DraftKings Faces Lawsuit Over Using AI to Target Bettors

DraftKings is in trouble, and in more than one way.

According to a New York Times report, it is accused of using AI to target struggling bettors with bonuses and promos. The report states that DraftKings has been studying bettors' behavior over the last few years. This helped it identify bettors who may be trying to stop but struggle to ignore promotions meant to get them gambling again.

Soon after the report was released, a bettor in West Virginia proposed a class action lawsuit against DraftKings. Because the sportsbook did not disclose its use of AI, the lawsuit accuses the operator of “unfair and deceptive” behavior. As a result, bettors wagered more than they planned, damaging both their finances and mental health. 

DraftKings Sportsbook has denied the allegations contained in the legal filing and plans to defend its practices in court.

For years, betting states have pushed for transparency from US sportsbooks on their practices around both targeting and limiting bettors. Lawmakers worry that operators inundate struggling bettors with bonuses and promos while limiting occasional or winning bettors early on. 

If the Times report is correct, those fears appear warranted. 

DraftKings Stock Continues to Tumble

The scandal around DraftKings comes at the worst possible time.

As of today, the company’s stock has fallen by 28% over the last three months alone. The price is the lowest it's been since early 2023, despite expanding the DraftKings app into all 50 states. DraftKings claims to have seen significant upticks in handle to start the 2026 football season, but another problem still looms.

DraftKings was one of the first sportsbooks to launch a prediction platform, but it has struggled to compete with industry-leading Kalshi. While its market share has grown, the industry has also gotten more crowded. 

Even if DraftKings can keep building its prediction platform, there’s no guarantee it will even be legal in 2027. The US Supreme Court is considering a case that will determine if sports contracts offered on these platforms are subject to state gambling laws. If the court rules for the states, sports markets would need to halt until they can obtain state licenses.

The AI scandal won’t help DraftKings save its tumbling stock, and could send the operator spiraling if the allegations are proven.