Report Alleges DraftKings Has Ties To Black Markets

BOSTON — A report released Tuesday accuses Boston-based DraftKings of "betting it can hide its black market operations" and says the sports betting company "represents the dying embers left by yet another Wall Street loophole."

The report was produced by Hindenburg Research, an investment research firm focused on activist short-selling. In the past, companies targeted by Hindenburg have seen stock prices drop by as much as 40 percent after a report's release. In September, a Hindenburg report on Nikola Motor Co. alleging fraud by founder Trevor Milton led to a Securities and Exchange Commission inquiry and Milton's resignation as executive chairman.

"This report is written by someone who is short on DraftKings stock with an incentive to drive down the share price,"DraftKings said in a statement. "Our business combination with SBTech was completed in 2020. We conducted a thorough review of their business practices and we were comfortable with the findings. We do not comment on speculation or allegations made by former SBTech employees."

Shares of DraftKings were trading around $48.50 Tuesday morning, down $2.05, or 4.07 percent, from Monday's close.

Shares of DraftKings are up more than 150 percent since the company had its initial public offering in April 2020. But in its report, Hindenburg says the merger with SBTech, a Bulgaria-based gaming technology company, that led to its listing on NASDAQ exposed the company to illegal activities.

"Unbeknownst to investors, DraftKings’ merger with SBTech also brings exposure to extensive dealings in black-market gaming, money laundering and organized crime," the report said. "Based on conversations with multiple former employees, a review of SEC & international filings, and inspection of back-end infrastructure at illicit international gaming websites, we show that SBTech has a long and ongoing record of operating in black markets."

Hindenburg estimates as much 50 percent of SBTech's revenue comes from illegal activities.

In addition to its core business of daily fantasy sports games, DraftKings has been expanding its business for traditional sports betting in states where it is illegal. It currently offers legal sports betting in 11 states, including New Hampshire.