Aug 13, 2024 21:00:00

Online gambling worsens gamblers' financial situation, especially among low-income young men

Since 2018, sports betting has been legalized in more than 38 states in the United States. As a result, the number of gambling addicts in the United States has increased, and it has become clear that this is having a negative impact on the economic situation, especially among young, low-income men.

Online sports betting hurts consumers

https://www.slowboring.com/p/online-sports-betting-hurts-consumers

online gambling: US gambling crisis feared as online betting rises - The Economic Times
https://economictimes.indiatimes.com/tech/technology/us-gambling-crisis-feared-as-online-betting-rises/articleshow/112470749.cms

Since sports betting was legalized in the United States, the market size has grown to $100 billion (approximately 14.8 trillion yen) per year. However, states that have legalized sports betting have seen a sharp increase in calls to gambling addiction hotlines. In addition, since legal gambling (such as lotteries) that existed before sports betting disproportionately damage the economic well-being of the poor, it has been pointed out that the additional tax revenue from sports betting may not be worth the cost of measures to combat gambling addiction. However, due to a lack of data on online gambling, it was unclear how online gambling negatively affects gamblers.

However, two papers published in July 2024 have shown that online gambling has a negative impact on gamblers' financial situation. These papers, which analyzed large samples of personal financial data, found that online gambling lowers gamblers' credit scores , increases their debt, and displaces positive investment activity. These effects are particularly prevalent among low-income men.

A paper examining the economic impact of legalized sports betting analyzed a consumer credit data set of 7 million people to examine how online gambling affects consumers' finances. Brett Hollenbeck, the author of the paper, said, 'We are now even more concerned about legalizing sports betting than when we began our research.'

According to a study by Hollenbeck et al., in states where all types of gambling are legal, the average credit score drops by 0.3% over four years. In particular, in states where only online gambling is legal, the average credit score dropped by 1% over four years. In addition, it was revealed that in states where online gambling is permitted, the likelihood of filing for bankruptcy after three to four years increases by 25 to 30%, and the recovery rate of unpaid debts increases by about 8%. In addition, it was pointed out that in states where online gambling is legal, low-income young men in particular have higher bankruptcy rates, more use of unsecured loans, and higher rates of credit card delinquency, making them more likely to fall into financial difficulties.

The graph below shows 'Credit Score', 'Bankruptcy', 'Cons. Loan', 'Credit Card Delinquency', 'Auto Loan Delinquency', 'Sec./Unsec. Accounts Ratio', and 'Cumulative Credit Card Limit', with the vertical axis showing 'M' (male), 'F' (female), 'M]45' (male over 45 years old), 'M[45' (male under 45 years old), 'LI M[45' (low-income male under 45 years old), and 'HI M[45' (high-income male under 45 years old).

Furthermore, a paper examining the impact of sports betting on vulnerable households analyzed consumer transaction data from over 230,000 households and compared measures of financial stability such as credit card balances, credit card debt, and overdrafts . The analysis found that legalization of sports betting significantly increased the number of sports bets without sacrificing gambling or consumption reductions. In other words, gamblers do not bet on sports to replace gambling that they had been doing, but rather they start betting on sports in addition to gambling. It was also found that gamblers bet on sports instead of investing in stocks, and it was found that a $1 bet on sports reduces stock investments by about $2.

According to study author Scott Baker, gamblers on lower incomes are disproportionately affected: households with low savings balances spend 32% more of their income on gambling than those with high savings, and households with overdrafts spend twice as much of their income on gambling as those without.

Ben Kraus and Milan Singh of Slow Boring , which are known for warning people about the dangers of sports gambling, have argued that common sense guardrails need to be put in place to limit the negative effects of sports gambling, such as requiring people to go to a casino or bar to bet on sports.