A board approved a $30 million contract. The company receiving the money was owned by the guy who’d just left the boardroom. Nobody outside the filing noticed for weeks.
That’s not a hypothetical. It’s what happened at DraftKings this August, and it’s the kind of story every founder should read twice, not because of the dollar figure, but because of how ordinary the whole thing looked on paper before someone actually read the fine print.
Most governance failures don’t announce themselves. They arrive dressed as routine board business, a line item in a filing, a vendor contract nobody outside finance bothers to open. Founders assume the danger is fraud. It rarely is. The danger is proximity, the quiet comfort of doing business with people you already trust, structured in a way that never gets a hard second look.
The Deal Nobody Was Supposed to Notice
Matthew Kalish cofounded DraftKings in 2012 and spent over a decade building it into the sportsbook giant it is today. In mid-2026, weeks before he stepped down from his executive role, DraftKings’ board approved a $30 million marketing contract with HardScope, a creator-marketing firm Kalish had just started. Fortune’s investigation laid out the mechanics: an audit committee sign-off, a related-party disclosure buried in an SEC filing, and a Harvard Law governance expert who called the voting structure behind it a “big red flag.”
Here’s the part that should bother founders more than the dollar amount. DraftKings CEO Jason Robins holds outsized voting power through the company’s dual-class share structure, the kind of setup researchers at the National Bureau of Economic Research have flagged as a recurring feature of founder-controlled IPOs. That concentration of control makes decisions like the Kalish deal easier to push through and harder to challenge internally. A follow-up report from the Northeast Times confirmed the filing details and framed the arrangement the same way most outside observers eventually did: not necessarily illegal, but exactly the kind of thing audit committees exist to stop.
DraftKings isn’t a scrappy two-person shop anymore. It’s a public company with a market cap in the billions and a board that’s supposed to catch this stuff before it becomes a headline. It didn’t. Which raises the uncomfortable question every founder eventually has to sit with: if a company this size can wave through a related-party deal this size, what’s actually protecting a startup with five employees and no audit committee at all?
Why Related-Party Deals Are the Blind Spot Founders Don’t See Coming
Founders build companies around trust. Early hires, first vendors, first investors, all of it runs on relationships. That’s not a flaw, it’s how anything gets built fast. The problem is that the instinct never turns off, even after the company has grown past the point where “I trust this person” is a sufficient reason to sign a contract.
Stanford Law School’s overview of corporate governance standards spells out why Nasdaq and NYSE require audit committees to independently review related-party transactions: insiders systematically underprice the risk of deals involving people they like. Not because they’re dishonest. Because familiarity makes scrutiny feel rude.
Founders who’ve raised a seed round and are staffing up fast tend to hit this exact trap with marketing spend specifically. It’s the easiest budget line to hand to a friend, a former colleague, a cofounder’s new agency, because marketing outcomes are fuzzy enough that nobody can prove the spend was wasted for eighteen months. By then the relationship is load-bearing and nobody wants to be the one who pulls it apart.
Three questions catch this before it becomes a DraftKings-sized headline:
- Who approved this contract, and did they have anything to gain from it personally?
- If a stranger reviewed this deal cold, with no context on the relationship, would the terms still look fair?
- Is there a paper trail showing the decision was actually debated, or did it just get rubber-stamped because the person proposing it was in the room?
Marketing Credibility Is Earned the Same Way Trust Is, Slowly and With Receipts
Marketing spend gets scrutinized hardest in industries where consumer trust is already thin. IGaming is one of the clearest examples. Online casino operators live or die on whether players believe the reviews, the payout numbers, and the bonus terms are real, not house-written puffery dressed up as journalism.
That’s why serious operators lean on third-party editorial coverage instead of just running their own ad copy. A brand claiming it’s trustworthy means nothing. A brand that shows up, unpaid and unprompted, in an independent outlet’s roundup of vetted platforms means something completely different. Readers can smell the difference between the two almost instantly.
This is roughly what Metrotimes’ full write-up does for the Australian online casino market: it runs licensing checks, payout speed comparisons, and bonus term breakdowns independent of anything the operators themselves are paying for. A founder auditing their own marketing spend should be asking whether their brand could survive that kind of outside-in scrutiny, or whether it only looks credible because the company is the one writing about itself.
Gambling involves real financial risk for the end user, and operators that get this wrong don’t just lose credibility, they lose licenses. Players should always gamble within their means and seek support through BeGambleAware.org if it stops feeling like entertainment.
What Founders Should Actually Change After Reading This
Reading about DraftKings and feeling smug isn’t the point. Most founders have some version of this risk sitting quietly in their own contracts, usually smaller, usually less scrutinized because nobody’s filing an S-1 on it.
Start with a basic audit. Pull every vendor contract signed in the last two years. Flag anything where the counterparty has a personal relationship with a founder, an executive, or a board member. It’s a shorter list than most people expect, and a longer one than most people want to admit.
Then fix the approval chain. Related-party deals shouldn’t get sign-off from the same person who benefits from them, full stop. That’s not distrust. It’s the same logic that makes referees not officiate their own kid’s game.
Document the reasoning, not just the decision. A one-paragraph memo explaining why a vendor was chosen, what alternatives were considered, and who reviewed the terms turns a defensible decision into a provable one. DraftKings had a filing. It didn’t have a strong enough story around it, and that gap is what turned a legal transaction into a governance scandal.
Founders who get this right early rarely think about it again. The ones who skip it find out the hard way, usually in a headline, usually years after the habit that caused it felt completely normal.
Frequently Asked Questions
- What is a related-party transaction in a business context? It’s any deal where a company does business with someone connected to its leadership, such as a founder, executive, or board member’s own company. These deals are legal but require independent review because the person approving them may personally benefit from the terms.
- Why do audit committees review related-party deals separately? Because insiders reviewing their own or a colleague’s deal tend to underweight risk, even unintentionally. An independent audit committee removes that conflict by having people with no personal stake assess whether the terms are fair to the company.
- How can a small startup without a formal board avoid this problem? Build the habit early: any contract involving a personal connection gets reviewed by someone with no stake in it, even if that’s just a trusted advisor or investor. Document why the deal was approved, not just that it was.
- Does a dual-class share structure make governance failures more likely? It can. Concentrated voting power, common in founder-led IPOs, makes it easier to push through decisions without broad buy-in. It doesn’t guarantee bad outcomes, but it removes a natural check that more distributed ownership provides.
- Is a related-party deal automatically a scandal? No. Plenty of legitimate related-party deals exist and get disclosed properly. The problem is weak review, not the relationship itself. Transparency and independent sign-off are what separate a normal disclosure from a governance failure.
The Real Lesson Isn’t About DraftKings
The DraftKings story will fade from headlines within a news cycle or two. The pattern behind it won’t. Founders keep rediscovering the same lesson: proximity to money and proximity to trust are not the same thing, and conflating them is how good companies end up explaining themselves to reporters instead of building the thing they set out to build. Fix the approval chain before you need to.