The Usage of Artificial Intelligence in Gambling and Its Legal Challenges

June 26, 2023 | Gambling

ITALY (June 22, 2023) — The dynamics of the gambling and betting sector can easily exploit the potential of artificial intelligence but hides considerable legal challenges.

Betting is an activity that involves predicting an uncertain future event, and the money you bet is based on the odds you think that event will or will not happen. The gambling industry is an ideal testing ground for artificial intelligence. Artificial intelligence collects data, allowing it to analyze statistics and events to improve accuracy continuously.

The gambling industry heavily leverages historical data to anticipate future outcomes and behaviors. It is, therefore, a fundamental and necessary skill for game design, odds setting, risk management, customer profiling, bonus program optimization, and fraud detection.

The correct identification of the probability of an event occurring

As a result of the ever-increasing regulation at both the national, European, and non-European levels of the gambling industry, analysts working in this sector and defining the probability of the occurrence of an event from which it is then possible to set the odds to be offered in the market-have the need to equip themselves with tools that enable the analysis of a large amount of data.

In this regard, reference is not exclusively made to the classic cases of the probability of a team winning a particular competition or event. But, for example, in the context of real-time betting, it could prove particularly useful to calculate the speed and trajectories of players on the field to predict in real-time and in advance the occurrence of a goal to update the live odds offered during an event correctly.

Some of the most innovative data analyzed by the sports betting industry include a player’s past fitness and performance, weather conditions before a given event, environmental factors of the venue, and even a club’s growth prospects. This data-driven approach allows bookmakers to identify trends and game statistics that can be used to determine the odds of each possible outcome and, therefore, the odds that will be offered to customers.

This allows bookmakers to establish the most accurate odds and offer more competitive odds to their customers.

Responsible gambling and fraud identification

Just as artificial intelligence facilitates the creation of new gaming products, similarly, it can serve as a safeguard to counteract the adverse effects of the industry. In the context of responsible gaming regulation, there are rather traditional practices to prevent player risk. Indeed, one relies on the gaming behaviors of players who have written off and self-excluded. Artificial intelligence can be essential in customer interaction, particularly in maximizing the player experience in areas such as customer service, which is also very useful in detecting, but more importantly, preventing, problem gambling.

The rationale is that new technologies further track and evaluate each customer by accumulating a large amount of behavioral data. Through artificial intelligence trained with behavioral data from known problem gamblers, companies can automatically identify and point to a customer with a risk of problem gambling, even if it is still in the early stages, so they can monitor its patterns and intervene promptly by blocking its operations before gambling activity becomes problematic. Players who receive personalized feedback on their gambling behavior, measured in terms of time spent and money spent, are more likely to modify their gaming behavior than those who do not receive personalized feedback and individually decide to self-suspend or restrict themselves.

In a different vein, artificial intelligence can use machine learning techniques to analyze historical betting data, odds information, and players’ gambling patterns to categorize abnormal play patterns and irregularities that might indicate the presence of fraud. For example, artificial intelligence may be able to detect a betting pattern that seems irrational or suspicious, such as a large number of bets on an unlikely outcome or a large volume of bets on an unknown league game.

Using artificial intelligence to detect betting fraud can also improve the reputation of the sports betting industry. When players know that the industry uses advanced technologies to prevent fraud, they are more likely to bet safely and confidently. Therefore, the real revolution in betting is to use predictive artificial intelligence tools to promote responsible gaming, limit fraud, and prevent money laundering and match-fixing cases. While bookmakers have used such tools for a couple of years to identify odds and develop new products and services properly, it will be up to national regulators to work in concert with operators to ensure lawfulness and supervision over the events being wagered on.

All uses of artificial intelligence in the gambling sector unveil legal challenges regarding privacy compliance, usage of IP-protected materials, and new obligations that might arise from the EU AI Act. You can read about the topic in the articles on this blog.