The Massachusetts Gaming Commission (MGC) will investigate the use of artificial intelligence by DraftKings and other licensed sportsbooks, following a New York Times investigation into the targeting of customers with betting promotions.
MGC Chairman Jordan Maynard stated on Thursday that Executive Director Dean Serpa and commission staff will engage with Boston-based DraftKings to understand the specifics of its AI and machine-learning practices. The commission has not found DraftKings guilty of any wrongdoing.
Maynard also mentioned, “The commission is aware of a report from The New York Times regarding the use of AI and machine learning by an operator.” “These AI technologies are evolving rapidly across our society, and we share the concerns over their application.”
The Times reported that DraftKings utilized machine learning to analyze betting records and pinpoint customers most likely to continue gambling and losing after receiving promotional offers. The investigation also found that DraftKings used an “elasticity” metric to estimate how much more a customer might wager following an offer.
MGC Chairman Jordan Maynard
Six former employees who worked on the systems expressed concerns that the technology could harm individuals struggling with gambling addiction. The newspaper also reported that efforts to use similar technology to identify gamblers who might need intervention had been set aside.
DraftKings denied the allegations, stating that it “works diligently to comply with all Massachusetts sports betting regulations and vehemently denies the suggestion that we do anything to make our offerings addictive.” “DraftKings does not use A.I. to target anyone based on losses and does not market to customers based on indicators of potential problem gaming,” the company added.
Massachusetts prohibits using customer data to provide promotions through automated systems, including AI, that are expected to make a gambling platform more addictive. Operators are required to report at least twice annually on how they analyze customer behavior to promote responsible gaming and mitigate potentially addictive behavior.
DraftKings has submitted these reports, according to an MGC spokesperson, but declined to provide them to The New York Times. Violations can lead to fines or license suspension or revocation. The commission has not previously taken enforcement action involving AI.
The MGC’s inquiry will extend to all licensed sportsbooks. Promotions for new and returning customers can vary based on betting activity, loyalty, account history, and previous promotional use.
The review builds on the regulator’s existing examination of AI. A study commissioned through the University of Nevada Las Vegas’ International Gaming Institute and released last November explored AI in promotions, player acquisition, responsible gaming tools, and player health. It identified a “governance gap” between technological advances and existing company practices and regulatory guidelines.
The study recommended creating an AI task force, which the MGC subsequently established under Serpa and will now use to evaluate DraftKings’ operations.
“We need to find out the facts on the ground, with no disrespect to The New York Times, but also recognize that this is a very important issue with gaming and gaming regulation,” Commissioner Paul Brodeur said. “Any further action or policy-making can then be determined by the Commission when or if appropriate.”
Maryland Gov. Wes Moore
Scrutiny is also emerging elsewhere. Maryland Gov. Wes Moore has called for legislation preventing gambling companies from using algorithmic and other means to identify and target users showing problem-gambling patterns, while proposed federal legislation would prohibit using AI to monitor betting activity and target customers with individualized promotions.
Sen. Richard Blumenthal, a Connecticut Democrat and co-sponsor of the federal bill, said gambling companies “are relentlessly and tirelessly taking advantage of vulnerabilities, simply to make more money.” He said The Times’ investigation “provides graphic and powerful proof of what their business model is.”
FanDuel, DraftKings’ largest competitor and another Massachusetts operator, stated that it uses machine learning and other technology to identify signs of harmful play and protect customers but did not address whether or how it uses AI for other business purposes.