A New York Times report has raised serious allegations against DraftKings, noting that the operator allegedly uses AI-powered data analysis to target gamblers most likely to lose.
The outlet alleges it has obtained internal documents and interviewed dozens of former DraftKings employees. It names operator Data Analyst Jayden Butts as one of its sources.
Apparently, in the past, the operator spent hundreds of millions of dollars on promotional incentives, bonuses and so-called “free bets,” as well as on marketing these practices.
Mr Butts alleges that the operator did not clearly understand incentive effectiveness and, in 2023, built a machine learning model. The model's task was to determine who was more likely to respond to promotions by gambling. His task was to allegedly test that model by prioritizing free bets and bonuses for likely losers.
Speaking to The New York Times, Mr Butts noted that by strict financial logic, “the best investment would be a problem gambler.”
Presumably, the model scores each customer based on their habits. Allegations claim that the higher the score, the more money a gambler is likely to lose for each promotion offered.
According to other unnamed operators former employees, DraftKings reportedly uses data science to target losing gamblers with promotions, while efforts to identify problem gamblers were stalled or dropped.
DraftKings' response and the known facts
DraftKings told the Times it “rejects any implication” that its marketing unfairly targets customers, saying promotions are based on sustained, engaged use of the platform rather than how much players lose.
While targeting engaged users and those with the largest losses can overlap, the exact mechanism by which the model weighs variables remains unknown.
Before concluding, a detailed investigation should be conducted to determine whether operators' practices are predatory.
The operator also said it monitors risky behavior and has declined to use risk-prediction technology it considers insufficiently evidence-based.
It also highlighted several responsible gaming programs, including a collaboration with Mindway AI's Gamalyze tool, expanded customer education resources and a partnership with IC360 for integrity and compliance monitoring.
What comes next
With a popular and established newspaper such as The New York Times reporting on this, public backlash is likely and we may see regulatory investigation.
A broader ethical AI use question
Concerns over targeting practices like these persist across multiple industries, as vast amounts of human-generated data are used to make increasingly precise predictions about consumer behavior. This is not new; many companies have used these practices with data long before the recent surge in AI advancement.
However, as AI capabilities advance faster than regulation and data analysis becomes cheaper, more automated and more precise, targeted marketing based on consumer tracking raises broader ethical questions about how far companies can go in using personal data to influence behavior.
DraftKings closed on a $700m senior secured term loan B credit facility and $750m revolving credit facility on August 25, utilized for repurchasing convertible notes and ‘general corporate purposes’
