SEC Investigates DraftKings Following Criminal Allegations

  • SBTech is suspected to be a front company for criminal activity.
  • The SEC has requested documents from DraftKings following the allegations.

LAS VEGAS – Sports betting giant DraftKings was recently accused of 'black market operations, false and misleading statements and/or failures to disclose information by short-seller Hindenburg Research.

The SEC is now investigating matters further.

DraftKing Accusations And SBTech

In a piece published June 15, Hindenburg Research details out numerous accusations against DraftKings.

One of the more notable accusations is that sportsbook SBTech is actually a front company used by DraftKings to launder money and cover other criminal dealings.

They also allege that SBTech has an 'expansive Asia-facing business at least as far back as 2014' despite sports gambling being illegal in major Asian markets.

Hindenburg Research believes that DraftKings' explanation for their success is "questionable". DraftKings claims their advantage is their "willingness to generate losses by spending its SPAC money on marketing and customer acquisition in order to boost its near-term numbers."

Securities and Exchange Commission Involvement

DraftKings received a subpoena from the SEC on July 9 seeking documents regarding the allegations. Investigations like this aren't uncommon following allegations from short-seller reports.

"We intend to comply with the related requests and are cooperating with the SEC’s ongoing inquiry. … Despite the potential for significant damages, we do not believe, based on currently available information, that the outcome of this proceeding will have a material adverse effect on our financial condition," said DraftKings.

This news may be troubling to fans who like to do their online sports betting through DraftKings or its subsidiaries, but it should be said that allegations do not equal convictions.

It's possible the SEC will find no wrongdoings, and the situation settles itself out.