The company's shares gained over 8% following the announcement on Tuesday.

Lottery.com (LTRY) announced on Tuesday that it has initiated an investigation into potential short selling of its stock and has engaged legal counsel to assist with the matter.

Paul Hastings LLP will conduct a probe on behalf of the company. The development sent Lottery.com's penny stock up 8.5% on Tuesday.

The lottery site operator, popularly known for games like Powerball and Mega Millions, believes that false information is being spread about the company, which is hurting its business and stock price.

Lottery.com suspects illegal naked short selling, citing repeated delivery failures, high short interest, and borrow rates topping 500%.

It did not disclose whether it had identified the malicious actors.

Lottery.com said in a statement that the investigation builds on prior referrals already made by the company to certain regulators, including the Securities and Exchange Commission, the Department of Justice, and Nasdaq MarketWatch.

On Stocktwits, the retail sentiment shifted to 'bullish’ from 'neutral' the previous day.

LTRY sentiment and message volume as of June 3 | Source: Stocktwits

Lottery.com has managed to turnaround its business over the past year, securing $250 million in funding and launching Sports.com to expand into the sports media and live events sectors. 

The company also regained full compliance with Nasdaq and is reportedly pursuing strategic acquisitions to drive growth.

Lottery.com shares are up 218% this year.

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