Louisiana regulators hold off on DraftKings licence renewal, grant conditional extension pending probe

The Louisiana Gaming Control Board (LGCB) has declined to fully renew DraftKings' gambling licence in the state. It voted unanimously on October 15 to grant a conditional extension instead, which means the sportsbook can keep operating in Louisiana while regulators carry out an investigation.

The decision followed a renewal hearing at which questions were raised about shareholder disclosures and recent allegations about how DraftKings targets customers with promotional offers. The company has not been accused of any wrongdoing. Assistant attorney general Delancey Houston told the board that authorities had found information suggesting some shareholders holding stakes of 5% or more had not completed the required suitability process. One shareholder had asked to be designated an institutional investor, and regulators have yet to decide whether that request is justified. Houston said the division also has concerns about the recent allegations and needs more time to investigate them.

The conditional permit sets several requirements. DraftKings has 30 days to submit all outstanding shareholder suitability findings, including petitions for institutional-investor treatment. Within seven days it must name a senior executive to act as liaison with the LGCB. It must also file monthly reports by the 15th of each month covering customer complaints, regulatory actions, advertising violations and changes to its compliance systems.

Much of the board's attention centred on a recent New York Times report about DraftKings' use of artificial intelligence and its treatment of customers who may have gambling-related problems. Regulators expect the operator to explain how it uses AI, answer questions about its prediction market activity and digital offerings for state residents, and show that its advertising meets responsible gambling requirements.

The report has also prompted legal action in Massachusetts, where a class-action lawsuit alleges that DraftKings used AI tools to identify customers most likely to respond to gambling promotions, including people showing signs of gambling harm. The claims are unproven and the case is at an early stage.

The extension is intended to give the regulator time for proper oversight and to protect the integrity of Louisiana's gambling sector. DraftKings can continue to operate under its current licence, but its future in the state will depend on what the investigation finds and what sanctions, if any, the board chooses to impose.