Since the Supreme Court’s 2018 ruling legalizing sports gambling, the practice has expanded to 38 states, with billions of dollars in wagers being placed annually. While initially seen as a potential economic boon, the impact of legal sports betting has proven deeply troubling.

According to the American Gaming Association, a staggering $35 billion is expected to be wagered on NFL games in 2024, a 30% increase from last year. In just a few short years, sports betting has become woven into the fabric of American sports culture. But behind the growing enthusiasm lies a darker reality that affects not only bettors, but also families and communities across the country.

Before 2018, sports betting was almost entirely illegal across the U.S. The Professional and Amateur Sports Protection Act, passed in 1992, prohibited most forms of sports betting, restricting it to a handful of states like Nevada. The Act sought to protect the integrity of sports and limit gambling-related harm.

But the landscape shifted in 2018, when the U.S. Supreme Court struck down the Act, ruling it unconstitutional and paving the way for states to legalize sports betting.

In the years that followed, 38 states and the District of Columbia rushed to legalize sports betting, lured by the promise of tax revenues and a regulated environment. By 2023, Americans were betting more than $1 billion per month, according to financial analysts at Goldman Sachs. With this surge in legal gambling came a dramatic increase in the accessibility and normalization of sports betting, with gambling advertisements saturating sports broadcasts and social media platforms.

A recent Seton Hall University poll found that more than one-third of Americans now regularly bet on sports. What was once a niche activity has become mainstream, aided by partnerships between sportsbooks and major leagues like the NFL and NBA. But as more Americans place their bets, growing evidence suggests that legal sports betting may come with severe economic and social costs.

Gambling and financial distress

Legal sports betting has delivered billions of dollars in revenue for sportsbooks, but for many Americans, it’s draining household finances. Social scientists have been studying the effects of legalization by comparing economic outcomes in states that have legalized sports betting to those that haven’t.

The findings are troubling. In a working paper from Northwestern University, researchers Scott Baker and his colleagues found that sports betting depletes household savings, with households putting $2 less into investment accounts for every dollar they spend gambling.

The research also showed sharp increases in the risk of overdrawing bank accounts or maxing out credit cards, especially among lower-income families.

Further research conducted by economists Brett Hollenbeck, Poet Larsen, and Davide Proserpio confirmed similar financial harms. Their study, which focused on the impact of online sports betting, found a 25-30% increase in household bankruptcies in states where sports betting is legal.

The researchers also noted higher rates of debt arrears, with young men from low-income neighborhoods being disproportionately affected. For many, the promise of winning big turns into a spiral of debt and financial instability.

Domestic violence and mental health

The financial devastation wrought by sports betting is just one aspect of a broader crisis. Legal sports betting is also contributing to a disturbing rise in domestic violence and mental health problems.

Researchers from the University of Oregon, Kyutaro Matsuzawa and Emily Arnesen, expanded on previous studies that showed a link between NFL losses and intimate partner violence. They found that in states where sports betting is legal, the effect is even more pronounced, with legal sports betting leading to a 9% increase in reported incidents of domestic violence.

The psychological effects of gambling addiction are well-documented. Problem gamblers are more likely to suffer from anxiety, depression, and even suicidal thoughts.

According to the National Council on Problem Gambling, around 2% of Americans meet the criteria for severe gambling addiction, and many more are at risk of developing gambling-related problems.

Addiction

The sports betting industry, while publicly advocating for responsible gambling, profits significantly from those most vulnerable to addiction. In New Jersey, one of the first states to legalize sports betting, about 5% of gamblers placed 70% of the bets in late 2020 and early 2021, according to state data.

These figures align with findings from across the country: a small percentage of bettors are responsible for the majority of gambling losses, and those bettors often struggle with compulsive gambling.

Critics argue that the industry’s focus on “responsible gambling” is more lip service than genuine concern. While sportsbooks offer tools like betting limits and self-exclusion programs, they simultaneously bombard bettors with promotions and incentives to place more wagers.

Some experts liken the industry’s business model to that of tobacco companies, which downplayed the risks of smoking for years while profiting off addiction.

Failures of regulation

When states first legalized sports betting, many hoped it would reduce illegal gambling and bring in substantial tax revenue to fund public services. But these promises have largely fallen short.

In states like Massachusetts, for example, gamblers continue to use unauthorized gambling sites despite the availability of legal sportsbooks. And while sports betting generates $10 billion in revenue annually, the tax revenues from it are meager compared to other vices like alcohol or tobacco.

In 2023, the 38 states that legalized sports betting collected only about $500 million in taxes per quarter—a fraction of the $20 billion that gambling companies raked in.

Some states have introduced measures to tighten regulations on sports betting ads and implement stronger consumer protections, but these efforts have been met with resistance from the gambling industry.

With mounting evidence that sports betting causes widespread harm, some advocates are calling for a reevaluation of legalization. Reversing course may not be easy—billions of dollars are now invested in the legal sports betting ecosystem—but some argue that the long-term social costs outweigh any short-term economic gains.

Information for this briefing was found via The Atlantic and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.