Louisiana declines to renew DraftKings licence, grants conditional extension

The Louisiana Gaming Control Board declined to renew DraftKings' full gambling licence, the company's existing licence was extended on a conditional basis while regulators examine its business practices, use of artificial intelligence and responsible gaming measures. DraftKings can continue operating in the state under the current licence. The board voted unanimously on 15 October to impose additional requirements on the company, according to the account of the renewal hearing.

Delancey Houston, an assistant attorney general, informed the board that regulators had gathered information indicating that certain shareholders with holdings of at least 5% had not gone through the suitability process the state requires. According to Houston, a single shareholder asked to be treated as an institutional investor, and no decision has been reached on whether that status is justified. Houston added that the division is troubled by recent allegations involving DraftKings and needs more time to look into them. No accusation of wrongdoing has been made against the company.

Several conditions come with the conditional permit. Within 30 days, the company must turn over any outstanding findings on shareholder suitability, and that submission is to cover petitions for institutional-investor treatment. A senior executive has to be named as the board's liaison within seven days. Reports are to be filed every month by the 15th, addressing customer complaints, regulatory actions, advertising violations and modifications to the company's compliance systems.

A recent New York Times report on DraftKings' use of artificial intelligence and how it handles customers who may have gambling problems drew much of the board's scrutiny. The company is expected to account for its AI use, respond to questions regarding its prediction market activity and the digital products it offers to state residents, and demonstrate that its advertising complies with responsible gambling rules. Legal action has followed in Massachusetts, where a class-action lawsuit claims DraftKings deployed AI tools to single out customers most likely to react to gambling promotions, among them people displaying signs of gambling harm. The allegations have not been proven and the case is still at an early stage.

The board said the extension ought to afford the regulator enough time for proper oversight and to safeguard the integrity of Louisiana's gambling sector. Whether DraftKings keeps operating in the state hinges on what issues the regulator identifies and on the penalties it decides to apply for any shortcomings.