I too am more concerned about your children than I am about a boy whose father allows such goings on. He and yes you are letting the boy set one hell of an example for future behavior if your reaction is not swift. At this hour I'm assuming everyone is awake so its time YOU to tell the boy and girl that this is not happening again.

Then if it does do take a pail of water to them. Literally. And don't worry about the mattress it will dry.

Part of your question was this autocratic boyfriend of yours who allows this double standard. Lets not think for one second that your kids don't know what's going on in the basement and that they're held to a separate standard. One solution other than getting rid of this petty tyrant is to tell him on no uncertain terms that he is not to discipline your children. Unless they are starting a fire on the living room floor he is not to correct their behavior in any way. Punishment for disobeying this directive is the end of the relationship.

He will throw this back at you regarding his sons friend who is invading the home without permission of the owner. You can agree that no visitors of any of the children will be allowed to stay overnight without agreement between the two adults.

If it's your house, they have to play by your rules. If it's your boyfriend's house, then voice your concerns. If he doesn't act, take your kids and move out. Continue to date, but refuse to livetogether until his son moves out and/or you can agree on paparenting issues.