Sports betting can place a serious strain on financial health, recent studies show. Consumers who bet on sporting events tend to have poorer debt management practices and worse credit scores. This is often accompanied by increased spending and reduced investments, especially among financially vulnerable populations. A third study suggests that sports betting could become one of the most addictive forms of gambling.
Researchers are therefore increasingly calling for regulation of the emerging sports betting industry, which is urgently needed six years after its legalization in the United States. Justin Balthrop, assistant professor of finance at the University of Kansas, describes the results as worrying and stresses the need for precise diagnoses before taking action. Since the US Supreme Court repealed the Professional and Amateur Sports Protection Act in May 2018, 38 states and the District of Columbia have legalized sports betting either through retail or online sportsbooks. Revenues climbed 30.3% to $7.56 billion by July of this year compared to the same period last year.
Balthrop and his team used the staggered introduction of sports betting in the US to closely examine the impact on household budgets. They found that for every dollar deposited into online sportsbooks, household investments were reduced by two dollars. This included additional spending on streaming services or sports bar bills. The negative impact was particularly significant on financially constrained households, which made fewer credit card payments and had higher balances.
Similar concerns were raised by Davide Proserpio and his colleagues in their study. On average, the credit score of a state’s population dropped by 0.3% after the legalization of sports betting, with this effect increasing to 1% for online sports betting. The study also showed increased cases of bankruptcies, debt consolidation loans and debt collection proceedings in states with legalized sports betting, resulting in limited access to credit, especially for low-income young men.
Researchers Dr. Jamie Torrance and his team explained the addictive nature of modern sports betting by three main factors: access, number of bets and the illusion of control. Unlike earlier, slower forms of betting, today’s sports betting is instantly accessible and financial feedback is provided in real time, which increases the addictive effect.
In light of these worrying developments, all researchers have stressed the urgency for lawmakers to act to mitigate these social and financial costs. A look at Australia shows possible solutions to slow down the betting process. In the US, time is of the essence as the sports betting industry continues to grow and develop. Recently, legislators from Missouri and Oklahoma have introduced bills to legalize the industry, while at the federal level, a bill has been introduced to promote regulation of advertising, betting opportunities and the use of artificial intelligence in the industry.
