DraftKings "elasticity" model draws multistate regulatory attention

A former DraftKings employee described it with a single word: elasticity. According to a New York Times investigation, the company applied that term internally to identify which customers were most likely to increase their spending after receiving a promotional offer. The reporting, drawing on accounts from multiple former employees, described a machine learning system that analyzed individual betting histories to determine who got bonuses and when.

DraftKings rejected the characterization directly. The company told the Times it does not use AI to target customers based on losses and does not market to users showing signs of problem gambling. That denial is now being tested in at least two states simultaneously.

Massachusetts opened a formal review after the Times piece published. Maine has not gone that far. The state's Gambling Control Unit told a local CBS affiliate it is monitoring AI use by operators nationally but has no laws or rules on the books that would govern it. Both DraftKings and Caesars hold mobile sports betting licences in Maine through partnerships with the state's tribal nations. Neither has been named in an enforcement action there.

The gap between monitoring and enforcement is where this story actually lives. Maine's posture — watching without authority to act — describes a structural problem that the elasticity reporting has made visible. States licensed operators before they had any regulatory framework for the tools those operators would eventually deploy. The licensing regime preceded the technology by years. What exists now is a set of advertising and responsible gambling requirements written for a different era, applied to systems that can price a customer's psychological response to a discount.

Maryland's governor called for legislation prohibiting apps from using algorithmic means to identify and target users displaying problem gambling patterns. That proposal reaches further than what Massachusetts is currently reviewing, and further still than what Maine has authority to do. The three states are not coordinating on a shared standard. They are each reading the same newspaper and reaching for whatever tool they happen to have.

A class action complaint filed by a West Virginia bettor in federal court in Massachusetts adds a private litigation track to the regulatory one. The plaintiff's theory — that DraftKings used predictive modeling to extract spending from customers who displayed vulnerability — tracks the Times reporting closely enough that the civil discovery process, if the case survives a motion to dismiss, could produce documents the regulatory reviews cannot compel.

The legal standard that governs all of this is not subtle. State consumer protection statutes typically prohibit unfair or deceptive trade practices. Whether a promotional targeting algorithm constitutes an unfair practice under those statutes turns on whether the operator disclosed how it worked, whether the customer could have understood what they were consenting to, and whether the harm was reasonably foreseeable. None of those questions has been answered in any of the pending proceedings.