made in a report by short-sellers Hindenburg Research. ©3844328/Pixabay
Hindenburg Report Claims DraftKings Operated in Black Markets
US-based sportsbook provider DraftKings has revealed a serious bit of legal news arriving from the nation’s Securities and Exchange Commission (SEC): the operator has been hit with a subpoena, following serious allegations made against it in a report from short-sellers Hindenburg Research.
DraftKings clarified that it received the subpoena from the SEC as early as July 9th, 2021, almost a full month after the Hindenburg report was first published. The renowned sportsbook provider failed to reveal in its most recent quarterly report which exact documents the SEC was seeking as part of its subpoena.
However, the Hindenburg Report itself made the somewhat damning claim that technology provider SBTech – which merged with DraftKings when the company went public in 2020 – had still continued to operate in black markets through an illegal “front” business.
The report made this claim based on its research into SBTech’s sources of revenue, revealing that approximately 50% stemmed from markets where gambling is still officially banned. Furthermore, it alleged that DraftKings has given false or misleading statements, as well as failing to reveal information concerning business prospects — all regarding this allegedly illegal activity.
For its part, DraftKings has made clear its intent to fully cooperate with the SEC’s investigation, while simultaneously attempting to vigorously defend itself against both the commission’s and report’s claims.
Operator Believes any Serious Consequences are Unlikely
Returning to DraftKings’ most recent quarterly report, the operator admitted it could not currently gauge the impact of any potential action coming as a result of the SEC’s subpoena. Nevertheless, it stated that it does not believe that there will be any serious negative consequences from this scandal.
“The company cannot predict with any degree of certainty the outcome of these matters or determine the extent of any potential liabilities. The company also cannot provide an estimate of the possible loss or range of loss. Any adverse outcome in these matters could expose the company to substantial damages or penalties that may have a material adverse impact on the company’s operations and cash flows.”
Though it is unlikely the subpoena will have a materially adverse effect on DraftKings’ finances, the sportsbook provider did admit that its operating results could feel some of the effects — though it did not specify which ones exactly:
“Despite the potential for significant damages, the company does not believe, based on currently available information, that the outcome of this proceeding will have a material adverse effect on DraftKings’ financial condition, although the outcome could be material to DraftKings’ operating results for any particular period, depending, in part, upon the operating results for such period.”
DraftKings Recently Slapped with Patent Infringement Lawsuit
It has been a surprisingly active year of legal cases for sportsbook operator DraftKings. On top of its recent subpoena courtesy of the SEC, esports provider Engine Media Holdings filed a patent infringement lawsuit against the sportsbook giant in early July 2021.
The lawsuit is centered around Engine Media’s skill gaming-focused Winview Inc. subsidiary, which owns two patents which are allegedly being used by DraftKings, both of which concerned integration between skill gaming and live events.
The lawsuit specified that select DraftKings gaming services in fact overlap with two Winview patents named “Methodology for Equalizing Systemic Latencies in Television Reception in Connection with Games of Skill Played in Connection with Live Television Programming” and “Method of and System For Managing Client Resources and Assets for Activities On Computing Devices”.
The first patent employs technology designed to improve latency for games of skill synchronized with live events, and was initially granted to Engine Media in 2017. The second patent, which arrived in 2014, allows for disseminating entertainment that is “directly correlated” with live events.
The case is still open as of writing and is expected to be heard in the United States District Court for the District of New Jersey. Engine Media are seeking recovery of damages as part of the proceedings. The esports provider will be represented by both Irell & Manella, LLP and McElroy, Deutsch, Mulvaney & Carpenter, LLP.
DraftKings Launching Sports Bars Across US
In some slightly more encouraging news, last week DraftKings announced that it has entered into a strategic partnership with US entertainment brand Sports & Social. This new collaboration’s main purpose is to support the launch of new DraftKings sports bars across the nation. The first of these establishments will be located in Nashville, Tennessee and Detroit, Michigan, with more cities set to follow shortly.
The design of these bars will be spearheaded the NYC-based award-winning interior design and lighting firm ICRAVE. DraftKings and Sports & Social both claim that these brand-new venues will represent an entirely new and innovative sports betting and entertainment experience for sports betting fans.
Accounting for the major changes to sports betting due to shifts towards mobile-technologies, DraftKings Chief Business Officer Ezra Kucharz described the in-person betting experience as being nevertheless vital to the operator’s spirit and ethos. By pivoting towards working in one of the fastest-growing entertainment markets, DraftKings sees an opportunity to bring its world-renowned products to fans in new, engaging and highly interactive formats.
DraftKings Marketplace is Operator’s First-Ever NFT Marketplace
The world of non-fungible tokens (NFTs) continues to grow increasingly popular and commonplace, with DraftKings now choosing to join in on the fray with its very own DraftKings Marketplace — an online platform for its customers to buy and sell these unique tokens via their existing DraftKings accounts.
The sportsbook provider will join forces together with NFT platform Autograph for the deal, becoming the exclusive dealer of Autograph’s NFT content in the process. Chief executive and founder of Autograph Dillon Rosenblatt touted the huge potential of NFTs when commenting on the partnership, calling them “the perfect medium to connect users to both the things they love and those who share those interests.”
Some of the first products and services that will be available on DraftKings’ NFT marketplace will be the “Pre Season Access” collection, demonstrating to the operator’s fans Autograph’s NFT commitment to legendary athletes.
