Louisiana delays full DraftKings renewal, grants conditional extension

• Louisiana extends DraftKings’ existing permit conditionally through February 19, 2027.
• Full renewal hearing is set for February 18, 2027, with seven conditions attached.
• Board is examining AI targeting allegations from a September New York Times investigation.

The Louisiana Gaming Control Board has not renewed DraftKings’ sports wagering permit. On October 15, the board voted unanimously to extend the existing permit on conditions through February 19, 2027.

The extension gives investigators time to examine allegations about the operator’s use of artificial intelligence and questions over shareholder suitability.

Two reasons to wait

The renewal of the Sports Wagering Platform Provider Permit held by DK Crown Holdings, the DraftKings entity, was on the board’s October 15 agenda. Renewals like this usually pass without much debate. This one could not be completed before the current permit expires on November 10.

The extension means DraftKings keeps operating in Louisiana without interruption. The board will consider the full renewal at a hearing on February 18, 2027, one day before the extension ends.

The first issue is ownership. Assistant Attorney General Delancey Houston told the board about a finding by the Louisiana State Police Gaming Enforcement Division. Certain shareholders holding 5% or more of DraftKings had not submitted to suitability checks, according to CDC Gaming. One shareholder has asked to be designated an institutional investor, and Houston said that request has not yet been decided.

The second issue is a New York Times investigation published on September 19. The Times drew on interviews with more than 40 former employees. It alleged that DraftKings began building a machine-learning model in 2023 to score customers on “elasticity”, meaning how much more they might gamble after receiving promotions.

DraftKings disputes the reporting and denies targeting customers based on losses. The same investigation has prompted a review by the Massachusetts Gaming Commission. Maine’s Gambling Control Unit has said it is monitoring AI use.

Board chairman Chris Hebert said the board has used conditional renewals before. They give the attorney general’s office and state police time to finish their investigations.

Chris Hebert, Chairman of the Louisiana Gaming Control Board, said:

“Now, I recognize and I think this entire board recognizes that a news report, or news reports, plural, are not findings of regulatory violations. Nevertheless as regulators, we have a responsibility to examine these matters that could affect the integrity of gaming operations and the protection of our citizens here in Louisiana.”

Seven conditions, tight deadlines

The extension carries seven conditions.

Within seven days, DraftKings must name a senior representative to handle all communications with the board.

Within 30 days, it must:

• file all outstanding suitability submissions, including any petition for institutional investor status
• certify that its marketing materials, commercials and digital ads comply with responsible gambling requirements

Within 30 days of each request, it must submit formal written responses on its use of AI, its prediction market activity and any other information the board asks for. Hebert said the board’s questions would follow in writing.

On the 15th of every month, DraftKings must file a compliance report. The report would cover:

• new digital wagering and prediction market products, and new promotions
• material changes to geolocation, KYC, AML and responsible gambling systems
• material customer complaints and significant system failures
• pending litigation or regulatory actions

The remaining conditions require DraftKings to propose protocols for timely notification of shareholder ownership. It must also cooperate fully with the board’s directives.

Hebert said:

“This proposal is not a determination that DraftKings has engaged in any wrongdoing.”

DraftKings pushes back

Most of the questions went to Paul Liberman, President of Operations and cofounder, and Lori Kalani, Chief Responsible Gaming Officer. Board member Ronald Sholes asked Liberman whether DraftKings could identify losing gamblers.

Liberman said the company holds financial records for every customer and can tell whether someone is winning or losing. He argued that targeting losers would serve little purpose because, in his view, most customers end up down over time.

Paul Liberman, President of Operations and cofounder at DraftKings, said:

“We do not use AI in any way to target losing gamblers by any means.”

Kalani told the board that DraftKings uses AI to help identify customers who may need an intervention. She said the company has closed 175 Louisiana accounts this year for customers who did not follow its responsible gambling advice. Those closures are separate from self-exclusions, cool-offs and voluntary closures.

She added that players returning from a cool-off period receive no promotions for two weeks. Players returning from self-exclusion receive none for 30 days.

The written answers due in the coming weeks will move the dispute from press reports into the regulatory record. By February, investigators will have DraftKings’ own account of how its models decide who receives which offers.

The questions Louisiana puts to DraftKings may also preview what operators start asking of their CRM and player-modeling suppliers. The long-running debate over AI in CRM is fast becoming a compliance matter.