DraftKings Faces Regulatory Setback in Louisiana

Louisiana state regulators declined to renew DraftKings’ full gambling license. However, the platform remains available in the state, as officials gave the sportsbook a conditional extension while they investigate its business practices, use of artificial intelligence, and responsible gaming measures. DraftKings must provide the requested information and convince regulators that its practices meet state requirements. DraftKings Must Meet Strict Disclosure Requirements The Louisiana Gaming Control Board (LGCB) voted unanimously on October 15 to impose additional requirements on the company. This decision followed a renewal hearing that raised questions about shareholder disclosures and recent allegations about the way DraftKings targets consumers with promotional offerings. While the company has not been accused of any wrongdoing, it is nevertheless walking on thin ice. Assistant attorney general Delancey Houston told the LGCB that authorities had uncovered information that suggested some shareholders with stakes of 5% or more had not completed the required suitability process. Houston said one shareholder had requested a designation as an institutional investor, but regulators had not yet determined whether that request is warranted. The division also has concerns about the recent allegations brought against DraftKings and therefore additional time is needed to investigate those allegations. Louisiana assistant attorney General Delancey Houston The conditional permit has several requirements. DraftKings has 30 days to submit all remaining shareholder suitability findings, including petitions for institutional-investor treatment. The company must also appoint a senior executive as a liaison with the LGCB within seven days. Monthly reports are required by the 15th of each month and should include customer complaints, regulatory actions, advertising violations, and changes to the company’s compliance systems. The Use of AI Remains a Problematic Topic Much of the LGCB’s attention focused on a recent New York Times report about DraftKings’ use of artificial intelligence and its treatment of customers with potential gambling-related issues. Regulators expect DraftKings to explain its use of AI, address questions about its prediction market activity and digital offerings to state residents, and prove its advertising adheres to responsible gambling requirements. The New York Times report has even led to legal action in Massachusetts. A class-action lawsuit in the state alleges that DraftKings used AI tools to identify customers most likely to respond to gambling promotions, including individuals showing signs of gambling harm. These claims are unproven, and the case remains in its early stages. According to the LGCM, the license extension should give the regulator time to conduct proper oversight and protect the integrity of Louisiana’s gambling sector. While the company can continue operating under its current license, its future in the state will depend on whether the regulator finds any issues and how it chooses to sanction potential deficiencies.