AI in Sports Betting: How Maine and Other States Are Responding to DraftKings Allegations
AI in Sports Betting: How Maine and Other States Are Responding to DraftKings Allegations
Background: The New York Times Report That Sparked Regulatory Scrutiny
In early 2025, The New York Times published a report alleging that DraftKings, one of the largest sports betting operators in the United States, had been using artificial intelligence (AI) to encourage gamblers to stay on its platform longer and spend more money. The report, based on accounts from former employees, claimed the company coined the term “elasticity” to describe players who could be incentivized through targeted promotions and behavioral nudges. The suggestion was that DraftKings systematically identified and targeted users most likely to respond positively to such stimuli—potentially including those already experiencing gambling-related harm.
What “Elasticity” Means in This Context
In economics and marketing, elasticity refers to how sensitive demand is to changes in price or incentives. Applied to gambling, it means identifying players whose betting behavior increases significantly when offered bonus bets, free spins, or other promotional tools. Critics argue that using AI to measure and exploit this “elasticity” is a form of predatory personalization—especially when directed at vulnerable consumers who may be chasing losses or exhibiting signs of problem gambling.
DraftKings’ Response: Denial and Defense
DraftKings firmly rejected the allegations. A company spokesperson stated at the time of the report:
“DraftKings does not use AI to target anyone based on losses and does not market to customers based on indicators of potential problem gaming.”
The company characterized the Times article as relying on the accounts of now-former employees and insisted that its practices fell within standard business operations. It emphasized that AI is used broadly across industries for personalization—such as recommending products on e-commerce sites—and that its application in sports betting is no different.
Legal and Regulatory Fallout: A Growing Wave of Scrutiny
Federal Lawsuit in Massachusetts
Shortly after the New York Times report, DraftKings was hit with a federal lawsuit in Massachusetts. The plaintiff, a West Virginia-based gambler, filed a complaint seeking to elevate the case into a class-action lawsuit. The lawsuit alleges that DraftKings used AI to unfairly extract more money from players, particularly those with a high “elasticity” rating.
Maine’s Monitoring of the Situation
The Maine Gambling Control Unit has now publicly stated that it is “monitoring the use of AI locally and nationally” in relation to DraftKings. However, the agency acknowledged a regulatory gap:
“At this point there are no Maine laws or rules specifically addressing its use.”
This statement highlights a broader challenge facing state regulators: AI technology is evolving faster than the legal frameworks designed to oversee it. Maine has not yet formally characterized DraftKings’ actions, but the monitoring indicates that the state is prepared to take further steps if evidence of wrongdoing emerges.
Massachusetts Opens Its Own Investigation
Regulators in Massachusetts have launched a formal investigation into DraftKings, as reported by CBS13’s I-Team. This investigation is separate from the federal lawsuit and focuses on whether the company violated state gambling laws or consumer protection statutes.
Maryland Governor Calls for Action
The issue has also reached the executive branch in Maryland. Governor Wes Moore called for an end to practices that involve “algorithmic and other means” to target users who are likely to spend more. While not directly naming DraftKings, the statement signals that AI-driven player targeting is now on the radar of state leaders across the country.
How AI Is Used in Sports Betting Platforms
To understand the controversy, it helps to look at how AI is typically deployed in the industry:
| Application | Description | Potential Benefit | Potential Harm |
|---|---|---|---|
| Personalized Promotions | AI analyzes betting history to offer tailored bonuses (e.g., “free bet on your favorite team”) | Increases user engagement and loyalty | Can encourage chasing losses |
| Predictive Churn Modeling | Identifies users at risk of leaving and sends retention offers | Reduces customer acquisition costs | May keep problem gamblers in the system |
| Loss Recovery Offers | Sends special bonuses after a user loses a large bet | Mitigates immediate frustration | Can lead to “loss chasing” behavior |
| Real-Time Behavioral Nudges | Pushes notifications based on in-game activity | Enhances the live-betting experience | Can exploit emotional highs/lows |
The line between responsible personalization and exploitation is thin—and largely unregulated.
Why This Matters for Consumers
For the average sports bettor, the DraftKings case raises several important questions:
- Am I being manipulated? Users may not realize that the bonus offers they receive are not random but computed based on their predicted “elasticity.”
- What data is being collected? AI systems can track not only betting amounts but also time spent, device usage, and even reaction times to offers.
- Are protections in place? Most state gambling laws do not explicitly forbid AI-driven targeting of vulnerable players. Self-exclusion lists and deposit limits help, but they may not prevent algorithms from trying to circumvent them.
Regulatory Challenges: A Patchwork of Laws
The current response to the DraftKings allegations illustrates the fragmented nature of U.S. gambling regulation:
- State-by-state oversight: Each state that has legalized sports betting (over 30) has its own commission or control unit. There is no federal body specifically overseeing AI in gambling.
- No standardized definition of “vulnerable consumer” regarding AI targeting. Some states consider habitual loss behavior as an indicator; others do not.
- Limited technical expertise among many regulators makes it difficult to audit AI systems or demand transparency in algorithmic decision-making.
What Could Happen Next?
Several outcomes are possible:
- Regulatory rulemaking: States like Maine and Massachusetts may draft specific rules prohibiting AI from being used to target players based on losses or indicators of problem gambling.
- Industry self-regulation: DraftKings and other operators could voluntarily adopt ethical AI standards to avoid further legal action and reputational damage.
- Class-action lawsuit progress: If the West Virginia gambler’s suit succeeds, it could set a precedent for other players to seek damages.
- Federal intervention: While unlikely in the near term, Congress could consider legislation requiring gambling platforms to disclose AI-driven personalization methods.
Conclusion: A Turning Point for AI in Gambling?
The DraftKings case is not unique—several other betting companies have faced similar accusations in Europe and Australia. What makes this moment significant is the coordinated response from multiple U.S. state regulators and the involvement of a major national newspaper. Whether DraftKings is ultimately found to have broken any laws, the mere fact that regulators are now actively monitoring AI use represents a shift in the industry’s oversight.
As AI technology becomes more sophisticated, the gambling industry—and its watchdogs—will need to decide where the line between smart marketing and consumer exploitation should be drawn.
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