The surge in online sports betting has significantly affected personal finances, especially among financially vulnerable individuals. According to a recent study titled “Gambling Away Stability: Sports Betting’s Impact on Vulnerable Households,” the legalization of sports betting in 38 states since the overturning of a federal law in 2018 has transformed it into a booming industry. In 2023 alone, the total bets amounted to over $120 billion, generating $11 billion in revenue. While this has been beneficial for state revenue, it has taken a toll on the financial well-being of many gamblers and their families.
The authors of the paper highlighted that individuals participating in sports betting tend to allocate less money towards investments and carry higher levels of debt. The impact extends to higher credit card balances, reduced available credit, decreased net investments, and an escalation in lottery participation. These negative consequences are particularly evident among financially constrained households, which are characterized by lower savings, inadequate cash reserves, elevated debt levels, and diminished net worth.
Research based on a quarter panel of 230,171 households in states with legalized gambling revealed that approximately 7.7% of households engage in online sports betting, with an average annual expenditure of $1,100 per household. As a result, individuals betting on sports have less disposable income to invest, particularly in traditional brokerage accounts. The findings indicated a substantial decline in net deposits in brokerage accounts several years after the legalization of betting, with a noticeable disparity compared to states where sports betting is still prohibited.
The study emphasized that the surge in sports betting and consumer spending contributes to increased financial instability, manifesting in reduced credit availability, heightened credit card debt, and a higher incidence of bank account overdrafts. Financially constrained households bear the brunt of this instability, as evidenced by the mounting credit card debt used to finance a habit that is statistically unlikely to yield positive returns. Lower-income households experience a disproportional increase in sports gambling expenditure relative to their income, exacerbating their financial hardships.
Comparisons between bettors and non-bettors unveiled noteworthy distinctions in behavior. While both groups had similar income levels, bettors exhibited riskier tendencies, such as higher likelihoods of engaging in speculative investments, overdrawing from bank accounts, playing online poker, and purchasing lottery tickets. Prior studies have corroborated these findings, highlighting a correlation between low-income individuals and increased participation in gambling activities, especially state lotteries and high-risk stocks.
Policymakers face a dilemma regarding the expansion of sports betting and similar activities that predominantly result in financial losses for participants. While governments benefit from the tax revenues generated by gambling, they are at odds with objectives aimed at promoting financial literacy, savings, and long-term financial security. The conflicting signals sent by government policies underscore the need to reevaluate the balance between individual freedom in spending and societal welfare goals. Legalizing sports betting may inadvertently hinder efforts to cultivate a culture of responsible financial management and savings, undermining initiatives promoting economic stability and retirement planning.
The rapid growth of online sports betting poses a significant threat to personal finances, particularly for financially vulnerable individuals. The detrimental effects of increased gambling activity on net investments, credit card debt, and overall financial stability underscore the importance of implementing regulations and interventions to mitigate these risks and protect individuals from potential harm.