The Role of AI in Gaming: Legal and Ethical Considerations

Gaming & BettingAI

7 Nov

Introduction

Artificial Intelligence (AI) is reshaping the gaming and gambling sector. From esports and video games to online betting platforms, AI is driving innovation by personalising experiences, detecting fraud, and even supporting responsible gambling.

Yet these opportunities come with significant legal and ethical challenges. Recent cases, regulatory reforms, and policy debates show that AI in gaming is increasingly under the spotlight. Operators must therefore treat the responsible use of AI not just as a technical matter, but as a regulatory and reputational necessity.

Personalisation and Player Behaviour

AI allows operators to analyse player data – from geolocation and identity verification to betting patterns – in order to tailor recommendations, limits, and offers. This can enhance customer experience, but raises ethical concerns where personalisation crosses into exploitation.

For example, offering larger bonuses to players who have just sustained heavy losses could be deemed manipulative. Regulators are watching closely. The Online Safety Act 2025 now requires games with user-to-user interaction to complete risk assessments and comply with new child protection duties.

High-profile cases outside gambling also highlight the risks. In the US, the parents of 16-year-old Adam Raine have brought proceedings alleging that ChatGPT facilitated rather than deterred harmful behaviour, underscoring the broader need for ethical AI design.

Addiction and Manipulation

AI technologies are increasingly used to enhance user engagement in gaming and gambling platforms. By fine-tuning reward loops, tailoring incentives, and dynamically adjusting difficulty levels, AI can create highly immersive and personalised experiences. However, these same mechanisms — when applied without appropriate safeguards — can intensify compulsive behaviours and contribute to addiction.

In RTM v Bonne Terre Ltd & anor [2025] EWHC 111 (KB), the High Court ruled in favour of a recovering gambling addict, holding that Sky Betting & Gaming had not obtained valid consent when using personal data for marketing. Despite the presence of tick-box consents and cookie notices, the court found that these failed to meet the legal standard for valid consent under the UK GDPR, the Data Protection Act 1998, and the Privacy and Electronic Communications Regulations 2003.

This ruling has far-reaching implications. It signals that operators cannot rely on standardised consent mechanisms when dealing with high-risk users. Instead, they must assess whether the individual’s circumstances allow for genuine autonomy and consider whether additional safeguards are needed. For AI-driven marketing and engagement tools, this means building in ethical guardrails that prevent exploitation of vulnerable users — not just to meet legal standards, but to uphold responsible gaming principles.

Fairness and Transparency

Trust in gaming depends on fairness. AI systems that dynamically adjust odds, outcomes, or game mechanics must be transparent in how they operate. Without clear disclosures, players may feel misled or manipulated, especially when outcomes appear inconsistent with what is shown on screen.

The ruling in Durber v PPB Entertainment Ltd [2025] EWHC 498 (KB), highlighted the risks of relying on vague or buried contractual terms to justify unfair outcomes. Paddy Power paid out a lower prize despite the claimant legitimately winning the “monster jackpot.” The Court found the operator’s standard terms too broad and unfair under the Consumer Rights Act 2015.

This ruling made it clear that operators cannot rely on hidden or overly broad terms to override what players reasonably expect based on their in-game experience. Where AI is used to determine outcomes — especially in real-time — operators must ensure that the logic is transparent, the rules are clearly communicated, and any discrepancies are resolved in favour of fairness.

For AI-driven gaming platforms, this means designing systems that are not only technically robust but also legally defensible. Clear user-facing rules, transparent outcome mechanisms, and fair dispute resolution processes are essential to maintaining trust — and avoiding costly litigation.

Responsible Gambling and Duty of Care

AI can play a constructive role in harm prevention. By monitoring behaviour such as excessive deposits or late-night play, AI systems can flag risky behaviour and trigger timely interventions. These might include self-exclusion prompts, cooling-off periods, or alerts to guardians and support services.

This aligns with duties under the Gambling Act 2005 and the License Conditions and Codes of Practice (LCCP), which require systems to monitor customer activity and interact when harm is detected. The Gambling Commission has consistently emphasised that operators must not only have systems in place, but also ensure they are effective in practice.

However, case law sets limits. In Calvert v William Hill Credit Ltd [2008] EWCA Civ 1427, a pathological gambler, sued William Hill for failing to implement its self-exclusion policy after he had requested to be barred from further betting. Despite assurances that his account would be closed, he was allowed to continue gambling and ultimately lost over £2 million. The Court of Appeal found that William Hill had indeed breached its duty of care.

This case illustrates a key principle in English tort law: a duty of care may arise where an operator assumes responsibility, but liability will not follow unless the claimant can prove that the breach caused the harm. Courts remain cautious about imposing broad duties on gambling operators unless those duties are clearly undertaken — for example, through contractual terms or specific assurances.

For AI-driven systems, this means that operators must not only put in place harm detection tools, but also act on them consistently. If an operator promises intervention and fails to deliver, it may be held accountable — but only if the claimant can show that the failure directly caused the harm. As AI becomes more embedded in customer interaction, the legal expectations around duty of care, intervention, and follow-through will likely evolve.

