Sports Betting Surge Drains American Investments, Study Finds

Study Reveals Shift from Investments to Sports Betting, Raising Financial Concerns

A recent academic study has uncovered a concerning trend in household finances, as Americans increasingly divert funds from stock investments to legal sports betting. The research indicates that for every dollar wagered, household investments decrease by approximately $2, with lower-income households bearing the brunt of this shift.

The rise of legal sports betting in the United States has been meteoric since 2018 when the Supreme Court overturned a federal ban. To date, 38 states have legalized sports betting, making it highly accessible through mobile apps. This accessibility has led to a dramatic surge in wagering, with the total amount bet in the US skyrocketing from $1.1 billion in January 2019 to $14 billion in January 2023.

The study reveals that US households now bet an average of $1,100 annually, with this amount increasing by $25 per quarter. More alarmingly, net investments typically decline by nearly 14% within two to three years after a state legalizes sports betting. Financially constrained households are particularly vulnerable, allocating a larger portion of their income to sports gambling and potentially exacerbating their financial difficulties.

The negative consequences of this trend are becoming increasingly apparent. Households already in poor financial condition are more likely to divert funds from investments to gambling, which has a negative expected value. This shift increases financial vulnerability and hardship among those who can least afford it.

A separate study has further highlighted the broader economic impact of legalized sports betting. In areas where sports gambling is legal, credit scores have dropped by 1%, while debt collection and bankruptcies have risen by 8% and 28%, respectively.

Michelle Malkin from East Carolina University’s Gambling Research & Policy Initiative emphasizes the cyclical nature of gambling addiction and its impact on financial stability. “This study underscores the need for increased awareness and potential policy interventions to mitigate the negative financial impacts of legalized sports betting,” Malkin stated.

As the landscape of legal sports betting continues to evolve, policymakers and financial experts are closely monitoring these trends, considering potential measures to protect vulnerable households and maintain financial stability in the face of this growing industry.