The explosion of online sports betting following the Supreme Court’s decision to overturn a federal law prohibiting it in 2018 has led to a significant impact on the personal finances of many individuals, especially those who are already financially distressed. This growth industry has spread rapidly across 38 states, generating over $120 billion in total bets and $11 billion in revenue in 2023. While this has provided substantial profits for state coffers, it has come at a great personal expense for gamblers and their families.
A recent paper titled “Gambling Away Stability: Sports Betting’s Impact on Vulnerable Households” highlights the negative effects of sports betting on financially constrained households. The study found that those who engage in sports betting tend to invest less, have higher debt levels, and experience a reduction in net investments. This pattern of behavior leads to higher credit card balances, less available credit, and an increase in lottery play, exacerbating the financial instability of these households.
The Impact on Investment
The consequences of legalized sports betting extend beyond just personal finances. The authors of the paper observed a noticeable decrease in net deposits to traditional brokerage accounts in states where sports betting is legal compared to those where it is not. This decline in net investment by bettors has been estimated at nearly 14%, with every dollar spent on sports betting resulting in a $2.13 reduction in net investment. These findings indicate a shift towards prioritizing gambling over other financial commitments, such as saving for retirement.
Lower-income households are disproportionately affected by the rise of online sports betting, with the bottom one-third of households by income showing the largest increase in spending on sports gambling relative to their income. Bettors from these households exhibit riskier behavior compared to non-bettors, engaging in activities like investing in cryptocurrencies, overdrawn bank accounts, online poker, and purchasing lottery tickets at a higher rate. This risky behavior further exacerbates their financial vulnerability.
The legalization and expansion of activities like online sports betting pose a dilemma for policymakers. While the government benefits from the revenue generated by these activities, they also conflict with efforts aimed at promoting financial literacy and encouraging saving for retirement. The conflicting signals sent by the government regarding gambling and savings highlight the need for a more balanced approach to address the financial challenges faced by vulnerable households.
The rise of online sports betting has had a detrimental impact on the personal finances of many individuals, particularly those who are already financially constrained. The lure of quick profits and the addictive nature of gambling have led to increased debt levels, reduced savings, and a higher incidence of financial instability. It is crucial for policymakers to consider the broader implications of legalized sports betting and work towards implementing measures that protect vulnerable households from the financial burden imposed by this growing industry.