DraftKings Faces Backlash for Using Artificial Intelligence to Target High-Loss Gamblers
Boston, Sunday, 20 September 2026.
A recent investigation revealed that DraftKings uses predictive algorithms to identify high-loss gamblers, specifically targeting vulnerable users with promotions to increase betting frequency rather than offering protection.
AI-Driven Targeting Strategies Exposed
DraftKings (NASDAQ: DKNG) is facing intense scrutiny following a New York Times investigation released on 2026-09-19, which revealed the company utilizes predictive artificial intelligence to identify customers expected to lose the largest sums of money [1]. The machine learning models reportedly score gamblers based on historical betting records to direct targeted bonus bets and promotional incentives specifically at high-loss users [2]. This strategy aims to maximize platform engagement and revenue by focusing on individuals identified as vulnerable to sustained financial losses [2]. Former employees indicate that the company intentionally structured these AI models to prioritize problem gamblers as high-value investment targets [2].
AI-Driven Targeting Strategies Exposed
Internal communications suggest the algorithm specifically seeks traits indicating a good investment, with one former data analyst stating the best investment would be a problem gambler [2]. Another anonymous former analyst described the practice as predatory, noting that if a user loses more, the system gives more to keep them playing [2]. This revelation raises significant legal risks and potential oversight intervention for the digital gambling industry as federal and state lawmakers refine AI compliance standards [1]. The company has resisted using similar technology to protect gamblers at risk of addiction, despite having the capability to do so [1].
Escalating Legal and Regulatory Challenges
Legal pressures mounted prior to the 2026 revelation, with Dr. Kavita Fischer filing a lawsuit against DraftKings in the U.S. District Court for the Southern District of New York on 2025-02-12 [3]. Fischer alleged the company exploited her addiction, having deposited $208,130.50 between 2023-01-01 and 2023-04-29, losing over $190,000 [3]. The case was voluntarily dismissed with prejudice following a confidential settlement in 2025-07 [3]. Additionally, the City of Baltimore filed suit against DraftKings and FanDuel on 2025-04-03, alleging the use of algorithms to cultivate addiction [3].
Escalating Legal and Regulatory Challenges
Regulatory bodies have also taken action, with the Massachusetts Gaming Commission (MGC) fining DraftKings $450,000 in 2025-07 for 1,160 unauthorized wagers and 242 credit-card deposits involving 218 customers [3]. In May 2026, DraftKings self-reported to the MGC that it had permitted users to gamble using funds deposited via credit cards, a violation of Massachusetts gaming law [4]. Internal data revealed that over 200 players placed more than 240 bets using prohibited credit card deposits [4]. The operator is scheduled to face an adjudicatory hearing with the MGC regarding this compliance failure [4].
Financial Performance Amidst Controversy
Despite regulatory hurdles, DraftKings has shown significant revenue growth in previous fiscal periods. The company reported a 57.371 percent year-on-year revenue increase in Q3 2023, rising from $502 million to $790 million [4]. Following this performance, DraftKings adjusted its FY2023 revenue guidance to between $3.46 billion and $3.54 billion [4]. The global sports betting market is projected to reach $221.1 billion by 2029, with AI-powered platform engagement up 215% since 2020 [3].
Financial Performance Amidst Controversy
However, the cost of expansion includes heightened liability. Problem gambling helpline calls increased 234% since legalization, and 14% of sports bettors report suicidal thoughts linked to AI-driven personalization [3]. Industry AI tools claim to detect at-risk gambling, though critics argue the same behavioral data is used for predatory marketing [3]. A 2024 Massachusetts Gaming Commission evaluation noted AI interventions could reduce gambling-related harm by up to 30%, suggesting a divergence between potential safety measures and current profit-driven implementations [3].
Legislative Response and Future Outlook
Legislative efforts to curb AI in betting were launched in 2025, including the federal SAFE Bet Act reintroduced in March 2025 by Senator Richard Blumenthal and Representative Paul Tonko [3]. State-level bills such as Illinois SB 2398 and SB 2399 seek to restrict AI-driven user tracking and mandate affordability checks [3]. As of 2025-02-14, the status of Illinois SB 2398/SB 2399 was referred to committee, with no update provided on passage [3]. Federal action remains unresolved as of 2026-09-20 [3].
Legislative Response and Future Outlook
Platforms now face a binary choice between continued exploitation, risking industry-wide liability, or genuine harm reduction through AI detection tools that trigger interventions [3]. Professor Nasim Binesh noted that the potential for AI to exacerbate gambling harms and exploit vulnerable individuals is a stark reality that demands immediate action [3]. As the industry evolves, the balance between revenue maximization and consumer protection remains the central tension for regulators and investors alike [1][3].