U.S. Regulators Step Up Scrutiny of Online Betting, AI Promotions, and Prediction Markets
26 October 2026
State commissions, Congress and sportsbooks are tightening oversight over online gambling. New York's gaming regulator has proposed new rules to curb addiction, while the U.S. Senate considers banning sports wagers in prediction markets. Meanwhile, DraftKings faces pressure from Louisiana and New Jersey over its use of AI in betting promotions.
Regulators weigh heavier restrictions on online gambling, reflecting growing concerns about addiction and market integrity. A recent ruling allowed sportsbooks to offer election event contracts, which they say gives them a federal regulatory head-start. Congress and states are scrutinizing the products, questioning whether they are financial instruments or just another form of betting.
New York: Tackling Responsible Gambling with New Rules
New York regulators have proposed two key rules to address gambling addiction. One would set thresholds for identifying at-risk bettors, like a 50% jump in app use, and require sportsbooks to intervene. The other would bar companies from using AI to customize bets or bonuses. The 60-day comment period started Friday.
These rules aren't a surprise. They represent the latest from New York regulators, ahead of formal adoption. According to a recent report, the plans had already received dozens of public comments, including media scrutiny of DraftKings' use of AI to target promotions to losing bettors. Considered together, the proposals lay out a framework for how New York wants to enforce online betting regulation.
The New York proposed rules are broadly similar to New Jersey's. In 2021, the Garden State adopted some of the strongest legal player protections in the US, with specific rules on at-risk list formation and how operators should engage at-risk customers. Jersey has been a consistent leader on responsible gambling.
"By continuing to closely monitor gambling operators' offerings, marketing and customer interaction, New York is taking a proactive approach to curbing problems," says Gilda Licamele. As a gambling addiction expert, she's closely followed New York's regulatory steps in this area.
Prediction Markets: A New Front in Regulatory Concerns
Recently, New York was one of 39 states, including DC, that had legalized state-regulated sports gambling. But a court ruling allowed Kalshi, a sports betting platform, to offer event contracts on elections in all 50 states - even in gambling-restricted ones. Federal classification of those contracts as "financial swaps" under CFTC regulation opened a path that could be used for sports wagers too. A bipartisan bill introduced this month aims to close it.
Congressional representatives have demanded transparency about how much revenue sportsbooks and prediction markets take from their VIP suites and topical betting markets. And they've asked about reliance on AI to optimize promotions to individual bettors.
DraftKings, BetMGM and others relied extensively on these markets for growth. Prediction markets' potential to open lucrative new segments - including legal access in gambling-restricted states - expands the firmament of U.S. sports betting. Failure to distinguish federally 'permitted' contracts from state-generated regulations creates a new political and regulatory matter in decades.
More on this is available via Gambling Apes on responsible gambling limits.
"The entertainment value of picking teams and making scores looks nice for the fans and might prevent another punching bag," says Robin Smith, a government relations rep, who tracks this Senate bill. "Nobody wants to frame sports betting in the erroneous premise of gambling."
Sportsbooks' AI Practices Draw Scrutiny from State Regulators
AI-using betting practices pose different regulatory challenges. This month, Louisiana gave DraftKings a conditional extension rather than a full renewal. Regulators there cited the need to investigate DraftKings' recent use of AI to improve user suitability checks. Louisiana's decision follows similar measures by Massachusetts, Maryland, Michigan, Maine and New York, none of whom have traditionally taken a tough stance on gambling.
The NBA has banned its official sportsbook partners from offering parlays, a bet type that accounts for around 30% of bets placed in the U.S. and drives substantial revenue with high hold rates. That penalty adds to regulators' case against AI's role in driving bets. The Ohio Casino Control Commission warned licensees that continued facilitation or support of illegal gambling activity raises "significant suitability concerns." As with New York's AI ban, the concern may not be derivative — just that AI helps detect gambling's telltale signs.
"There are certainly reasonable measures to prevent exacerbating addiction," says Noah Sternback, a former gaming control board chairman, who also is a gambling addiction expert. "But the ability of sportsbooks to solve addiction isn't the core problem." Sternback doubts whether AI is the right tool for protecting gamblers from addiction's harmful effects.
Congressional scrutiny of VIP rewards has sharpened the debate. Lawmakers claim VIP programs drive gamblers to take on more wagers. The appetite for regulation increases alongside these rewards.
State regulators have chronicled other questionable practices. Recently, Louisiana gave DraftKings only a conditional extension to investigate its suitability checks. The regulator found DraftKings had used AI to approve questionable accounts. Like the NBA, some regulators say DraftKings handled detection poorly. As with New York's proposed AI ban, others disagree, and believe DraftKings played a role.
What's at stake in this regulatory push is really about how to reconcile gambling's growth with addiction, consumer protection, and state versus federal authority. As these debates progress, the regulatory pressure around sports betting may only accelerate.