Massachusetts probes DraftKings AI that targeted losing bettors

Massachusetts regulators are opening a review into how DraftKings and other licensed sportsbooks used artificial intelligence to target losing gamblers with promotional offers. The move comes after a New York Times investigation alleged the company built machine-learning models to pinpoint customers most likely to keep betting and losing.

What the regulator is doing

The Massachusetts Gaming Commission has opened an investigation into how DraftKings and other regulated sportsbooks use artificial intelligence to target bettors with promotions, following a New York Times report alleging DraftKings used machine learning to identify customers who were more likely to continue betting and losing after receiving promotional offers.

MGC chair Jordan Maynard said during a public meeting that he had directed commission staff to engage with DraftKings about the findings and to learn more about how all licensed betting companies in the state were deploying AI. The commission has not determined that DraftKings committed any wrongdoing.

Inside the NYT report

The New York Times investigation found DraftKings built a machine-learning model that scores customers by how much they are likely to lose, then used it to direct roughly $400 million in bonus bets and perks toward the highest scorers in 2025.

The model, internally called an “elasticity” score, looked at how often a customer played, how their account balance moved, how much they bet and lost, and how likely they were to stop gambling. The higher the score, the more free bets and perks the system pointed their way.

The report also found that the company had explored AI tools to identify customers who might require responsible gambling interventions, although those efforts were later sidelined.

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DraftKings pushes back

DraftKings strongly denied the allegations. The company said it “vehemently denies the suggestion that we do anything to make our offerings addictive.” DraftKings also said it does not use AI to target customers based on their losses or market to users based on signs of potential problem gambling. The company said it works to follow all Massachusetts sports betting regulations.

Why it matters

Operators that breach state gambling regulations can face fines or have their licenses suspended or revoked; the MGC will decide on further action after completing its review. Massachusetts is one of DraftKings’ home markets, and the outcome could set the tone for how other states scrutinize AI-driven promo engines across the industry.

The probe also follows a Baltimore lawsuit alleging the same tactics, adding legal risk on top of the regulatory review.

Options market and stocks to watch

Traders may want to watch these names as the story develops:

DKNG: Direct target of the probe and the NYT report. Watch for headline-driven volatility and any flow tied to further state-level actions.

FLUT: Parent of FanDuel and the other big US sportsbook. Watch for spillover if Massachusetts widens its AI review to other operators.

MGM: Runs BetMGM and is licensed in Massachusetts. Watch for how it responds to any new AI-use disclosure requirements.

CZR: Caesars Digital could get pulled into any broader industry review of promo targeting. Watch for regulatory read-through.

PENN: Owner of ESPN Bet, another licensed operator that could be swept into the probe. Watch for commentary on AI and promo practices.

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