DraftKings Inc. dodged a bullet in the Bay State, but it wasn’t as lucky in New Jersey.
The Massachusetts Gaming Commission (MGC) met Thursday and ultimately voted to allow Boston-based DraftKings to void more than 100 same-game parlays on the NBA in October that used what the company said were faulty odds.
However, the MGC did attach a condition to the relief it provided DraftKings, by requiring the operator to refund bettors to the tune of three times the amount of their wager in cash. The decision by the MGC, in a 3-2 vote, will save DraftKings more than half a million dollars.
Nevertheless, as indicated by the split vote, commissioners were not united in what the regulator should have done about the bets. A motion to reject DraftKings’ request to void the wagers was itself shot down by a 3-2 margin, leading to the decision to cancel the parlays but provide cash to players.
“I cannot stomach the fact of enriching a group of people that were taking advantage of the system,” commissioner Jordan Maynard said.
The Massachusetts Gaming Commission is today again considering DraftKings' request to void a bunch of wagers "placed at incorrect odds" because of a third-party vendor. 17 other states have already voided the wagers, but MA and NJ still investigating.https://t.co/ny2SOJ5WF0 pic.twitter.com/8eF0NZuVC9— Geoff Zochodne (@GeoffZochodne) November 30, 2023
The decision highlights the bind that bettors, bookmakers, and regulators can be put in by modern sports wagering.
Sharper bettors are on the lookout for lines and odds that may be out of step with those of other operators and can pounce on them once they are identified, which is what happened with DraftKings. Bookmakers, meanwhile, rely on third-party vendors and automation to crank out wagering markets and attract as much handle as possible, which can lead to mistakes. When that happens, regulators can find themselves asked to arbitrate between angry bettors and operators that stand to take a significant financial hit.
The MGC dealt with a similar situation back in September, when it voted to allow Barstool Sportsbook to void $47,759.94 in NFL player prop bets placed after the outcome was already decided. While that request was approved, it was evident subsequent requests could get further scrutiny, which is what happened with DraftKings.
Sheesh, Penn Sports Interactive (the operator of Barstool Sportsbook and the future ESPN Bet) is asking the Massachusetts Gaming Commission to void 257 wagers amounting to $47,759.94 on player prop markets for the already-concluded NY Giants-Arizona Cardinals NFL game last… pic.twitter.com/L4QucYRGMd— Geoff Zochodne (@GeoffZochodne) September 21, 2023
DraftKings asked the MGC to void 178 wagers by 138 customers, which amounted to $4,182.36 and resulted in winnings of $575,436.82 for the players. These wagers were same-game parlays on an NBA game on Oct. 24 between the Los Angeles Lakers and the Denver Nuggets, but were “placed at incorrect odds” because of a third-party vendor, Sportcast, DraftKings said.
The company told the MGC that 17 other states already voided the wagers, while another four jurisdictions saw no bets placed at the suspect odds. Connecticut and New Jersey, however, forced DraftKings to pay bettors their money.
New Jersey's decision was made on Tuesday, the MGC heard. DraftKings did not offer a number as to how much they are on the hook for in the Garden State, but MGC staff did note Connecticut’s decision cost the company around $151,000.
It's payback time
DraftKings also told Massachusetts regulators that the wagers, which were graded as unsettled, “began creating customer friction,” a memo to the MGC noted. The bookmaker tried to make it up to certain customers by issuing bonus bets to users they deemed “had not intentionally abused the incorrect odds,” which was anyone whose parlay was less than 50% made up of the suspect markets. As a result, 14 of the 138 affected customers in the state received free play from DraftKings.
The commission heard that DraftKings refunded bettors who used a bonus bet with an identically-sized bonus bet but that players who wagered with their own money received three times the amount back in cash. The latter, ultimately, is the treatment the MGC decided every one of the 138 customers should receive, which means DraftKings will have to pay $12,547.08 because of the situation, not $575,436.82.
Still, the commission heard that the same third-party vendor was responsible for a “small” but similar error that happened earlier this year, although DraftKings has since brought those NBA wagering capabilities in-house. Furthermore, while some commissioners were worried about rewarding bettors who pounced on a bad line, others were concerned about framing that behavior as something dastardly.
“They're not doing anything illegal,” commissioner Eileen O’Brien said during Thursday's meeting. “To me, sometimes those people are the very people that would keep you on your toes and make sure that you're not doing anything that would cause risk or misinformation or mistakes to go out.”
'This took a good amount of time'
Under its regulation related to voiding wagers, the MGC must consider whether there was any effect on the integrity of the event in question or if there was a possibility of any illegal activity. Commissioners must also weigh whether allowing the wager would be unfair to bettors and if it is contrary to public policy.
MGC staff said all the regulatory requirements had been met and that they had "no reservations" about processing DraftKings' void request. Still, sorting out the DraftKings error took more than a month. MGC chair Cathy Judd-Stein suggested the regulator may need to revisit its void-related rules to streamline the process.
“This took a good amount of time,” she said. “I might recommend that we do take another look at our reg and see where we can be helpful to make sure that we are absolutely clear.”