The explosion of online sports betting has had a detrimental impact on personal finances, particularly among financially distressed individuals, according to a recent paper titled “Gambling Away Stability: Sports Betting’s Impact on Vulnerable Households.” Since the Supreme Court overturned a federal law prohibiting sports betting in 2018, 38 states have legalized it, leading to a growth industry that generated over $120 billion in total bets and $11 billion in revenue in 2023 alone. While this has boosted state coffers, it has come at a significant personal cost to gamblers and their families, with participants investing less and accruing higher debt levels.
The negative effects of sports betting are particularly pronounced among financially constrained households, which typically have lower savings, cash levels, higher debt levels, and lower net worth. A study of 230,171 households in states with legalized gambling found that 7.7% made online sports bets, with an average household annual expenditure of $1,100. This resulted in reduced investments, with a noticeable drop in net deposits to traditional brokerage accounts in states where betting was legalized compared to those where it was not.
In addition to reduced investments, the increase in sports betting has led to financial instability in terms of decreased credit availability, increased credit card debt, and a higher incidence of overdrawn bank accounts, especially among financially constrained households. Low-income households bear a disproportionate burden, with the bottom one-third of households by income spending the most on sports gambling relative to their income. This increase in credit card debt suggests that individuals are becoming more indebted to fund their gambling habits rather than simply shifting funds from one form of entertainment to another.
Bettors and non-bettors displayed notable differences in behavior, with bettors exhibiting riskier tendencies such as investing in crypto, overdrawn bank accounts, playing online poker, and purchasing lottery tickets at higher rates than non-bettors. This aligns with prior studies that have found gambling activity to be more prevalent among low-income investors who tend to participate in state lotteries and risky investments. The conflicting signals sent by the government, which promotes activities like sports gambling despite the majority of participants losing money, create a dilemma for policymakers.
As legalized sports betting continues to gain traction, policymakers must consider the potential consequences for household financial stability and long-term wealth accumulation. The allure of gambling may divert funds from savings and investment accounts, particularly for financially constrained households, undermining government efforts to promote saving through tax incentives and financial literacy programs. Policymakers must balance individual freedom with the need to protect vulnerable households from the financial risks associated with excessive sports betting.
