A new study found that legal online sports betting was associated with weaker household finances, especially for frequent bettors and families with thinner savings. The research tracked changes after states allowed mobile wagering and found lower savings, less investing and more borrowing.
The paper, published on 30 June in the Journal of Financial Economics, was written by Brigham Young University Marriott School of Business professors Mark Johnson and Jason Kotter. It examined about 184,000 U.S. households.
The clearest effect was on investing. On average, households cut deposits into brokerage and investment accounts by about $81 a quarter after online sports betting became legal, and the study found a 20% reduction in net investment in brokerage accounts.
The effect was much larger among frequent bettors. Their brokerage and investment deposits fell by about $221 a quarter, while they were putting more than $1,100 a quarter into sports betting apps.
Nearly 40% of bettors made app deposits at least 10 times, and the average amount deposited into sports betting apps rose steadily over time. The researchers also found that for every dollar heavy bettors put into a betting app, roughly 20 cents never reached long-term savings.
The strain was sharper for households with lower savings. Researchers said they were more likely to reduce investing, increase credit-card debt and rely on consumer loans after online sports betting became legal.
KU News quoted co-author Kevin Pisciotta as saying credit card balances rose, available credit fell and card payments declined. He said one reason may be that bettors feel they have some role in the outcome, unlike a slot machine, and that the social setting of sports betting makes it feel more like a shared activity than a solitary gamble.
The study did not find a broad decline in total household spending. Instead, spending rose in categories tied to the activity, including restaurants, alcohol and cable or telecommunications services.
To test whether that was simply an entertainment effect, the researchers compared sports betting with spending around Taylor Swift’s Eras Tour. Concert spending did not produce the same pattern of reduced investment or increased borrowing.
The paper also relied on transaction data from a U.S. data aggregation and analytics platform with more than 60 million American users and billions of transactions from 2010 through September 2023. KU News said the team could trace transfers from a Vanguard account into DraftKings and follow how behaviour changed over time.
The findings arrive after the Supreme Court’s 2018 Murphy v. NCAA ruling struck down the federal ban on sports betting. The Congressional Research Service says 39 states and the District of Columbia have since legalized state-regulated sports gambling in some form, and the authors said policymakers should consider adding more friction or stronger consumer protections while preserving legal access.
