(Illustration by Aryton Temcio/Cronkite News)
PHOENIX – Sports gambling operators are using artificial intelligence to track and limit problem gambling exposure for their users, but the introduction of this technology and the use of personal data also raises questions about whether it could be used for the wrong reasons.
The sports gambling world is still largely unregulated, relying mostly on self-governance, which raises the possibility of a conflict of interest when it comes to responsible gambling.
Access to bettors’ data, behavior and habits opens the door to the potential for predatory behavior by sports-gambling operators.
Timothy Fong, co-director of the UCLA Gambling Studies Program, believes that AI could spell trouble for gamblers susceptible to addiction, who could be easier targets for sportsbooks.
“It’s really the use of AI that creates predatory scenarios, where people who are already vulnerable because of mental health issues or a gambling addiction could be manipulated or targeted without their knowledge,” Fong said.
Sportsbooks are looking for ways to utilize AI, and among them is to personalize the betting experience for users through incentives or by providing specific information based on that person’s gaming habits.
Shane Kraus, a clinical psychologist and associate professor at UNLV, is skeptical about the use of AI to promote safe gambling and added that he is unaware of this practice.
“AI in the gambling space tailors incentives and better understands a player’s interest, so they’re ensuring the options that they are feeding to a player are going to resonate with them,” Kraus said. “It’s going to want to, A, make them engage and, B, stay on longer again.”
In fact, AI can be used to essentially attract new bettors.
Emerging AI technologies like SharpLink’s C4 Sports Betting Conversion engine, for instance, are used to convert sports fans into bettors, which is done by determining the best personalized betting offers and experience for the user based on their behaviors, past and present.
For example, a user might receive wagering offers that are based on their favorite team, sport or player.
In a guest column published on Sportico by SharpLink CEO Robert Phythian, he said that SharpLink, a company previously partnered with the now-defunct SaharaBets and currently with BetMGM, utilizes AI in their C4 engine to keep users engaged longer.
Phythian said that in a sports betting category such as “Bets for You,” the technology might suggest “Because you bet on X,” to prompt a similar wager. Or, “Those who bet on X, also bet on Y,’ to suggest another bet.
“Fans will be presented with a personalized experience based on the preferences they either explicitly state in their profile or implicitly demonstrate by their behavior and consumption patterns,” he said.
Studies have shown that personalizing user experiences is beneficial for organizations that are trying to drive revenue.
Research from European sports data organization LSports shows that 72% of sportsbooks surveyed listed a “personalized player experience” as the biggest factor in retention rates.
Fong sees a pitfall with keeping players engaged longer on platforms.
While longer engagement translates to a bigger profit for the sportsbooks, the longer gamblers place bets, the more likely it could be that they develop a gambling habit, which can lead to gambling disorders.
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“The real story, of course, is what percentage of profits generated by the casino industry is on the backs of people with this disease?” Fong said. “I’ve seen ranges anywhere from 10% up to 80% of the bottom line profits are on the backs of people with (a) gambling disorder.”
A 2018 survey report conducted by the Minnesota Department of Human Services claimed that gambling revenue generated by individuals with gambling problems seemed to rest anywhere between 15% and 33%, based on outside data.
It is hard to accurately quantify the scope of the issue because it is not a tracked metric, but a significant increase in calls to national problem gambling lines have been tracked, and that trend is also reflected in Arizona.
Based on data obtained from the Arizona Department of Gaming, there were 280 problem gambling calls in 2021 between March and December. In 2023, the first full year of legal sports gambling in Arizona, there were 512 problem gambling calls between January and September, which is an increase of more than 82% over the 2021 sample – and in one less month.
Further data provided by Telus and LifeWorks shows 185 helpline-specific calls between July 2020 and June 2021 to the Arizona Office of Problem Gambling, which increased to 619 calls from July 2022 to June 2023 – a 234% spike.
The number of calls jumped to 687 in 2024.
It is clear that sports gambling legalization is, at a base level, coinciding with an increase in problem gambling calls, which means that the need for intervention might be needed.
The increase in problem gambling is also noteworthy considering that sportsbooks want to engage and retain users. It is clear that keeping bettors on gambling platforms increases their chances of developing addiction issues.
Research released in 2023 and conducted by Dr. Lia Nower of Rutgers University found that sports gamblers in New Jersey were more likely to develop anxiety, depression, substance abuse issues, and problem gambling compared to non-sports gamblers. It also found that a small percentage of bettors, around 5%, were placing 70% of the bets, which Nower concludes “means the people losing the most money are the most essential to operator profits.”
Nower found 14% of sports bettors from this study to have suicidal thoughts, while 10% acted on those thoughts.
As much as sportsbooks need to advertise and want to personalize the experience for customers through AI, they could be doing serious harm to their attempts to prevent problem gambling in the process.
It’s questionable to be in a position to push something that has an addictive nature, yet to try and tamper down on its addictive nature when the survival of the gambling enterprise is based on getting people to lose and gamble more.
Yet personalisation and advertising are not unique to the gambling industry, this is similar to what is seen on retail websites and even social media, with algorithms that play on the brain’s affinity towards certain topics and content.
Coupled with the psychology of being a sports fan, personalization for sports gamblers can be troubling.
Brianne-Doura Schawohl, a leading policy consultant on problem gambling issues, finds sports gambling is distinguished from other forms of wagering because sports is in its own realm.
“What separates sports betting from so many other forms of gambling out there is it entices a consumer based on this concept of skill, based on ego and arrogance,” Schawohl said. “Then when you incentivize that with things like free play and bonus offers and attractive promotions that make it seem like there’s little to no risk – when gambling always has risks – it can become a dangerous scenario for people.”
