AI-Driven Sportsbooks Raise Concerns Over Predatory Practices

Sports gambling operators are now employing artificial intelligence (AI) to manage and track risks associated with problem gambling. However, this technological advancement simultaneously raises concerns regarding its potential misuse, alongside issues related to user data privacy.

The unregulated nature of the sports gambling sector adds another layer of complexity. Operators often rely on self-governance, presenting a conflict of interest when it comes to promoting responsible gambling. This lack of oversight allows access to bettors’ personal information, which could result in predatory practices by operators trying to maximize profit margins.

Timothy Fong, co-director of UCLA’s Gambling Studies Program, warns that AI can target individuals already prone to gambling addiction. “The use of AI here creates scenarios where vulnerable individuals could be exploited without their awareness,” Fong explains.

Sportsbooks are not just using AI for risk management; they’re also focusing on creating a more engaging betting experience. This includes personalized incentives and tailored content, based on an individual’s past behavior. Artificial intelligence assists in crafting betting offers that resonate with users by tracking their likes, interests, and previous wagers.

Shane Kraus, a clinical psychologist at UNLV, expresses skepticism about the efficacy of AI in promoting safe gambling practices. He notes a potential agenda in the way AI facilitates user engagement: “It aims to not only increase activity but keeps users on the platform for longer periods.” This prolonged engagement raises alarms as increased betting duration may correlate with a greater likelihood of developing gambling issues.

The implementation of AI technologies like SharpLink’s C4 Sports Betting Conversion engine is notable. This system identifies optimal betting offers by analyzing user habits, converting casual sports fans into active bettors. Personalization might include tailored recommendations based on teams or athletes a user supports.

According to SharpLink CEO Robert Phythian, features like “Bets for You” leverage user behavior to suggest similar bet options, enhancing user engagement. He claims that personalized experiences significantly boost retention rates among bettors, a finding echoed by research indicating that 72% of sportsbooks view personalization as vital for sustaining interest.

Yet, retaining users can have unintended consequences. As Fong emphasizes, the longer customers gamble, the higher the risk of developing problematic habits, a concern corroborated by data showing that a minority of bettors drive a majority of sportsbook profits.

Evidence suggests that approximately 10% to 80% of casino profits could be derived from individuals struggling with gambling addiction. A 2018 study from Minnesota found that 15% to 33% of gambling revenue was sourced from those with issues. This troubling trend is mirrored in Arizona, where calls to problem gambling hotlines surged by 82% after the state legalized sports betting in 2021.

Arizona’s statistics reflect this pattern vividly: reports indicate 512 problem gambling calls were made from January to September 2023, compared to just 280 during the same period in 2021. The rise in gambling-related inquiries underscores a pressing need for interventions in this burgeoning industry.

Brianne Doura-Schawohl, a prominent consultant on gambling policy, suggests the sports betting landscape poses unique risks attributed to its connection with fan culture. “A sports fan’s identity can drive risky behavior, especially when combined with promotional offers that present gambling as low-risk,” Schawohl warns, emphasizing the problematic perception of gambling as controllable skill rather than chance.

As AI technologies proliferate in gambling, concerns over ethical advertising and user manipulation remain salient. The same conversations about responsible marketing surround products like cigarettes, highlighting the stark risks tied to gambling engagement. Advocates for regulation worry about data privacy and the industry’s largely unsupervised nature.

To address these issues, proposals like the SAFE Bet Act aim to impose federal standards on gambling advertising while limiting AI’s role in tracking user behaviors. Similarly, the GRIT Act intends to allocate excise tax revenue toward problem gambling research, marking a significant step towards recognizing and addressing gambling addiction at a national level.

Despite these developments, states continue profiting from gambling taxes—with Arizona earning around $34 million in 2023, a rise from the previous year. Critics point out the conflict of interest inherent in states benefiting from gambling while simultaneously promoting responsible gaming practices.

In summary, while AI has the potential to enhance user engagement in sports gambling, it also raises critical ethical questions regarding user manipulation and addiction. As this industry continues to evolve, the balance between profit and responsible gambling will be a defining factor in its future sustainability.