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In a significant regulatory action, the Ohio Casino Control Commission (OCCC) has levied a $425,000 fine against DraftKings, one of the leading sports betting operators in the United States. The penalty comes as a result of two separate violations in the Buckeye State, highlighting the strict oversight of Ohio’s newly regulated sports betting market.

The first violation involved DraftKings accepting college player prop bets, which are explicitly prohibited in Ohio. The company allowed these wagers from March 14 to March 19, 2024, despite the ban being enacted on March 1. This oversight raised concerns about the operator’s compliance mechanisms and ability to swiftly implement regulatory changes.

Interestingly, offshore betting sites exist in a legal gray area for Ohio residents. While no law explicitly prohibits individuals from using these sites, it’s not expressly legal either. The Unlawful Internet Gambling Enforcement Act of 2006 targets operators, not bettors. Adam Haynes from the Best Offshore Sportsbooks says that residents in Ohio have access to various bet types that offer different ways to engage with sports betting, including exclusive promotions and generous bonuses. There are no federal or state laws that explicitly prohibit the use of overseas sportsbooks by Ohio players.

The second infraction was related to account funding practices. DraftKings permitted customers to fund their accounts at “unauthorized” locations, which goes against Ohio’s strict regulations on where and how bettors can deposit money into their sports wagering accounts. The OCCC revealed that DraftKings had processed a staggering $2.5 million in deposits across 40,985 transactions at non-gaming retail locations. This violation occurred over an extended period, from January 1, 2023, through March 5, 2024, indicating a systemic issue in the company’s compliance procedures.

In response to these violations, DraftKings has taken corrective actions. The company has removed player prop bets from its Ohio betting menu and ceased accepting deposits at unapproved locations. Additionally, the OCCC is mandating that DraftKings train its employees on the relevant laws and regulations to prevent future occurrences.

This incident in Ohio is not isolated, as DraftKings faces scrutiny in other states as well. In Massachusetts, the company is under investigation for allowing credit card deposits, which are banned in the state. The Massachusetts Gaming Commission (MGC) conducted a marathon seven-hour hearing on November 20, 2024, to address this issue, marking the second such hearing on the matter.

The Ohio fine and the ongoing issues in Massachusetts underscore the challenges faced by sports betting operators in navigating the complex and varied regulatory landscape across different states. Each jurisdiction has its own set of rules and restrictions, requiring operators to maintain robust compliance systems and stay vigilant about regulatory changes.

Industry experts suggest that these incidents could lead to increased scrutiny of sports betting operators across the country. States with legalized sports betting may review their enforcement mechanisms and potentially consider more stringent penalties for compliance failures.

The $425,000 fine in Ohio is particularly noteworthy given the state’s relatively recent entry into the legal sports betting market. Ohio launched its regulated sports betting industry on January 1, 2023, and has quickly established itself as a significant market. The state has seen impressive betting handles, with September 2024 reaching over $864 million, marking it as the third-highest monthly total on record for Ohio.

This regulatory action against DraftKings comes at a time when the sports betting industry is experiencing rapid growth and increased attention from both consumers and regulators. The American Gaming Association recently reported record-breaking commercial gaming revenue for the third quarter of 2024, indicating the sector’s continued expansion.

As the industry evolves, operators like DraftKings are under pressure to balance aggressive market strategies with strict adherence to state-specific regulations. The Ohio fine serves as a reminder of the potential consequences of compliance failures in this highly regulated environment.