TLDR:

• Sports betting has exploded since legalization in 2018, generating $120 billion in bets in 2023
• Studies show sports betting is negatively impacting personal finances, especially for lower-income households
• Gambling is associated with reduced investing, higher debt, and lower credit scores
• Young men and those in low-income areas are most affected financially by sports betting
• The industry faces potential regulation changes as its societal impacts become clearer

The rapid expansion of legal sports betting across the United States is reshaping the financial landscape for millions of Americans.

Since the Supreme Court overturned a federal ban in 2018, 38 states have legalized sports wagering, creating a booming industry that generated over $120 billion in bets and $11 billion in revenue in 2023 alone.

While this growth has boosted state tax coffers, recent studies suggest it’s taking a toll on personal finances, particularly among financially vulnerable populations. Researchers from several universities have found that sports bettors tend to invest less, carry higher debt levels, and face increased financial instability.

A study by researchers from the University of Southern California and UCLA examined financial data from about 7 million U.S. adults.

They found that in states with legal online sports betting, average credit scores declined by roughly 1% about four years after legalization. The likelihood of bankruptcy increased by 28% after about two years.

Another study by Northwestern University, University of Kansas, and Brigham Young University researchers analyzed billions of consumer transactions between 2010 and 2023.

They estimated that for every dollar spent on sports betting, net investments in financial instruments like stocks decreased by about $2 on average. In states that legalized betting, net investments typically fell by 14% within two to three years.

The impact appears most pronounced among lower-income households and young men. Researchers found that the bottom third of households by income had the largest increase in sports gambling spending relative to their income. These “financially constrained households” were more likely to divert funds from investments to betting activities.

The average household that engages in sports betting spends about $1,100 annually, or $280 per quarter, according to the research. This represents an increase of about $25 per quarter, with the trend continuing upward. As betting activity rises, so do associated financial risks.

The studies found correlations between sports betting and increased credit card debt, reduced credit availability, and higher rates of overdrawn bank accounts.

Industry growth has been swift. Total sports wagers in the U.S. jumped from about $1 billion in January 2019 to $14 billion in January 2024. A recent poll found that 37% of American adults had bet on a sporting event, up from 28% in 2022.

The financial implications extend beyond individual bettors. Some experts argue that by promoting gambling activities where most participants lose money, governments are sending mixed signals. This potentially undermines other policy goals, such as encouraging retirement savings through tax incentives and financial literacy programs.

Addiction is a significant concern. A January 2024 poll found that 15% of respondents knew someone with a problem related to online sports betting. Among those who had placed online bets, 18% reported difficulty meeting financial obligations due to gambling losses.

Online sportsbooks provide responsible gaming resources and allow bettors to set limits on deposits, wagers, and time spent on their platforms.

However, some experts believe significant risks remain, particularly given the addictive nature of gambling and the industry’s effective use of technology for customer engagement.

The sports betting boom has also faced criticism on other fronts. Some sportsbooks have refused to pay out winning bets due to odds errors, while others have limited how much successful bettors can wager.

In some states, tax revenues from sports betting have fallen short of projections or been allocated to purposes unrelated to addressing gambling-related issues.

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