DraftKings has been fined $200,000 by the Securities and Exchange Commission (SEC) following a breach of regulations related to the selective disclosure of information on social media. The penalty stems from a post made on CEO Jason Robins’ personal accounts on X (formerly Twitter) and LinkedIn, which the SEC claims violated fair disclosure rules.
The Controversial Post
On July 27, 2023, DraftKings’ public relations team shared a post through Robins’ personal social media channels, highlighting the company’s growth potential. The message stated, “There’s massive potential for growth in new markets—but we’re still seeing really strong growth in existing states.” The post went on to detail impressive revenue growth figures from 2018-2019, which the SEC argues should have been communicated to all investors at the same time, rather than selectively through personal accounts.
Violation of Regulation Fair Disclosure
The SEC contends that DraftKings’ actions breached Regulation Fair Disclosure (Reg FD), which mandates that publicly traded companies must provide material information to all investors simultaneously. John Dugan, Associate Director for Enforcement in the SEC’s Boston Regional Office, emphasized the importance of equitable information dissemination, stating, “Information about growth in sales as a public company can be extremely important to investors.”
DraftKings’ Response
After the controversial posts were made, DraftKings’ communications team alerted the public relations firm, and the posts were promptly removed within thirty minutes. However, the company did not officially release the information to investors for another seven days, aligning it with their scheduled earnings release. This delay raised concerns about compliance with the SEC’s regulations.
DraftKings’ internal policies include a “quiet period,” during which employees are prohibited from discussing financial results. The posts in question were made before this quiet period ended on August 4. The SEC noted that DraftKings’ staff had reviewed and approved the content, which contravened multiple internal policies regarding public disclosures.
A DraftKings spokesperson commented, stating the company is “pleased to have this matter resolved” while emphasizing their commitment to regulatory compliance.
Conclusion
This incident highlights the critical importance of adhering to regulations governing the dissemination of information in publicly traded companies. As DraftKings moves forward, it will need to reinforce its internal policies to prevent similar issues in the future.
I am Aparna Sahu
Investment Specialist and Financial Writer
With 2 years of experience in the financial sector, Aparna brings a wealth of knowledge and insight to Investor Welcome. As an accomplished author and investment specialist, Aparna has a passion for demystifying complex financial concepts and empowering investors with actionable strategies. She has been featured in relevant publications, if any, and is dedicated to providing clear, evidence-based analysis that helps clients make informed investment decisions. Aparna holds a relevant degree or certification and is committed to staying ahead of market trends to deliver the most up-to-date advice.