DraftKings faces scrutiny over allegations that AI helped target losing bettors with promotions. Massachusetts and Louisiana regulators are examining its practices, while a class action raises questions about player protection.
Artificial intelligence is changing how online betting companies understand their customers. It can study betting habits, predict player behaviour, and help decide which offers a customer receives.
But what happens when this technology identifies people who are likely to lose money and sends them more betting offers?
That question has put DraftKings under growing scrutiny in the United States.
Reports have raised concerns that the company used customer data and machine learning to identify bettors who were more likely to lose money after receiving promotions.
DraftKings has denied targeting customers based on losses or signs of problem gambling. However, the issue has attracted attention from state regulators and led to a proposed class-action lawsuit.
What Did the Investigation Reveal About DraftKings?
A September 19, 2026, New York Times investigation brought the issue into public view.
It examined internal documents, betting records, and interviews with more than 40 former DraftKings employees.
The report described a machine learning model developed in 2023. It analysed customer information and estimated which users were more likely to respond to promotions by gambling and losing more money.
According to the investigation, the model gave customers scores linked to their expected response to promotional offers. Customers with higher scores could receive more incentives, including free bets and other offers.
The report also said that DraftKings tested the model on around 5,000 online casino players in September 2023 before expanding its use.
Former employees raised concerns that the system could identify people at risk of gambling harm and encourage them to continue betting.
DraftKings disputed the report’s findings. The company said its promotions target customers who show sustained engagement with its platform, not people selected because of their losses.
Massachusetts Regulators Question Sportsbook AI Practices
The controversy soon reached the Massachusetts Gaming Commission (MGC).
On September 24, Commission Chair Jordan Maynard directed staff to examine how licensed sports betting operators use AI and machine learning. The Commission later sent a detailed letter to operators, requesting written answers by November 3, 2026.
The request covered more than 70 questions about how these systems influence marketing, promotions, and customer engagement.
Regulators wanted to know whether operators use customer losses, deposits, betting frequency, or other account activity when deciding who receives promotional offers.
The request applied to all licensed sports betting operators in Massachusetts, not only DraftKings. Responses were requested voluntarily and were to remain confidential.
The November 3 deadline has now passed. However, no public findings from the review have been announced in the sources available as of November 13.
Louisiana Delays DraftKings Licence Renewal
Louisiana has taken a separate regulatory step.
On October 15, the Louisiana Gaming Control Board voted to give DraftKings a conditional four-month extension of its sports betting permit. The extension runs through February 19, 2027, while the full licence renewal hearing is scheduled for February 18.
The board raised questions about the company’s reported use of AI, along with concerns about shareholder suitability.
DraftKings was asked to provide information about its AI practices, prediction market activity, and digital services offered to Louisiana residents. The board also required the company to review and certify that its marketing materials and digital advertisements meet responsible gambling rules.
DraftKings co-founder and President of Operations Paul Liberman told the board that the company does not use AI to target losing gamblers.
In response, the board said it needed more time to examine the concerns and complete its review. The next hearing in February 2027 will provide further clarity.
DraftKings Also Faces a Proposed Class-Action Lawsuit
Legal pressure has added another layer to the controversy.
On September 30, bettor Daniel Vest filed a proposed class-action lawsuit against DraftKings in a federal court in Massachusetts.
The complaint alleges that the company used customer information to identify people likely to lose money or continue gambling, then sent them additional promotions.
According to the complaint, Vest received at least 70 emails, text messages, or app notifications in the month before September 25.
The lawsuit argues that DraftKings’ use of customer information conflicted with statements in its privacy notices about responsible play. It seeks damages, refunds, and changes to the company’s promotional practices.
DraftKings has denied the allegations and said it intends to defend itself. The court has not ruled on the claims.
What Does the Controversy Mean for the iGaming Industry?
The issue goes beyond one sportsbook. Many online betting companies use customer data to personalise offers and understand player activity.
AI can help operators identify customer preferences and send relevant promotions.
However, using betting losses or signs of harmful behaviour to increase promotional activity could create serious player protection concerns.
Regulators may now expect operators to explain how their marketing systems work. They may also ask companies to show which customer data influences an offer and whether staff can review automated decisions.
Operators should take several practical steps:
- Review promotional models: Check whether losses or risky betting patterns influence marketing decisions.
- Keep clear records: Maintain details of the data and rules behind promotional offers.
- Add human checks: Allow trained staff to review and challenge automated recommendations.
- Check vendor tools: Understand how third-party systems use customer information.
- Protect vulnerable players: Keep responsible gambling checks separate from efforts to increase betting activity.
These steps can help companies prepare for closer reviews and build stronger player protection practices. Our guide on AI-assisted operator security covers how operators can use AI responsibly.
What Happens Next?
DraftKings’ regulatory and legal position remains under review.
Massachusetts may use the information collected from operators to shape future AI policy.
Louisiana’s February 2027 hearing will be another important point in the process.
The proposed class action will also move through the court system, where the allegations and DraftKings’ response will be examined.
For the iGaming industry, the message is clear. AI can make marketing more precise, but operators must ensure that customer data does not become a tool for encouraging harmful gambling.
The next regulatory decisions could help define where that line stands.
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