DraftKings Inc. and other online gambling operators in the United States are facing increased scrutiny over their use of artificial intelligence (AI) and behavioral data to target customers, particularly those who have sustained losses. Recent inquiries by federal lawmakers and state officials reflect growing concerns about the ethical implications and potential harm to individuals with gambling addictions.
In New York, consumer protection lawyers from the Attorney General’s office have reached out to former DraftKings employees to discuss the company’s data practices. This confidential inquiry follows investigative reports that revealed DraftKings’ use of machine learning, a form of AI that identifies patterns in customer data to target promotions at individuals most likely to continue gambling and losing. The extent of the Attorney General’s investigation remains unclear, and the office declined to comment.
At the same time, the New York State Gaming Commission has proposed regulations that would restrict gambling companies from using automated systems to send personalized promotions or suggest wagers based on users’ betting history or losses. The proposed rule, which will undergo a 60-day public comment period before a final vote, aims to address the rapid development of technology that can potentially exploit vulnerable gamblers. The commission chair, Brian O’Dwyer, emphasized that while legalized sports betting has generated billions in tax revenue for the state since 2022, it also poses risks to individuals. DraftKings and other operators have opposed some aspects of the regulation, arguing that broad restrictions could hinder legitimate business applications of AI and reduce customer engagement.
In Louisiana, the state’s gaming control board recently delayed the routine five-year license renewal for DraftKings, instead granting a conditional four-month extension. The board requested formal responses about the company’s use of AI and required the submission of overdue documents. During a hearing in Baton Rouge, the board’s chair, Christopher Hebert, cited reports about DraftKings’ practices as raising “serious questions.” DraftKings executives faced extensive questioning, with co-founder and president Paul Liberman acknowledging that the company tracks customer activity but denying that it targets losing bettors specifically. He framed most customers as spending money on entertainment rather than explicitly losing money.
At the federal level, three Democratic lawmakers—Senator Richard Blumenthal of Connecticut and Representatives Paul Tonko of New York and Valerie Foushee of North Carolina—sent letters last week to DraftKings and several other online gambling companies. They requested details about the use of AI and “VIP” programs, referencing investigative journalism that found VIP status could be granted even to those exhibiting signs of problem gambling. Blumenthal criticized these practices as “supercharging addiction” by using AI to sustain users’ engagement with gambling.
DraftKings has denied targeting customers based on losses or indicators of problem gambling, stating that it maintains regular communication with regulators and emphasizes responsible business practices. The company views ongoing dialogue with regulatory bodies as standard business procedure.
This heightened attention has also led regulators in Massachusetts and Michigan to begin their own reviews of the use of AI in online gambling. As the debate continues, stakeholders are weighing the fine line between technological innovation in customer engagement and the protection of individuals from potential harm related to gambling addiction.