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Sports betting is not going that well. When we last checked in with the industry in August, things were a bit of a mess for both the betting public and the companies that took their wagers. Sportsbook operators were for the most part struggling to make a profit in an uber-taxed and regulated business. That was despite their customers, sports bettors, gradually losing a higher percentage of their money. The golden days of juicy, supposedly risk-free bet promotions were ebbing. Other than a select few sportsbooks that had gobbled up market share, who in this relationship was thrilled about how things were going?
The status quo has held since then, but some murmurs have come out of Washington that all is not well. In September, a pair of Democratic members of Congress introduced a bill that would constrict the sports betting industry in a number of ways, including severely curtailing advertising and specific types of bets. This week, the Consumer Financial Protection Bureau released a report on the jarringly popular practice of funding a sports betting account with a credit card. It turns out that creates complications.
The betting industry has no imminent reason to fret. Democratic members won’t be crafting lots of new laws for the foreseeable future, and the CFPB will likely not be in the consumer protection business for the next four years. The genie of legal sports betting is never going back into its bottle. Given that, we should all want a better sports gambling experience, with more people enjoying it recreationally and fewer losing bets they can’t afford to lose.
Reasonable people can disagree on reforms, but one improvement is obvious: The United States deserves a sports betting industry that does not get any of its funding via credit cards. The major card companies could see to that. Assuming they won’t, lawmakers should.
How much of the money that Americans bet on sports comes first from a credit card rather than a bank transfer? The sportsbooks haven’t said, but a good estimate is “quite a bit of it.” One payment processor says that a quarter of U.S. sports bettors prefer to fund a sportsbook account with a credit card. For now, most of the 38 states with legal sports betting allow the books to take customer deposits from their cards.
It doesn’t have to be that way. In a few states, it isn’t, as they’ve banned credit card deposits to sportsbooks. They have been illegal in the United Kingdom since 2020.
Policymakers in these places have recognized the first problem with the practice: Anyone depositing to a sports betting account with a credit card is betting with money that they may or may not have. But the issues run deeper, as the CFPB report makes clear. Credit card companies almost universally consider sports betting deposits to be a cash advance, making them subject to additional fees that have surprised some of the bettors incurring them.
The report offers a simple illustration of how a cash advance fee could frustrate a sports bettor: “Someone wagering $20 could face the same $10 fee as on a $200 cash advance ATM withdrawal.” The CFBP shared complaints that people had filed with the agency, one calling the fee “sneaky” and “unfair” and another expounding, “There was nothing when I was entering my payment info on the website to make me feel as though this would be treated any differently from the hundreds of prior transactions I’ve made with a credit card in the past.” They said their complaint was “a warning for others.” The agency shares data that appears to show statewide cash advance fees spiking in Kansas, Missouri, and Ohio at virtually the same moments those states rolled out legal sports betting.
Sports betting is not a reliable way to turn a profit. First, it’s hard, and second, someone has to win 53 or 54 percent of the time to make money under typical odds. Cash advance fees make it even harder to profit. One could imagine a bettor making a credit card deposit, paying a $10 cash advance fee, and then placing a $10 bet at −110 odds. A winning bet would return $9.09 in profit, or 91 cents fewer than the credit card fee before they get into any other betting. Not great, yet arguably a much smaller problem than the fact that bettors are taking out credit to take part in an addictive and likely money-losing exercise over the long term. (Granted, we could say the same about some people’s holiday shopping on a credit card.)
The sports bet via credit card also undermines one of the key arguments—maybe the key one—for legalizing sports wagering in the first place. The gaming industry talks often about the security that legal sports betting promotes. In an amicus brief to the Supreme Court in 2016, in the case that ended a federal restriction on states legalizing sports betting, the American Gaming Association wrote about “safety” repeatedly. “When presented with a safe, legal market or an illicit alternative, consumers will almost always choose the former,” the lobbying organization for gaming businesses told the justices.
“Safe” means a lot of things in sports betting. For one thing, it means that sportsbooks pay out winning bets and don’t steal customers’ money. It means that in a regulated betting market, the worst sports betting crimes have a better chance of being prevented or uncovered. If someone bets a suspiciously huge amount on obscure stats involving a Toronto Raptors bench player, the jig will soon be up.
But safety in sports betting is also about literal safety, even if the sportsbooks don’t say so explicitly. Safety means a bettor can’t go into debt to ESPN BET or FanDuel the way he could, for instance, to a vengeful underground bookie. And even if he could go into debt to a multibillion-dollar corporation, that company would not send a thug with a baseball bat to his house to make sure he paid his debts.
He can go into debt to MasterCard, though. He will pay added cash advance fees to do it. A MasterCard executive is unlikely to stake out the bettor’s friend as he walks his dog, as the leader of one gambling operation allegedly did to Shohei Ohtani in 2023, but credit card debt is not exactly safe. Being in debt can unquestionably make you less safe even if the threat is a lack of health care or housing, not a bookie.
Most big financial exchanges recognize this point. I could not log into just about any stock brokerage account right now and deposit funds with a credit card, even if my intention was to put all of the money directly into a relatively low-risk stock market investment with a century-long track record of gradually going up. I could open up a “margin” trading account and invest with borrowed money, but that would take several more steps than are required to get funds from a credit card into a sports betting account—which is as simple as selecting a credit card deposit from a menu of options.
Sports betting’s main shortcomings stem from this kind of easy, mindless process. The industry is centuries old, and there’s nothing wrong with someone making a market for people to express financial confidence in a game outcome. IPhone betting apps are not centuries old, however, and the human mind is still struggling to adjust to how quickly it can convert money from a credit card to a betting account (while incurring extra fees!) and wager it on the most ridiculous NFL parlay. Here is another area where even modern financial trading is not this loosey-goosey: If you want to make riskier trades, like with options contracts or crypto, your brokerage will likely make you check more boxes than your betting app will make you check when you fill out a slip for a nine-leg football parlay. No wonder we suck at these bets.
All of these issues are a bit more serious when the starting point for someone’s betting is money that they do not already have in their bank account. That bettor’s chances of turning a profit are lower with cash advance fees cutting into already-tiny margins. The likelihood of the bettor not having the money they lost is higher, because credit is not cash. The possibility that the bettor will fall into debt, with all the crushing things that can bring to their livelihood, is higher. The chances of that bettor feeling duped are way higher, as the testimonials to the CFPB indicate. Most people do not read credit card fine print.
Alleviating those struggles a bit will not make sports betting into an altruistic industry. We go to the sportsbook to win bets, and we mostly lose them. That is the cost of recreation. But you do not need to be a nanny-state authoritarian to subscribe to one of the most basic principles of modern finance: If you can’t use your AmEx to buy an S&P 500 index fund, you shouldn’t be able to use it to bet Cowboys +6.5.
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