Football season is just around the corner, a time when millions of Americans will bet on everything from who will win the Super Bowl in February to how many touchdown passes Denver Broncos quarterback Bo Nix will throw in his rookie season.
For the vast majority of gamblers in the 38 states and Washington, D.C., where sports betting is legal through a combination of retail and online sportsbooks, the wagers likely won’t have a significant impact on their finances because most won’t get rich off sports betting, while many will count their gambling losses as a worthwhile entertainment expense.
But some gamblers may regret more than just losing their bets: There’s growing evidence that sports betting is hurting some Americans’ finances.
According to a working paper published in August by researchers from the University of Southern California and the University of California, Los Angeles, sports betting “has a negative impact on consumers’ financial health.” In the 30 states where online sports betting is legal, the average credit score dropped by about 1% about four years after legalization, and the likelihood of bankruptcy increased by 28% about two years later. The analysis was based on financial information for about 7 million U.S. adults provided by the University of California Consumer Credit Panel.
“We find extensive evidence that legal sports betting, and particularly mobile/online access to betting, is linked to significant increases in problematic debt activity and worsening consumer financial conditions,” Brett Hollenbeck, one of the study’s authors, wrote in a statement to X.
Another working paper published in July by researchers from Northwestern University, the University of Kansas and Brigham Young University found that for every dollar bet on sports, net investment in financial instruments such as stocks declined by about $2 on average. In the two to three years after sports betting was legalized, net investment in a state typically declined by about 14%, and for some households, sports betting was associated with higher credit card balances and overdrafts. The analysis was based on a dataset of billions of U.S. consumer transactions from 2010 to 2023 provided by a data aggregation and analytics platform.
“Our findings indicate that sports betting not only leads to increased gambling activity, but also to higher credit card balances, lower available credit, lower net investments, and increased lottery purchases,” the researchers wrote.
In recent years, widespread legalization of sports betting has encouraged many Americans to participate in sports betting. Total sports betting in the United States is expected to grow from approximately $1 billion in January 2019 to $14 billion in January 2024, and a February Seton Hall University poll of 1,523 U.S. adults found that 37% of Americans have bet on sporting events, up from 34% in 2023 and 28% in 2022.
While the sports betting industry has boosted tax revenues for states, created jobs, made a lot of money for some and entertained millions, some experts have expressed concern about the economic impact that the loss of sports betting would have on some Americans and questioned whether the industry’s benefits outweigh the potential costs.
Sports betting can lead to addiction and harm low-income Americans
When sports betting becomes a financial problem, gambling addiction tends to be one of the main causes. A January Siena College poll of more than 3,000 Americans found that 15% of respondents know someone who has or has had a problem with online sports betting. Among those who have bet at an online sportsbook, 18% said they have had trouble meeting “financial obligations” because of gambling losses.
“We believe that since 2018, we’ve seen an increase in the incidence and severity of gambling problems across the country,” Keith White, executive director of the National Council on Problem Gambling, told CNBC in April. In 2018, the Supreme Court lifted a federal ban on sports betting, paving the way for its legalization across the United States.
Online sportsbooks like FanDuel and DraftKings offer bettors responsible gambling resources and tools, including information about where they can seek help in their state. Many platforms also allow bettors to place limits on deposits, rewards, and the time they spend on the platform.
But some experts believe significant risks remain.
“This is a product that we know is addictive,” Timothy Fong, co-director of the UCLA Gambling Studies Program, previously told Business Insider about sports betting. “There’s an American appetite for this product, and when you combine that with very powerful and effective industry forces and technology, this could potentially go in a very negative direction.”
When sports betting causes financial problems, it tends to be lower-income Americans who are most affected.
The USC and UCLA analysis found that young men, especially those living in low-income counties, were more likely to experience financial hardship as a result of online sports betting. Additionally, researchers from Northwestern University, the University of Kansas and BYU found that “financially constrained households” with fewer savings were more likely to “divert funds from their investment portfolios into gambling activities.”
Gambling has long had a disproportionately negative impact on the finances of low-income Americans. An analysis published by The Economist in April found that in the poorest 1% of U.S. zip codes, the average adult spends about 5% of their annual income on the lottery, or about $600 a year. In the wealthiest 1% of zip codes, the average adult spends 0.15% of their income, or $150 a year.
The impact of gambling on people’s finances isn’t the only reason the recent boom in sports betting has received mixed reactions.
For example, some sportsbooks have not paid winning customers because they priced betting odds incorrectly, giving bettors an unexpected advantage. Others have also placed significant limits on the amounts some of their most successful bettors can wager. While these developments have frustrated some gamblers, these sportsbooks have generally not violated any laws or regulations.
Additionally, while sports betting generates millions of dollars in tax revenue, in some states the revenue has fallen short of expectations, and not everyone thinks the money is being spent wisely. In Arkansas, about 18% of tax revenue goes to “horse breeding awards and horse racing prize money,” according to a Bloomberg analysis. Between the second quarter of 2023 and the first quarter of this year, less than 2% of U.S. sports betting taxes went to anti-gambling programs.
Over the next few years, the sports betting industry could undergo some changes, including higher taxes and tighter regulation of marketing practices to minimize the risk of gambling addiction. Higher taxes could increase tax revenues for states, but could lead to fewer promotions and less favorable odds for bettors, sportsbooks say.
Perhaps the biggest change for industry executives would be if the two most populous states in the U.S., California and Texas, legalize sports betting. Despite the political differences in those states, it’s unclear when or if legalization will happen, as a variety of factors have kept many lawmakers and residents from buying into it.
Regardless of how it unfolds, efforts to assess the U.S. sports betting boom — and its impact on society — appear to still be in their early stages.
If you or someone you know has a gambling problem, call the National Council on Problem Gambling’s helpline at 1-800-522-4700. The helpline offers resources and referrals in all 50 states, Canada, and the U.S. Virgin Islands. Help is available 24 hours a day, 7 days a week, and is 100% confidential.
Are you a sports bettor and would you like to share your story? If so, please contact this reporter at jzinkula@businessinsider.com.