Betting vs. Investing: New Study Reveals American Bettors’ Priorities
Date: 2024-08-16 Author: Leon Pierce Categories: SPORTS BETTING
Since sports betting legalized in the United States in 2018, millions of Americans have gained access to legal forms of the sport. This has not only led to sponsorship deals between bookmakers and sports teams, but also increased state revenue for educational programs.
While betting was previously available through illegal channels, legalization is helping to redirect consumers to the licensed sector, where they are better protected. Despite these positive aspects, the expansion of gambling has led to a sharp increase in calls to gambler helplines across the country, and fears about gambling addiction continue to grow.
Now, a new study has revealed another aspect that is affecting millions of American families. This analysis, conducted in collaboration with experts from Brigham Young University, the University of Kansas School of Business, and Northwestern University, shows how sports betting affects vulnerable households.
A white paper titled “Gambling that Threatens Stability: The Impact of Sports Betting on Vulnerable Households” examines the effects of legalized betting on household financial investments, spending, and debt management.
Betting Spending Undermines Savings and Investments
Particularly concerning is the finding that betting activity has increased significantly since 2018, accompanied by a marked decline in investment. The study finds that this increase has not crowded out other forms of gambling, but has significantly reduced savings as risky bets with negative expected returns displace investments with positive expected returns.
In short, the increase in betting activity has not affected other forms of gambling. However, it does negatively impact funds that could be allocated to savings and positive-return investments, such as stocks, bonds, or savings accounts.
“It is important to note that the increase in online sports betting primarily displaces investments with positive expected returns,” the study notes.
Financially constrained households are most vulnerable
Households experiencing financial difficulties are more likely to reduce their investments in assets with positive expected returns. These investments tend to yield positive returns in the long term, while sports betting, on the contrary, increases the risk of losses.
In addition to increased betting costs and decreased investment, financially constrained households also face additional negative consequences. The study notes that they have increased credit card debt, reduced available credit limits, and more frequent overdrafts.
“Notably, sports betting causes a significant decline in net deposits into traditional brokerage accounts, particularly among financially constrained households,” the study says.
This shift from investing to betting raises concerns about the negative impact of gambling on the economic opportunities of U.S. households. The researchers recommend that lawmakers consider ways to encourage savings through financial literacy programs or tax incentives.
The study’s authors emphasize that analyzing how sports betting diverts funds from investment accounts will be important for developing effective policies that promote long-term wealth accumulation and financial stability.
