For those in the gaming industry, it is never a good idea to cross the regulatory agencies in the state they are located. In Nevada, that would be the powerful Nevada Gaming Control Board, who regulates the gaming industry with an iron hand. The New Jersey Department of Gaming Enforcement (DGE) has a similar reputation in that regard as the sports betting operation DraftKings found out quite recently.
DraftKings Nailed for Proxy Betting
In a decision that was released last week, the New Jersey DGE hammered DraftKings, who operates as a sports book in the Garden State, with one of the highest fines handed out to one of its licensees. The $150,000 fine meted out by the DGE against DraftKings was for proxy betting by one of the larger players on the site. That player has now been banned from participating in action on the site, presumably a permanent action.
“Proxy betting” is an action when someone has another person place a bet for them. It is an illegal action in any live casino – a person cannot knowingly place a bet for another person (although it is rarely enforced) – and it is also illegal in the online gaming industry. The reasons for this are because gaming is limited to those who are within the borders of the state offering the games and someone from outside the state is not permitted to join the game.
In this instance, a man in Florida with a DraftKings account is the person of interest. The player was known as a rather large player, sometimes betting as much as $50,000 per game. This type of action got the player special perks from DraftKings, including being seated in the private company suite in February 2020 for the Super Bowl.
In addition to the $150,000 fine, DraftKings admitted that they were deficient in policing such a situation. “We strive to continuously improve our systems to detect violations of our terms of use,” DraftKings said in a statement to The Associated Press on Thursday. “In this instance, our systems failed to detect the violation of our terms of use. We have taken corrective action to address that.”
More Than Just a “Little” Mistake
At issue in the situation is that it wasn’t just a little mistake that DraftKings made.
Reportedly, the player involved was in Florida and logged into his DraftKings account. This was fine, because he could not actively wager from Florida due to the geolocation technologies employed by DraftKings. Only minutes after his Florida log on, however, the account was legally logged into from a location in New Jersey (the DGE did not release any names in the case), and several bets were placed.
The DGE says that DraftKings delivered a written warning to the player about this action, but then they made a critical mistake. Instead of informing the player that it was a prohibited act – proxy betting – DraftKings informed the Florida player that they could still do the illegal act if the friend waited at least two hours after the Florida player had exited his account before placing the wager. This, of course, is highly wrong and goes against the DGE regulations for sports betting in New Jersey.
Not only did the Florida player and his New Jersey accomplice commit this act, they did it frequently. 21 bets were placed by the Florida player in this proxy arrangement. Furthermore, the duo did the same thing in Pennsylvania once their online sports book went live in 2020. As of October 2020, the Florida player has been stripped of both accounts and the 21 outstanding bets were voided – no word on whether the money was seized by the DGE or not.
