US sportsbook giant DraftKings has revealed it received a subpoena from the US Securities and Exchange Commission (SEC) concerning allegations made by a report from short-sellers Hindenburg Research.
DraftKings said it received the subpoena on 9 July, soon after the report was published.
While DraftKings did not reveal the nature of the documents the SEC was seeking, the Hindenburg Report in question suggested that technology provider SBTech – which merged with DraftKings when it went public in 2020 – had continued to operate in black markets through a “front” business.
The report claims that roughly 50% of SBTech’s revenue came from markets where gambling is banned. It also alleged that DraftKings has given false or misleading statements – and failed to disclose information regarding business prospects – regarding this alleged activity.
DraftKings has said it intends to fully co-operate with the SEC’s investigation, while intending to “vigorously defend against these claims”.
In its half-year report, DraftKings said it could not estimate the impact of any potential SEC action, but added that it believes any serious negative outcome to be unlikely.
“The company cannot predict with any degree of certainty the outcome of these matters or determine the extent of any potential liabilities,” it said. “The company also cannot provide an estimate of the possible loss or range of loss. Any adverse outcome in these matters could expose the company to substantial damages or penalties that may have a material adverse impact on the company’s operations and cash flows.
“Despite the potential for significant damages, the company does not believe, based on currently available information, that the outcome of this proceeding will have a material adverse effect on DraftKings’ financial condition, although the outcome could be material to DraftKings’ operating results for any particular period, depending, in part, upon the operating results for such period.”
DraftKings was recently involved in another legal battle, after esports provider Engine Media filed a patent infringement lawsuit against the company.