Fraud Prevention and Compliance

AI also supports fraud prevention and compliance. By analysing patterns in real time, AI systems can identify suspicious transactions, flag identity mismatches, and detect anomalies that may indicate money laundering or other criminal activity.

Operators must meet obligations under the Proceeds of Crime Act 2002, including reporting suspected money laundering to the NCA. This includes not only large or unusual transactions, but also patterns of behaviour that suggest criminal property may be involved. In addition, Licence Condition 12.1.1 of the Gambling Commission’s framework requires operators to conduct and maintain up-to-date AML risk assessments. These assessments must reflect the operator’s business model, customer base, and transaction types — and must be supported by effective policies, procedures, and controls.

The risks of non-compliance are significant. In 2020, Betway was fined £11.6 million for AML and customer protection failures. The Gambling Commission found that Betway had allowed VIP customers to deposit and lose large sums without sufficient checks, and had failed to intervene despite clear red flags. This case highlighted the importance of robust systems — not just policies on paper — and demonstrated that enforcement action will follow where operators fall short. Cases like this show that AI systems can be invaluable in strengthening compliance frameworks and avoiding costly enforcement action.

However, reliance on AI does not absolve operators of responsibility. Systems must be regularly audited, staff must be trained to interpret alerts, and decisions must be documented to demonstrate compliance.

Ultimately, AI should be viewed as a compliance enabler — not a substitute for governance. Operators must ensure that their use of AI aligns with legal duties, regulatory expectations, and ethical standards, particularly when dealing with financial crime and customer protection.

The Changing Regulatory Landscape

Governments and regulators are increasingly alert to the risks posed by unregulated AI and monetisation mechanics in gaming — particularly where these intersect with consumer protection and gambling law. One of the most contentious examples is the use of loot boxes, which allow players to purchase randomised in-game rewards, often with real-world money.

In the UK, loot boxes have come under scrutiny following public consultations and parliamentary debate. While the government has stopped short of classifying them as gambling, it has called for stronger industry self-regulation, including measures such as parental approval for purchases and clearer disclosures about odds. The Department for Culture, Media and Sport (DCMS) has urged developers to implement safeguards voluntarily, warning that statutory regulation may follow if progress stalls. Other jurisdictions, including Belgium and the Netherlands, have taken stricter approaches by attempting to regulate them under gambling law.

In Electronic Arts v Kansspelautoriteit (2022), FIFA loot boxes were ultimately held not to contravene Dutch gambling law as FIF was deemed to be a game of skill. This decision highlights the divergent international approaches to regulating AI-driven monetisation features. While some regulators treat loot boxes as gambling, others view them as part of a broader entertainment experience.

For operators and developers, the lesson is clear: regulatory expectations are evolving, and compliance strategies must be adaptable across jurisdictions. AI systems that drive monetisation — whether through loot boxes, dynamic pricing, or personalised incentives — must be designed with legal and ethical safeguards in mind.

Implications for Operators

As AI becomes more embedded in gaming and gambling platforms, operators must take a proactive and legally informed approach to its deployment. The regulatory landscape is evolving rapidly, and the risks of misuse — whether intentional or accidental — are too significant to ignore. Key implications include:

Consent must be meaningful – targeting vulnerable players risks breaching data protection and consumer law.
Transparency is critical – vague terms and hidden AI systems create legal and reputational risks.
Responsible gambling is a legal duty – AI should be used to detect harm, not intensify it.
AML and compliance are high-stakes – AI tools can strengthen risk assessments and protect against enforcement.
Regulation is evolving – operators must monitor developments in loot boxes, child safety, and AI governance.

Conclusion

Artificial Intelligence is transforming the gaming and gambling sectors — enhancing user experience, streamlining operations, and enabling more sophisticated compliance tools. Yet with these opportunities come heightened legal and ethical responsibilities. Courts and regulators are setting higher standards on consent, fairness, and player protection.

Operators must recognise that AI is not a neutral tool. Its design, deployment, and oversight carry real-world consequences — from data protection breaches and unfair contract terms to failures in responsible gambling and anti-money laundering compliance. As demonstrated by recent case law and enforcement actions, regulators are increasingly willing to hold operators accountable for how AI systems affect vulnerable users and shape consumer outcomes.

To navigate this evolving landscape, operators should embed transparency, compliance, and ethical safeguards into their AI strategies from the outset. In a competitive and increasingly scrutinised market, responsible AI is not just a compliance requirement; it’s a strategic advantage.

This article is intended for information purposes only and provides a general overview of the relevant legal topic. It does not constitute legal advice and should not be relied upon as such. While we strive for accuracy, the law is subject to change, and we cannot guarantee that the information is current or applicable to specific circumstances. Costigan King accepts no liability for any reliance placed on this material. For further details concerning the subject of the article or for specific advice, please contact a member of our team.