Parker Conrad
Photograph by Jim Wilson — The New York Times/Redux
By Heather Clancy
November 25, 2015

Barely a week after Zenefits acknowledged it would fall short of its lofty 2015 revenue growth targets comes the revelation that the health insurance startup is under regulatory scrutiny in at least one state.

At issue is whether some current and former Zenefits employees sold policies to businesses without the proper licenses to do so, according to BuzzFeed. The article cites at least one ongoing investigation in Washington state, where selling insurance without a license is a felony. The civil fine is up to $25,000 per violation.

Other states where Zenefits may also have problems include Arizona, California, Massachusetts, Michigan, Nevada, New Jersey, and New York, according to the BuzzFeed story.

Every state requires individual brokers to carry licenses—it’s a highly regulated industry, one that Zenefits has vowed to disrupt. The company sells benefits and policies in 50 states. CEO Parker Conrad holds licenses for all of them, but that doesn’t cover his employees.

While individual Zenefits managers have encouraged employees to obtain the proper licenses, the company didn’t have a systemic approach for managing this until last July, reports BuzzFeed. That’s more than two years after Zenefits began selling policies.

Zenefits has encountered skeptical state regulators before. Earlier this year, it won a hard-fought battle in Utah, where it was initially banned from doing business because of its policy of giving away its software.

In a statement provided to BuzzFeed, a Zenefits spokesman said the company’s employees hold more than 280 active resident insurance licenses and 2,500 active non-resident licenses. The company said it has always been Zenefits’ policy to require the proper licenses.

Here’s the rest of the statement:

We have taken correction action, including terminating the employee, when we have learned of violations, either because the individuals failed to pass the brokerage exam or have otherwise violated our licensing policies. Any accusations of other individuals violating our licensure policies will be thoroughly investigated, and we will take proper remedial action.

BuzzFeed’s revelation is the latest in a recent string of troubling developments surrounding this high-flying tech unicorn, the term commonly used to describe startups with private valuations of more than $1 billion.

Earlier this month, the Wall Street Journal reported Zenefits was unlikely to meet its $100 million revenue target for this year. While Conrad confirmed that finding, he said Zenefits has quadrupled its annual recurring revenue over the past 12 months. That would put its revenue at close to $80 million, based on the $20 million number it disclosed for 2014.

Zenefits, last valued at $4.5 billion, was also part of a group of startups that recently suffered a black eye after Fidelity marked down the value of its holdings in them. In the case of Zenefits, the mutual fund giant cut the value by 48%.

Skepticism grows over unicorn valuations:

Follow Heather Clancy on Twitter at @greentechlady or via her RSS feed. Please make sure to subscribe to Data Sheet, Fortune’s daily newsletter on the business of technology.

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