This is a summary of the working paper “The Financial Consequences of Legalized Sports Gambling” by Brett Hollenbeck, Poet Larsen, and Davide Proserpio, check out the full paper on SSRN. 

Sports betting is now legal in 38 states. Accurate data on participation is hard to come by, but one survey finds that nearly two-thirds of men and half of women have made at least one bet. Another shows that 27% of men have an online sportsbook account. 

Is sports betting just harmless fun? Or can it have negative consequences? If so, for whom? These are the questions addressed by my recent research paper with Brett Hollenbeck and Davide Proserpio.

The bottom line: Sports betting is leading to financial harm, and initial evidence suggests the effects are strongest among young men living in poorer areas.

The economic harms of sports betting

States that legalize sports betting see aggregate negative impacts on:

• Credit Scores: Down by 0.3% in states with any form of legalized sports betting. With access to legalized online sports betting, this effect is nearly 3x as large.
• Bankruptcy Rates: Up 25-30% three to four years after online betting is legalized, translating to roughly 30,000 more bankruptcies in the US.
• Debt Collections: Increased by 8%, with $30 more debt per consumer in states with online sports betting access.
• Debt Consolidation Loans: Directionally up by 10% in states with legalized general and online sports betting.
• Auto Loan Delinquencies: Increased by 9% in states with any legalized betting and 5% in states with online betting.
• Secured to Unsecured Credit: Usage increased by 4% in states with online betting.
• Credit Card Limits: Reduced by 3% in states with online betting.

While these impacts appear small, they are average differences over the entire population, so they don’t speak to the concentrated impacts on certain participants. However, an implication of the fact that we find significant effects on the overall population is that, among those negatively affected, the effect sizes must be quite large.

Our analysis also finds some differences in sports betting’s impact across demographic groups. In particular, we see directionally greater economic distress for young men under 45, particularly those in low-income counties, as Figure 1 shows.

Figure 1

These results suggest that young men, and especially those living in low-income counties (counties with below median wages) experience negative impacts from online sports betting, including:

• Greater declines in credit scores: young men see a 0.5% decline in credit score
• Higher bankruptcy rates: young men in low-income areas see a 0.023% increase in the probability of bankruptcy. This is roughly 2x the average increase we observe among the population.
• Greater use of consolidation loans: in low-income counties young men see a .044% increase in the probability of holding these loans.
• Larger decreases in credit limits: young men see an almost 4% decrease in credit limits.

I will note that these sub-group estimates are noisy, but the directional pattern is persistent: if there is economic harm, young men in below-median-income areas appear to be hardest-hit.

Looks like cause, not just correlation

My colleagues and I draw on a unique financial dataset that allows us to compare financial outcomes for different groups, before and after the legalization of sports betting in various states.

There could be other factors that explain both legalization and the worse economic outcomes. For instance, there could be concerns that the states choosing to legalize sports betting might be doing so due to existing budgetary problems, making them less capable of providing social assistance during economic shocks like the COVID-19 pandemic. We run statistical tests to address this issue and do not find evidence to support these concerns, thus, strengthening the interpretation of our results as causal.

An alarm bell on sports betting

Our paper fits within a broader body of research on the impact of gambling. Previous studies have shown that excessive gambling is associated with serious financial difficulties, like debt accumulation. But the causal pathways as well as the demographic effects of sports betting are less well understood. One recent paper by Taylor et al. (2024), found that the legalization of online sports gambling increased overall gambling rates, and more calls to problem gambling hotlines. But there was no data (at least that we are aware of) on gender differences until this most recent study. In a similar working paper by Baker et al. (2024), the authors find that online sports betting is leading to greater financial distress among households, particularly those that are already financially constrained prior to online sports betting legalization.

It is early days, of course, and the need for more research is clear. But the results of our study suggest that policymakers should pay close attention to the impact of sports betting, especially online, and especially for the most economically vulnerable young men.

The American Institute for Boys and Men and the NYU Tech and Society Lab are tracking research on the impacts of sports betting, especially on young men. Check out our Google Doc, and if you have any additions or edits, please leave a comment.