Louisiana Delays DraftKings Full Licence Renewal Over AI Allegations

The Louisiana Gaming Control Board has declined to fully renew DraftKings' sports betting and casino licence, instead granting a conditional extension while regulators investigate allegations about the operator's use of artificial intelligence.

DraftKings President of Operations and cofounder Paul Liberman and Chief Responsible Gaming Officer Lori Kalani appeared before the board on Thursday to field questions about reports that the company used AI to identify and target losing bettors, and about how it treats VIP customers who may show signs of problem gambling, Legal Sports Report reported.

DraftKings' Louisiana licence was due to expire on 10 November. The board said it needed more time than that to complete its review, citing both the AI-related allegations and an outstanding shareholder who has not yet passed suitability checks.

Assistant Attorney General Delancey Houston told the hearing that the state's Division had its own concerns beyond those raised by board members. "In addition, as some of the concerns that you all have raised today, the Division also has concerns regarding recent allegations brought against DraftKings and, therefore, additional time is needed to fully investigate those allegations," Houston said.

The board voted unanimously to approve a conditional renewal running through 19 February, with a full renewal hearing set for 18 February.

Board chairman Chris Hebert said the extension builds on a tool the board has used before to give the attorney general's office and state police time to finish investigations. "Now, I recognize and I think this entire board recognizes that a news report, or news reports, plural, are not findings of regulatory violations," Hebert said, adding that the board still has "a responsibility to examine these matters that could affect the integrity of gaming operations and the protection of our citizens here in Louisiana."

Hebert said DraftKings would receive further written questions from the board in the coming days.

The conditional approval carries seven requirements. DraftKings must submit all outstanding suitability paperwork, including a petition to classify the unresolved shareholder as an institutional holder, within 30 days. It must also propose protocols for timely notification of shareholder ownership changes.

The operator has 30 days to respond formally on its use of artificial intelligence, prediction market activity, digital audits of Louisiana residents and any further information the board requests. It must also certify, within the same window, that its marketing materials, commercials and digital advertising comply with responsible gambling rules.

DraftKings must file monthly compliance reports on the 15th of each month covering prediction market products, new digital wagering offerings, promotions, changes to geolocation, know-your-customer and anti-money-laundering systems, responsible gambling systems, unresolved compliance issues, system failures, significant customer complaints, advertising violations and pending litigation or regulatory actions, along with any corrective steps taken.

The company must also name a senior representative to handle all communications with the board within seven days and fully cooperate with the board's directives throughout the conditional period.

Hebert said the conditions should not be read as a finding against the operator. "To those in attendance from DraftKings, I want to emphasize to you that this proposal is not a determination that DraftKings has engaged in any wrongdoing," he said, describing it instead as "a measured regulatory response that allows us as a board to fulfill our oversight responsibilities."

Liberman pushed back on the substance of the AI allegations, arguing that most DraftKings customers lose money over time regardless of any targeting. "So, identifying a losing gambler doesn't necessarily make sense in that context because most customers that play on the platform are not going to be winners, they're going to be someone losing on the plaform," he told the board, adding that the company does not use such information "to target in any way a particular customer or customer segment because we don't think that that's relevant."