Sports betting company DraftKings agreed to settle for $200,000 charges it violated Regulation FD disclosure rules, the Securities and Exchange Commission announced September 26.
The regulation prohibits the selective disclosure of material information. It permits the disclosure of material information on social media, but the company must first identify the accounts that people can expect that information to come from.
DraftKings violated the rule by disclosing new information about the company’s performance on its CEO’s personal X and LinkedIn accounts, without having first identified those accounts as sources of this kind of information, the SEC said.
“Information about growth in sales as a public company can be extremely important to investors,” John Dugan, an SEC associate director for enforcement, said in announcing the settlement. “It is essential that, when companies disseminate material, nonpublic information, they do so fairly to all investors.”
The alleged violation goes back to last year, when the company’s PR firm in July posted a statement about company performance under the name of company CEO Jason Robins.
The statement was posted on Robins’ X and LinkedIn accounts and said the company continued to see “really strong growth” in states where it was already operating, the SEC said.
At the time of the posts, according to the agency, DraftKings had not yet publicly disclosed its second quarter 2023 financial results, nor had it publicly disclosed other information shared in the posts.
By releasing what amounted to new information in the way it did, the SEC said, the company was making material information available only to people who followed or otherwise viewed the CEO’s posts.
The PR firm deleted the posts shortly after they were published at the request of the company.
It was another week before the company publicly released the performance information when it announced its financial earnings for the second quarter of 2023.
Handling release of the information in this way, the SEC said, amounted to “selectively disclosing material, nonpublic information to investors who followed or otherwise viewed the company CEO’s social media accounts without disclosing that same information to all investors,”
In announcing the settlement, the SEC referred to a report it released in 2013 in which it spells out its policy on the use of social media under its Regulation FD disclosure rules. The release announcing the report sums up the policy: “SEC says social media OK for company announcements if investors are alerted.”
