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DraftKings Under Federal Investigation

DraftKings is under federal investigation by the Securities and Exchange Commission over its acquisition of SBTech, a sports betting technology provider based in Bulgaria.

DraftKings acknowledged that two federal securities law putative class actions were filed against the company and certain officers in July in the U.S. District Court of the Southern District of New York. The actions allege violations of the Securities Exchange Act related to DraftKings’ purchase of SBTech and stem from a report by financial research firm and short seller Hindenburg Research.

In DraftKings’ earnings report, the company said that it plans to defend itself against the claims but acknowledged that it cannot predict the outcome or the potential liabilities associated with the SEC investigation.

“Despite the potential for significant damages, the Company does not believe, based on currently available information, that the outcome of the 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,” the company stated in its earnings report.

DraftKings purchased SBTech, a veteran company in the international sports betting market, in December 2019. The deal was completed in 2020.

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