AI has a significant presence in several areas of the gambling and sports betting industry, from addressing fraud and safety issues to use for automated betting and customer profiling. Gambling and sports betting companies and online platforms use AI in these areas to improve the user experience and gain an edge on competitors.
Fraud
According to TransUnion’s report, fraud in the online betting sector rose over 50% in the first quarter of 2022 when compared to the same period in the previous, with promotion fraud the most prevalent form. AI is fast becoming an important weapon in the fight against this trend and the criminals involved.
One example is the use of AI for on boarding customers through more advanced “know your customer” and money laundering checks. Such products can also include AI facial recognition technology to speed up user identification assessments, just as users are becoming more used to uploading documents and selfies from a phone in other industries, including online banking. This can help to check that users are who they say they are and reduce fraudulent behavior, including users seeking to set up multiple accounts to effect bonus abuse, chip dumping or “gnoming,” which is often found in poker, where multiple accounts may be deployed to deliberately lose in order to help another account win.
A further example is the deployment of AI to look for patterns of suspicious behavior during the course of play. Here, the well-known value of AI in analyzing large and multiple datasets at speed comes into its own with the development of algorithms trained to look for irregularities or markers of suspicious activity based on past knowledge of similar events.
Safe gambling
As operators around the world come under increasing regulatory and governmental pressure to protect users who may be at risk of financial, emotional or physical harm, AI presents one option for increasing the sophistication of the range of checks that can be carried out. Again, the value that AI has in terms of looking at patterns of behavior in order to help predict or flag potential risks presents huge potential for the analysis of “markers of harm.” Various operators have, therefore, been investing in technologies using AI in this area.
Whilst incredibly useful, developments in this area are not without their challenges. For example, the increased data collection on potentially vulnerable individuals puts operators in somewhat of a Catch-22 situation in that they want and are required to protect individuals from gambling harm but, at the same time, don’t want to inhibit their privacy rights. Further, with increased AI regulation on the horizon in many parts of the world, such as the EU’s focus on safety uses of AI as “high risk,” this may mean that operators that wish to use such technologies will be subject to higher scrutiny and regulation, although currently the focus in the draft is more on safety components in certain products.
What is clear from these developments is that AI presents a potentially powerful tool to protect individuals but also that there is a demonstrable need for regulators to help clarify the parameters of such use so that operators have clear guidelines and guardrails to help them invest and move forward with such technologies.
Automated betting
Many gambling and sports betting companies use AI to improve their automated betting software, applications and processes, for example, using predictive analytics and machine learning to identify patterns in data and make predictions about future events. Such AI techniques are used most often for sports betting, where vast amounts of data about past games, player and team performance and other factors are quickly analyzed to make predictions about a range of outcomes for future sporting events and with greater accuracy.
Relatedly, AI also improves the accuracy and efficiency of odds calculations, which are an essential part of sports betting because they determine the payouts for winning bets. Traditionally, human analysts manually calculated betting odds, but now, companies use AI to automate this process in order to provide users with more accurate and up-to-date odds and a wider range of events and markets to bet on. AI-powered automated betting systems can also place wagers on behalf of users without human intervention.
In February 2023, Narrativa, a leader in the AI content marketplace, and Quarter4, the all-in-one predictive data points delivery platform for sports betting, announced a strategic partnership to provide a complete AI-generated sports betting content experience for the gambling industry. Narrativa uses the most advanced AI technology to generate innovative and human-like sports betting content to increase organic traffic, offer additional contextual information for users and drive results. To complement Narrativa’s automated content, Quarter4 will integrate its all-in-one pre-game and in-game customized probabilities solution to deliver multiple predictive data points for players, teams and games.
In a potential challenge to the industry, users are also increasingly using AI in the form of betting bots, which are designed to automate the gambling process by actively scanning gambling and gaming websites for any changes in odds, so users can quickly capitalize on the odds before they disappear. With multiple bots playing the same game, a player can take advantage of arbitrage decisions or set up a game so that one bot wins by betting against other botted accounts.
With respect to predictive analytics, automated betting and betting bots, the use of AI raises some legal concerns with respect to fraud and safety, as previously discussed, and privacy considerations with respect to automated decision-making, as discussed further in the Data protection and privacy section.
In terms of fraud and safety, an increased industry problem has been the use by fraudsters of bots to win to the detriment of other players. A case of AI being used against rather by the gambling industry in this area. It is therefore important for online platforms and regulators to carefully consider the potential risks of AI as well as the benefits in order to implement appropriate safeguards to protect users.
Customer profiling
AI is used in the gambling industry to analyze the behavior and preferences of users when they interact with sports betting apps based on a number of factors, such as their location, past sports bets and favorite sports. In particular, companies use natural language processing (NLP) to process human language and extract meaning from text-based conversations, allowing for more accurate customer service interactions.
Sports betting companies can then use this information to provide personalized recommendations and marketing messages tailored to each user’s interests and betting history that may otherwise be difficult for humans to detect. For example, if a user has a history of betting on a particular team, a sports betting app might send them alerts when that team is playing or provide the user with special promotions related to that team.
In January 2023, SharpLink Gaming Ltd., a targeted conversion solutions company for U.S. sports betting and iGaming industries, formed a strategic partnership with BetMGM, a leading sports betting and iGaming operator. Through SharpLink’s intelligent C4 Sports Betting Conversion technology, BetMGM will be able to deliver and determine the best sportsbook betting offers and experience for each identified user, using sophisticated behavioral modeling and tracking technologies.
Gambling companies using such technologies will, of course, need to be alert to privacy considerations when using personal data for the purposes of profiling, as discussed further in the Data protection and privacy section. Depending on the jurisdiction, gambling and sports betting companies may be required to make specific disclosures and obtain user consent prior to using automated decision-making tools for the purposes of profiling.
