Key points
- A new lawsuit targets DraftKings' AI model
- DraftKings denies targeting problem gamblers
- The stock was already sliding
DraftKings (DKNG) faces a proposed class action over allegations that it used a machine learning model to identify customers likely to gamble and lose more after receiving promotions. The complaint says the company "weaponized AI" to "understand and exploit users' vulnerabilities to financially benefit the company."
The suit was filed in federal court in Boston on September 30 by Daniel Vest, a DraftKings customer from West Virginia. Most of its case comes from a New York Times investigation published on September 19, and DraftKings denies the core claim.
What does the lawsuit claim?
According to the Times report quoted in the complaint, DraftKings built a machine learning model in 2023 from customer betting records. Its job was to find which customers were more likely to respond to promotions by gambling and losing more. The complaint calls the customers the model flagged "elastic."
Vest has bet thousands of dollars a year with DraftKings for several years, according to the complaint. In the roughly 30 days before September 25, he got about 70 emails, texts, and app notifications from the company. The suit wants to represent everyone DraftKings flagged as "elastic" or sent promotions based on the model.
The legal claims are narrower than the headline language. Right now, the suit alleges breach of contract, breach of implied contract, and "money had and received," built mostly around what DraftKings' privacy notices told users. It doesn't yet include a Massachusetts consumer protection claim. Vest's lawyers, from Block & Leviton and Lynch Carpenter, say they sent DraftKings a demand letter under that law and plan to add the claim after 30 days if there's no settlement.
They're asking for damages, a refund of money tied to the model, and a court order stopping DraftKings from using it to send extra promotions. The complaint also leans on a figure from the Times story. A DraftKings executive told investors that data science helped improve its margins on promotion-driven sports bets by 13% in 2025, and that it used AI to personalize "hundreds of millions of promotional dollars."
What does DraftKings say?
DraftKings rejects the central allegation. "DraftKings does not use AI to target customers based on losses, nor do we use AI to target customers based on indicators of potential problem gaming. We intend to vigorously defend any potential lawsuits on the matter," a spokesperson told The Boston Globe.
For me, the Massachusetts Gaming Commission's review is just as important. The lawsuit seeks relief for customers, while the regulator said after the Times report that it would examine the allegations against DraftKings and other licensed operators.
How has the stock done?
DraftKings shares closed at $21.75 on September 18, the last trading day before the Times report, and finished at $19.00 on September 30, down 12.6%. The slide started a little earlier, though, with a 7.6% drop on September 17. The stock was at $18.90 at 11:53 a.m. ET on Thursday, down 0.5%.
Promotions are a big line item for the company, which went public in 2020 through a SPAC merger. DraftKings brought in about $8.7 billion in gross revenue from sports and casino bettors last year and gave out about $3 billion in promotions, according to Citizens Bank research cited by the Times and quoted in the complaint. The complaint says Vest's lawyers sent their demand letter on September 30, putting their planned addition of a Massachusetts consumer protection claim around October 30 if there's no settlement.
