DraftKings is facing a proposed class action in Massachusetts over allegations that the sports betting company used artificial intelligence and customer data to identify bettors who were likely to respond to promotional offers and continue gambling.
The lawsuit, filed in the U.S. District Court for the District of Massachusetts, claims that DraftKings used AI-driven technology to determine which customers were most likely to increase their betting activity after receiving promotions. According to the complaint, the system allegedly prioritized users who were expected to generate higher losses for the company.
DraftKings has denied the allegations and said it does not use AI to target customers based on their losses or indicators of potential problem gambling. The company said it intends to vigorously defend itself against the claims.
Lawsuit Accuses DraftKings of AI-Driven Targeting
The lawsuit was filed by Daniel Vest, a West Virginia man who says he gambled thousands of dollars through DraftKings over several years.
According to the complaint, Vest received at least 70 emails, text messages and other promotional communications during a single month encouraging him to continue gambling.
The plaintiff alleges that DraftKings used an AI model to identify customers who were likely to respond positively to incentives and increase their betting activity.
The lawsuit further claims that the company did not adequately disclose this use of artificial intelligence to customers and that the alleged practices violated Massachusetts law.
The allegations draw heavily on a recent investigation by The New York Times, which interviewed former DraftKings employees and reviewed internal documents relating to the company’s use of data science and machine learning.
How DraftKings Allegedly Used Machine Learning
According to the investigation cited in the lawsuit, DraftKings began developing machine-learning models to evaluate the effectiveness of its promotional spending.
The objective was reportedly to determine which customers were more likely to increase their wagering after receiving free bets, bonuses or other incentives.
One internal metric was reportedly referred to as “elasticity.” According to former employees cited by The New York Times, the model attempted to estimate how much additional betting activity a customer could generate in response to promotional incentives.
The model reportedly analysed numerous customer data points, including:
- betting frequency;
- account balances;
- wagering amounts;
- historical losses;
- the relationship between amounts wagered and lost;
- and other behavioural indicators.
The investigation alleged that customers considered more responsive to promotions could receive a greater share of promotional spending.
Importantly, these claims come from former employees and documents reviewed by The New York Times and are now referenced in the lawsuit. They have not been established as facts by a court.
Former Employees Raised Concerns
The lawsuit follows a September investigation by The New York Times, which interviewed more than 40 former DraftKings employees and reviewed internal research, presentations, Slack messages and other company materials.
Several former employees who worked on promotional targeting reportedly expressed concerns about the potential consequences of using behavioural data to identify customers most likely to respond to betting incentives.
The investigation described a fundamental tension between two potential uses of artificial intelligence.
On one side, machine learning could help DraftKings determine where promotional spending was most effective. On the other, similar technology could potentially be used to identify customers who showed signs of developing gambling problems.
According to former employees cited by the newspaper, DraftKings explored a separate predictive model designed to identify customers at risk of gambling-related harm but ultimately did not deploy it.
DraftKings Disputes the Allegations
DraftKings has rejected the suggestion that its promotional systems are designed to exploit vulnerable gamblers.
The company said its promotions are aimed at customers who demonstrate sustained engagement with its platform rather than people selected because they have experienced losses.
DraftKings also disputed the characterization of its responsible-gaming efforts.
The company has said that responsible engagement is integrated into its operations and highlighted its responsible gaming team, including a chief responsible gaming officer.
In a statement to WBUR, DraftKings specifically said that it does not use AI to target customers based on losses or indicators of potential problem gaming. The company said it plans to defend itself against the lawsuit.
The Case Raises Questions About AI and Sports Betting
The lawsuit comes as sportsbooks increasingly rely on large amounts of customer data to personalise their products and marketing.
Sports betting operators can collect information about how frequently customers place bets, which markets they use, how much they wager and how they respond to promotions.
AI and machine-learning systems can process this information at a scale that would be difficult to achieve through manual analysis.
That creates potential benefits for operators, including more efficient marketing and personalised user experiences. At the same time, it raises questions about how such technology should be used when the product involves financial risk and potentially addictive behaviour.
The DraftKings case could therefore become part of a broader debate over the use of predictive technologies in online gambling.
Promotions Are a Major Part of the Sports Betting Business
The allegations are particularly significant because promotional incentives represent a substantial expense for major US sportsbooks.
Research cited by The New York Times estimated that DraftKings generated approximately $8.7 billion in gross revenue from sports betting and online casino customers in 2025, while distributing around $3 billion in promotional incentives.
The company has also discussed the role of analytics in improving the economics of promotional betting.
According to The New York Times, DraftKings told investors that analytics helped improve margins on promotion-driven sports bets by 13% in 2025 and that AI was used to personalise hundreds of millions of dollars in promotional spending.
These figures help explain why the ability to predict which customers will respond to incentives can have significant commercial value for a sportsbook.
AI Could Also Be Used for Responsible Gambling
The controversy highlights another possible application of artificial intelligence in the betting industry: identifying customers who may be at risk of gambling-related harm.
According to the New York Times investigation, former DraftKings data scientists worked on a machine-learning model intended to identify behavioural patterns associated with potential gambling problems.
The proposed system reportedly considered factors such as deposits, withdrawals and attempts to chase losses, alongside other customer information, to generate risk scores. The goal was to identify potentially problematic behaviour before it became more severe.
The project was subsequently abandoned, according to former employees cited by the newspaper.
DraftKings’ chief responsible gaming officer Lori Kalani told The New York Times that the company made a collective decision not to use predictive technology for problem gambling after determining that the approach was not sufficiently evidence-based.
What Happens Next in the DraftKings Case?
The lawsuit is still at an early stage, and the allegations have not been proven in court.
The plaintiff is seeking to represent other DraftKings customers who allegedly received promotional offers based on similar AI-driven targeting. The case could eventually determine whether the company’s alleged use of customer data and artificial intelligence violated Massachusetts consumer-protection or other laws.
For the broader gambling industry, however, the case raises questions that extend beyond DraftKings.
As sportsbooks increasingly use AI to personalise promotions, optimise marketing and analyse customer behaviour, regulators and courts may face growing pressure to establish clearer boundaries around how these technologies can be used.
The central issue will be whether predictive technology is being used primarily to improve customer experience and responsible gambling, or whether it can also be used in ways that increase betting activity among customers who may already be vulnerable.
For now, those questions remain unresolved. DraftKings denies the allegations, while the proposed class action will test the claims made by the plaintiff and the evidence behind them.
Source: https://www.law360.com/articles/2532371/draftkings-uses-ai-to-exploit-losing-bettors-suit-alleges
