Aritifial Intelligence is catching on across the world at an accelerated rate, and every industry is feeling the impact. That includes legalized sports betting.
Mind you, it was not long ago that the leading mobile betting sites were the disruptors. Sports betting was novel just a few years before now—new in a way that forced everyone from pro sports leagues to the NCAA to credit card companies to adjust and adapt how they conducted business. These days, though, sports betting isn’t just more commonplace; it is effectively the standard. At this writing, 40 of 50 states will have some form of legal sports betting by the end of 2025, on top of the District of Columbia and Puerto Rico. The proliferation of online betting, in particular, has changed so much. Not only is it adding substantial amounts of tax revenue to state budgets, but lawmakers are not attempting to reconcile downsides, such as the crescendo of problem gambling and, potentially, bankruptcy reports.
This introduction to a completely new industry has prompted fresh legislation proposals. And it’s starting to feel like Aritifical Intelligence is headed down the same path.
While the heads of these tech companies at the forefront of AI development insist regulations will ruin their products, and by extension, leave the United States trailing other countries in the industry. Yet, the more use of artificial intelligence spreads, the harder it becomes to weigh the risk-reward profile, in large part because both the risks and rewards keep evolving.
Sports betting is a perfect example of one sector just beginning to feel the squeeze. Where artificial intelligence was once considered a tool that could potentially expedite transactional processes and polish off betting-site functionalities, it is now starting to pose an existential threat to the entire industry by rendering customers susceptible to a new genre of deepfakes and scams.
Artificial Intelligence Deepfakes in the Sports Betting Sector are on the Rise
The list of fraudulent developments taking place in sports betting is pretty extensive. Among the biggest issues right now, though, is what’s known as Synthetic Identity Theft. If you are not familiar with what it is and how this works, here’s Conor Reynolds of iGaming Business with the lowdown, through the lens of the United Kingdom:
“‘Synthetic identity theft is a type of fraud in which genuine and fabricated personal information are blended to generate a completely new, fake identity,’ Dr Michaela MacDonald, senior lecturer in law and technology at Queen Mary University of London, tells iGB. ‘Alongside voice cloning, behavioural mimicry and deepfake technologies, AI-generated synthetic identities can easily bypass traditional Know Your Customer (KYC) systems by defeating facial recognition, exploiting support chats, or spoofing voice-activated authentication.’
“Research on deepfake technology from the Alan Turing Institute, published in March, said AI-enabled crime is being driven by the technology’s ability to automate, augment and vastly scale up criminal activity volumes. That report stated: ‘UK law enforcement is not adequately equipped to prevent, disrupt or investigate AI-enabled crime.’ While legislation may help to deter the threat of AI-enabled crime, the institute called for a ‘more robust and direct approach’ – one that is centred around the ‘proactive deployment’ of AI systems in law enforcement.”
Any organizations and institutions that traffic in sensitive information to conduct business are vulnerable to these issues. That makes sports betting websites a natural target. Customers have to input everything from their name, date of birth and address to credit card, crypto and bank information. Some even require social security number verification.
This makes operators appealing to fraudsters well-versed in AI technology. They are able to easily empty out bankrolls, and they can even cull enough important information to flat-out steal identities.
It isn’t Entirely Clear Whether Sports Betting Websites Can Handle These New Threats
As a rule, sports betting websites generally have top-notch cybersecurity protocols in place. This is now a multi-billion-dollar, vergingon on trillion-dollar, industry. Commercial operators would not still be in business, let alone raking in lucrative profits, if they couldn’t protect peoples’ information.
Still, the best cybersecurity isn’t necessarily a match for evolving AI practices. This is a threat nobody has really faced on a regular basis before, and the entire point of AI technology is that it knows, well, basically everything. Previous modes of security are part of its operating consciousness, and these Large Language Models (LLMs) are designed to evolve based on everything off which it has “learned.”
This a profoundly vague explanation, which somehow doesn’t make the notion any less terrifying. And that’s part of the problem. So many of these companies cannot truly know whether they are adequately safeguarded against these rising AI threats. And even if they are, LLMs are designed to figure out ways around the roadblocks.
That is why calls for legislation and more AI law-enforcement protocols are mounting in number. But it remains to be seen what can be done to weed out these threats to an impactful degree. In the meantime, gambling commissions are left to dole out substantial fines to sportsbook operators who have their systems pillaged by Synthetic Identity Theft issues. We have seen penalties as high as almost $800,000 (€ $687,000).
What Does the Future Hold for Synthetic Identity Theft Prevention?
If anyone has a definitively effective answer to this question, they are going to become extremely rich. Of course, the most common suggestion is to implement more security measures upon account creation and login. What that entails, though, remains to be seen.
Facial recognition no longer even suffices. AI can help fraudsters get around even that. Delaying transaction time might be a solution, in order to run them through extra layers of approval, but speed and access are the two biggest selling points for sportsbooks.
Granted, slowing down the transactional process beats getting buried in fines and mass exits of existing customers who grow wary of the risks involved. But capitalism is a short-term thinker’s game. Companies do not always think in the biggest-picture terms. The widespread dissemination and operation of AI technology is proof unto itself—which means Synthetic Identity Theft is one problem that doesn’t seem likely to go anywher anytime soon.
