Massachusetts' gambling regulator says it will examine how DraftKings and other betting companies in the state are using AI, in response to a NYT investigation

Massachusetts regulators will investigate DraftKings' use of AI to target gamblers, which could lead to new rules for betting companies. The state will examine how these companies use AI to identify and target customers, potentially impacting promotional strategies and user protection measures.

The Massachusetts gambling regulator has announced it will investigate DraftKings and other betting companies operating in the state regarding their use of artificial intelligence. This decision follows an investigation by The New York Times, which revealed that DraftKings employs AI to identify customers likely to place losing bets and respond to promotional offers. The AI model is trained on users' betting history, enabling DraftKings to target vulnerable gamblers with promotions designed to encourage further betting, thereby increasing company profits. The Electronic Frontier Foundation (EFF) has criticized this practice, arguing it exacerbates the harms of online behavioral advertising and preys on individuals with problem gambling tendencies. DraftKings reportedly uses first-party data for this targeting, indicating that limitations solely on third-party data sharing may not address the issue.

The regulatory scrutiny of DraftKings' AI practices signals a growing concern among authorities about the ethical implications of advanced algorithms in industries with vulnerable consumer bases. By focusing on how AI targets problem gamblers, regulators are acknowledging the potential for technology to amplify existing harms, moving beyond traditional oversight to address algorithmic decision-making. This investigation could set a precedent for how other states and jurisdictions approach AI-driven marketing in regulated sectors, particularly in gambling and financial services.

This development highlights the tension between technological innovation and consumer protection, suggesting that companies leveraging AI for hyper-personalized marketing must be prepared for increased oversight. The New York Times report, and now the regulatory response, underscore the need for transparency in how AI models are trained and deployed, especially when they interact with user data in ways that could exploit vulnerabilities. Future actions by Massachusetts regulators will likely focus on data usage, predictive modeling, and the specific safeguards in place to prevent predatory targeting.