Many sports fans get so tied up in their favorite sports and athletes that they begin to exude confidence based on their knowledge, but if this attitude translates to the sports gambling world, players can be in for a rude awakening with a game that will always be based on luck.
A 2013 study published in Science Daily found that betting experience or knowledge of a particular sport does not improve betting outcomes.
“Their identity is tied to sports but that becomes a risk factor for people taking risks,” Kraus said of sports fans. “The emotional connection and their knowledge often comes back to bite them.”
In light of the criticism regarding marketing and advertising strategies used by sportsbooks, the use of AI and behavioral tracking only adds fuel to the fire.
Advertising has always been a hot topic for controversial products, with the easiest example being cigarettes. Some can think back to the Marlboro Man commercials of the 1960s and 1970s, which put an inherently unhealthy product right in front of the public in a positive and attractive way.
Labeling gambling bad or good can be a matter of opinion and is based on how someone behaves with it, but the risk of playing is unquestionable, and legislators are worried about data privacy and user manipulation with AI being a murky, largely unregulated technology.
Using AI to personalize the experience for gamblers is a form of advertising that is focused on customer retention.
“People are starting to get sick of the constant, incessant and aggressive advertising,” Schawohl said.
“People probably haven’t caught on to the extent AI is currently being utilized within the industry. People probably are naive to how much AI drives most of their internet engagement offerings right from the ads you get fed on Facebook or Twitter.”
FanDuel CEO Amy Howe has been an advocate for using artificial intelligence, saying FanDuel is making “huge investments” in the technology to detect problematic gambling.
Critics are skeptical.
“The reality is, more often than not, there is a lot of chatter or empty promises where operators will highlight things that they are capable of, but in the absence of mandatory regulations, they don’t do it.” Schawohl said.
The Responsible Online Gaming Association, a coalition formed in early 2024 by most of the major sportsbook operators in the U.S., looks to support independent research and educational tools to prevent problem gambling. Each operator has pledged a combined $20 million toward these efforts, which will help to develop a database of problem gamblers and to promote programs that address the issues.
Herein lies a conflict of interest despite the potential good of the coalition: The major sportsbook operators are forming a responsible gambling organization which will help to keep those same sportsbooks accountable through research, including on common issues like advertising and marketing, but it remains self-regulated.
Questions remain about how independent this research will truly be, as self-regulation presents an opportunity for non-action, and how it will be used?
Many sportsbooks have developed and integrated “responsible gaming” tools but there is evidence that those tools are rarely utilized by gamblers.
Data from DraftKings and PSI on online bettors in Massachusetts in 2023 revealed that less than 3% of users utilize any type of responsible gaming tools, which corresponds with national data showing similar numbers.
Nower claims less than 1% of bettors aged 21-24, a rapidly rising betting population, uses responsible gambling tools available on sites.
As gamblers aren’t really utilizing the tools available to them, states are seemingly lagging behind when it comes to setting the tone for responsible gambling.
A report released by the NCPG on state adherence to the Internet Responsible Gaming Standards found that, on average, only 32 out of 82 player-protection measures were fulfilled through state law and regulation across the United States.
The IRGS is a comprehensive set of standards and guidelines for states to follow in order to promote safe gambling practices and protection for users from sportsbooks.
The data indicates that states could be passing more laws to protect users from sportsbooks.
Right now, the United States federal government does not recognize, fund or support anything to research, prevent or treat problem gambling.
The NCPG estimates that around nine million Americans suffer from gambling addiction and the “annual social cost” is about $14 billion.
“The trends I’m seeing in the U.S. market are utilizing machine learning and AI solely for customer acquisition and retention, and I think that’s really caused the political climate to percolate to the surface.” Schawohl said.
U.S, Rep. Paul Tonko, a Democrat from New York, recently initiated a comprehensive bill called the SAFE Bet Act that would set federal sports gambling standards for advertising, the use of AI and financial efficacy. If passed, sportsbooks would not be able to advertise during games, or use “bonus” bets and “no sweat” bets as a way to engage users.
It would also ban the use of AI to track behavior, provide microbets or individualize promotions.
Another pending bill called the GRIT Act, proposed by Democratic U.S. Rep. Andrea Salinas of Oregon and Sen.Richard Blumenthal, a Democrat from Connecticut, would set aside 50% of the federal excise tax that comes from all sports gambling activity to spend toward problem-gambling research. This would be the first time the federal government would create a source of funding to research and treat issues related to gambling.
But just like Tonko’s bill, the GRIT Act may not pass and is publicly opposed by the American Gaming Association.
Sports betting regulation is also murky since states make money from sportsbook operations.
Last year, states made a combined $2.5 billion from sports gambling tax revenue, which is an increase from $1.8 billion the previous year. In 2023, Arizona brought in around $34 million in sports gambling tax revenue, which is up from $28.5 million in 2022.
This tax revenue is generally allocated to a state’s general fund that helps operate health services, human services, education, law enforcement and public safety, and other major day-to-day governmental operations. If the money from sports gambling does not go into the general fund, it can be used for specific purposes like problem gambling services and resources.
Legalization of sports betting theoretically minimizes the harm done by off-market sportsbooks, allowing the government to control, or at least benefit from, the flow of money – which continues to grow each year..
Fong believes the government would rather have a person lose money to “an above board gambling operator,” where it can at least recoup money through taxes that benefit the state, rather than allow the money to go straight to unlawful sportsbooks.
