Millions of Americans watched football over the weekend, cheered, dined and gambled more than ever before. The American Gaming Association projects that $35 billion will be wagered on NFL games in 2024, about a third of last year’s total.
If you’re a sports fan, gambling is everywhere. Television broadcasts are filled with gambling ads. More than one in three Americans now bet on sports, according to a Seton Hall University poll. Before 2018, sports betting was banned almost everywhere. Now it’s legal in 38 states and the District of Columbia, generating $10 billion in annual revenue.
Readers might be quick to dismiss these developments as harmless. Many sports fans enjoy betting on games, they say. Is it really that big a deal if you bet with a company instead of a friend?
A growing social science literature suggests that in fact this is quite the opposite: the rise of sports betting has unleashed a wave of economic and family hardship that has disproportionately hit the most economically unstable families. Six years into the experiment, the evidence is compelling: legalizing sports betting was a huge mistake.
Since 1992, sports betting has been completely banned in most of the United States under the Professional and Amateur Sports Protection Act. PASPA prohibited the running of gambling “schemes” related to competitive sports. Americans could bet against each other on the outcome of the Super Bowl, but neither the government nor corporations could profit from it.
This approach continued until 2012, when New Jersey, fearing that Atlantic City was becoming uncompetitive, legalized sports betting. The NCAA sued, alleging violations of PASPA, and the state countered that PASPA itself infringed on state sovereignty. The case went all the way to the Supreme Court, which ruled in 2018 that PASPA violated the Tenth Amendment, which prohibits the federal government from exercising powers reserved to the states.
Once PASPA was repealed, states eagerly allowed sportsbooks to open. Within a year and a half, Americans were betting about $50 million a month, according to Goldman Sachs estimates. By late 2023, that figure had grown 20-fold to more than $1 billion a month.
Because states legalized sports betting at different times, social scientists can compare various measures of happiness before and after legalization in states that did and did not legalize.
An alarming pattern is emerging. Two recently published working papers examine the economic impacts of legalization. One, by Scott Baker of Northwestern University and colleagues, finds that legal sports betting reduces household savings. Specifically, for every dollar spent on gambling, households deposit $2 less into investment accounts. States experience significantly increased risk of insufficient bank balances and over-limit credit cards. These effects are most pronounced for already unstable households.
A second paper, by economists Brett Hollenbeck of the University of California, Los Angeles, and Poet Larsen and Davide Proserpio of the University of Southern California, makes a similar point. Looking specifically at online sports betting, they find that legalization increases a household’s risk of bankruptcy by 25% to 30%, as well as increases in defaults. These problems appear to be concentrated among young men living in low-income counties, further evidence that sports betting hurts the poorest the most.
A third recent paper, by University of Oregon economists Hisataro Matsuzawa and Emily Arnesen, describes another, perhaps more unexpected, and arguably more devastating, harm of gambling legalization: domestic violence. Previous research has found that an NFL home team upset loss leads to a 10 percent increase in reported incidents of men using violence against their partners. Matsuzawa and Arnesen extend this further, finding that in states where sports betting is legal, the effect is even greater. They estimate that legal sports betting increases intimate partner violence by about 9 percent.
Due to the design of the study, these results reveal not only what sports betting correlates with, but also what it causes. And the numbers revealed are, of course, not just numbers, but human lives. Sports betting is addictive. While many can do it a little, some continue to gamble compulsively to the point of no return. This leads to debt and bankruptcy, as well as emotional instability and even violence. But the problem doesn’t end there: gambling addiction is also associated with anxiety, depression and even suicide.
The gambling industry may claim to want to prevent gambling addiction, but its profits come primarily from the obsession of people with problems. The vast majority of gambling is done by a small minority of people. For example, in late 2020 and early 2021 in New Jersey, about 5% of gamblers spent 70% of the money on gambling. The costs of gambling are concentrated among those least able to pay, holding back those who need help the most. Money that could have been used to buy a home, get a degree, or pay off debt is instead being used to gamble in other ways. Such behavior is irresponsible, but it is difficult to blame only those who gamble, since the companies make profits by encouraging people to gamble more.
Legalization hasn’t brought many benefits, either: Tax revenues, one of the main reasons for legalization, have been sluggish, bringing in only about $500 million per quarter across all 38 legal states, less than alcohol, tobacco, or marijuana. Legalization has also not shrunk the illegal market, and, at least in Massachusetts, gamblers are still likely to use unauthorized gambling sites after legalization.
Against this backdrop, PASPA-era Prohibition looks relatively harmless: Americans could bet against one another, but corporations couldn’t profit from it, gambling arrests were essentially nonexistent, and Prohibition’s human toll was limited.
Most states have allowed companies to make billions of dollars off the most economically vulnerable with few tangible benefits. Some commentators and politicians have hesitantly acknowledged these costs and proposed carefully regulating the neighborhood to address them.
But a more elegant solution would be the more blunt approach: to ban sports betting again. Regulation is complicated, difficult to get right, and fraught with challenges that would almost certainly subject regulatory bodies to the industry’s grip, but a ban would cut to the root of the problem: without legal sports betting, there would be no sports betting industry.
For the 12 states where sports betting remains illegal, such as Texas and California, the solution is simple: don’t change anything. In other states, the damage may be harder to undo. But it’s damage worth undoing. If these states are “laboratories of democracy,” the results of their sports betting experiments are in and uniformly negative. Better to end the studies now than prolong the suffering.