Since the 2018 U.S. Supreme Court ruling that legalized sports betting nationwide, the pastime has taken the U.S. by storm, driving the rapid expansion of online and in-person sportsbooks and fueling the growth of a burgeoning industry.

Billions of dollars are being wagered annually, reshaping how people spend, save, and invest—though not always for the better. While states benefit from the new revenue streams, the social and financial costs of gambling are mounting. From dwindling savings to rising debt and bankruptcy rates, its impact is becoming increasingly apparent.

How Much Are Americans Losing to Sports Betting?

Americans have wagered almost $450 billion on sports since the Supreme Court struck down a federal law prohibiting sports gambling in 2018. That decision has been a big boon for sports betting operators—including market leaders FanDuel and DraftKings—which have generated close to $40 billion in revenue in the 38 states where sports betting is now legal, according to Legal Sports Report.

As more Americans place bets, these revenues have been growing fast. In 2024 alone, preliminary reports show operators booked more than $14.2 billion after paying out bettors’ winnings, up 29% from 2023. So what does that mean for the people placing bets? 

These revenues are “essentially the take that operators are making,” Scott Baker, an associate professor of finance at the Kellogg School of Management, told Investopedia. In other words, “it’s almost equivalent to the net losses for Americans,” he says. Baker led a team of researchers who found that nearly 8% of households were involved in gambling by the end of 2023 in their working paper. On average, these bettors spent $1,100 per year on online bets.

The researchers analyzed millions of financial transactions by hundreds of thousands of U.S. households and discovered that as people put more money into sports gambling, their savings and investments declined “significantly.” Net investments, for example, fell by an average of about 14% for households in states that legalized sports betting—meaning that for every dollar a household spent on sports betting, it put $2 fewer into investment accounts.

“For certain people who are prone to some of the addictive behavior from this, the effect is really bad, and I think it’s going to cause some of these households a lot of hardship,” Baker says. 

The data also showed consumers spending money differently. The researchers found that increased access to sports gambling boosted spending on cable TV, restaurants, and other forms of entertainment, as well as participation in lottery games. 

“If you start sports betting, you start watching more sports, you might go out to sports bars more,” Baker explains. “It’s a sign that sports betting isn’t necessarily offsetting these other activities, but amplifying them instead.”

How Is Sports Betting Affecting Debt and Bankruptcy?

Legalized sports betting isn’t just changing consumers’ spending habits—it’s also impacting their financial health, according to research led by UCLA Anderson School of Management’s Brett Hollenbeck. Overall, consumer financial health is “modestly deteriorating” in states that legalized sports gambling, Hollenbeck and his colleagues conclude in their working paper.

Within four years of a state legalizing online sports betting, Hollenbeck and the team found that credit scores decreased by an average of 1%, debt collection amounts jumped by 8%, and bankruptcy filings soared by 28%—representing roughly 30,000 additional bankruptcies per year.

“By reducing the frictions, people might bet a lot more than they otherwise would have—and they might make worse decisions,” Hollenbeck explains.

What Are the Benefits of Sports Betting?

Despite growing concerns about gambling addiction and financial strain among bettors, the rapid adoption of sports betting has delivered financial benefits to states where it’s legal. States raked in more than $1.8 billion from taxes on sports betting in 2023—helping to fund infrastructure projects, education, and even counseling services for gambling problems.

Industry leaders have also taken steps to address challenges. Major gaming companies including Bally’s, FanDuel, and DraftKings joined together to form the Responsible Online Gaming Association, committing over $20 million to promote responsible gambling initiatives.

The Bottom Line

The growing legalization of sports betting has helped states and operators cash in on billions of dollars—but the cost to Americans’ financial health is becoming increasingly evident with time. Studies show a troubling rise in debt, bankruptcy, and reduced investments among bettors. 

As states navigate this booming industry, the challenge lies in balancing the tax windfall with the mounting social costs. On the other hand, Bettors should approach this high-stakes pastime with caution to avoid long-term financial consequences.

Baker sums it up: “Sports betting is still ramping up, so whether people lose a bunch of money and then quit, or if they really fall into some bad patterns, that all remains to be seen,” he says. “But it’s clear that gambling often gets the best of some people—maybe because they don’t understand the odds or how much this is really costing them.”