DraftKings and other online gambling companies are facing mounting scrutiny as federal lawmakers and officials in several states have begun questioning them in recent weeks about their use of artificial intelligence and behavioral data to keep their customers betting.
In New York, consumer protection lawyers from the attorney general’s office have contacted former DraftKings employees to discuss the company’s data practices, according to three former employees who spoke on the condition of anonymity to discuss a confidential inquiry or out of fear of retaliation, and messages reviewed by The New York Times. At the same time, the state’s gaming commission has proposed sharp limits on how operators can deploy A.I.
In Louisiana, gambling regulators voted to delay a routine license renewal for DraftKings, partly to allow themselves time to investigate how the company uses A.I. and customer data.
And in Congress, three lawmakers sent letters last week to online gambling companies, including DraftKings, requesting details about their “V.I.P.” programs and their use of A.I.
The actions follow reporting from The Times in September that found DraftKings had deployed machine learning, a form of artificial intelligence that seeks patterns in data, to analyze customer records and identify those most likely to continue gambling and losing when sent promotions. Former employees who built those systems told The Times that they worried the technology would harm gamblers struggling with addiction. Regulators in Massachusetts and Michigan announced shortly afterward that they were looking into the issue.
DraftKings “does not use artificial intelligence to target customers based on losses and does not market to customers based on indicators of potential problem gaming,” a spokesperson said in a statement, adding that the company “values an open and ongoing dialogue with regulators” and that “regular conversations and check-ins with regulators are normal course of business.”
Senator Richard Blumenthal of Connecticut and two other Democrats, Representatives Paul Tonko of New York and Valerie Foushee of North Carolina, published their letters to DraftKings and five other companies late last week, demanding a response by Nov. 5.
They cited The Times’s findings as well as recent reporting by ProPublica, which found that DraftKings granted V.I.P. status to a reporter deliberately mimicking signs of problem gambling, and other articles about online gambling by the Philadelphia Inquirer and The Guardian.
“Sportsbooks are supercharging addiction, using A.I. to target users and keep them hooked on gambling,” Mr. Blumenthal told The Times in a statement.
Lawyers from the New York attorney general’s office have been asking former DraftKings employees about issues raised by The Times’s story, the three former employees said. The lawyers work for the Bureau of Consumer Frauds and Protection, as well as the Bureau of Internet and Technology, which has recently led high-profile lawsuits against social media giants, including Meta and TikTok, over addictive algorithms.
The extent of their inquiry remains unclear. The attorney general’s office declined to comment on the matter.
Separately, the New York State Gaming Commission announced this month that it had unanimously voted to propose regulations that would effectively bar gambling companies from using automated systems to target customers with personalized promotions, or from suggesting wagers based on their betting history or losses.
The proposed rule will undergo a 60-day public comment period, possible revisions and a final vote before taking effect. It expands on a brief initial version that regulators released for feedback in March, which drew pushback from DraftKings and other major sports betting companies. In written comments in May, DraftKings argued that the proposal could result in “broad restrictions on legitimate business uses of A.I.” and that the technology had the potential to “improve the customer experience.”
Brian O’Dwyer, the commission’s chairman, said in a statement that while legalized sports betting has brought New York billions in tax revenue since it legalized the practice in 2022, it can still pose a danger.
“I don’t believe anyone gave real long-term consideration of how quickly technology could be developed and used to extract as much money as possible from unsuspecting individuals,” he said.
In Louisiana, the state’s gaming control board voted this month to hold up a standard five-year license renewal for DraftKings and place the company on a four-month conditional extension instead.
The board ordered DraftKings to answer formal questions from its investigators about its use of A.I., and to submit overdue paperwork. DraftKings’ spokesperson said the board was allowing the company “additional time” to complete its application, which is “common in such administrative matters.”
The order happened during an Oct. 15 hearing in Baton Rouge in which the board grilled two DraftKings executives. Christopher Hebert, the board’s chairman, said that The Times’s report raised “serious questions.”
Paul Liberman, a DraftKings co-founder and president, acknowledged that DraftKings had the ability to track winners and losers, but denied that the company was singling out losing bettors.
“Most customers that play on the platform are not going to be winners,” Mr. Liberman told the board. He added that he preferred the phrase “spending money” — rather than losing money — because customers were paying for entertainment.
Bianca Pallaro, Jenny Vrentas and Walt Bogdanich contributed reporting.
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