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Researchers have found that the rapid growth of legal sports betting across the United States has come at a financial cost for those who can least afford to gamble.
Currently, 38 states and the District of Columbia have some form of legal sports betting. Voters in Missouri narrowly approved a ballot initiative on Tuesday (November 5), with the nation’s 39th regulated market expected to launch in 2025.
An 80-page report by the National Bureau of Economic Research (NBER), a nonprofit in Cambridge, Massachusetts that specializes in economic research, found that after sports betting was legalized in a U.S. state, financially-constrained households that participate in sports wagering immediately saw negative impacts on their finances.
Financially-constrained households are defined as ones that have limited financial resources and are unable to act as economically as they should. Some of the characteristics may include more credit card debt, less available credit, lower investment contributions and a rise in the frequency of account overdrafts.
“Combined, these results suggest that sports betting exacerbates the financial constraints of households already operating with less flexibility,” the report said.
Overall, in the states where sports betting is legal, approximately 7.7 percent of households made online sports wagers with an average yearly bet amount of $1,100, according to the research.
The NBER report found that many people wager on sports as a casual form of entertainment, but gamblers are not just using discretionary funds to bet on games — they are using other money.
“If sports betting simply substitutes for other discretionary spending, its effects on household financial health may be neutral. However, there could be long-term financial impacts if sports betting crowds out personal savings or induces households to increase leverage to continue betting,” the report said.
For example, the legalization of sports betting by states has resulted in a 14 percent reduction, or a $53 drop, in net brokerage investments. Also, researchers found that every dollar spent on sports betting caused low-savings households to cut investments by $3.07.
“This report confirms that even sports bettors who do not have an addiction to gambling will likely experience financial harm,” Keith Whyte, executive director for the National Council on Problem Gambling, told Vixio GamblingCompliance in an email.
“This finding reinforced the need for comprehensive public awareness and education to ensure all consumers are thoroughly informed about the risks of gambling, including the negative financial consequences highlighted in this study. Current programs are clearly insufficient.”
Whyte said, therefore, the NCPG is advocating for the Gambling Addiction Recovery, Investment, and Treatment (GRIT) Act, which would allocate 50 percent of the 0.25 percent federal sports betting tax to bolster existing state efforts.
The GRIT Act, introduced in both houses of Congress in January, would distribute 75 percent of tax revenue to states for gambling addiction prevention and treatment through the existing Substance Abuse Prevention and Treatment Block Grant program.
The remaining 25 percent will go to the National Institute of Drug Abuse to fund grants for research into gambling addiction. The national annual social cost of problem gambling is $7bn, with an estimated 7m American adults suffering from gambling addiction, according to the NCPG.
Scott Baker, a faculty research fellow with Kellogg School of Management at Northwestern University who along with four other researchers authored the CBER report, found that legal sports betting also increases credit-card balances, reduces available credit, increases lottery play, and decreases net investments in financial markets.
“Our findings suggest that [although] online sports betting may offer states a new source of revenue, it also exposes local residents, especially those already facing financial difficulties, to significant financial risks,” the researchers wrote.
The researchers urged state regulators and lawmakers change to sports betting regulation needs to be more nuanced, balancing the economic and entertainment benefits against the increased financial vulnerability of households faced with less flexibility and a greater chance of developing problem gambling.
“Our evidence suggests that the online nature of sports betting plays a critical role in driving these negative financial outcomes,” the report says. “As a result, introducing additional frictions, such as requiring bettors to physically visit specific locations to place online bets, could help deter less informed or impulsive betting behavior and mitigate some of the adverse effects.”
The report titled “Gambling Away Stability: Sports Betting’s Impact on Vulnerable Households” was released earlier this month and is based on data from 230,171 households between 2012 and 2023.
