A new survey finds that online sports betting is increasing consumer stress as access to gambling soars.
Following a 2018 U.S. Supreme Court ruling, 38 states legalized sports betting. As a result, researchers found that states that allowed online sports betting experienced “significant increases” in auto loan delinquencies, bankruptcies and debt collections, according to a working paper that has not yet been peer-reviewed.
“While many states may have chosen to legalize in hopes of increasing tax revenues, the negative effects we document may partially offset any tax benefits as more consumers find themselves in worse financial situations,” wrote the authors, led by Brett Hollenbeck, an associate professor at the University of California, Los Angeles Anderson School of Management. The results are based on data on more than 4 million people spanning the period March 2016 to June 2023.
The Federal Reserve’s efforts to rein in inflation have kept interest rates high across the board, narrowing the room for maneuver for consumers in general. The Fed is expected to signal next week that it plans to cut rates in September, setting up a streak of quarterly cuts through 2025, according to economists surveyed by Bloomberg News.
Sports betting expanded rapidly from tribal and commercial casinos following a 2018 ruling that invalidated a 1992 federal law that banned state-sanctioned sports betting, with some exceptions. Since then, major sportsbooks have moved in, taking in more than $100 billion in wagers last year alone, up more than 25% from the previous year.
According to Hollenbeck, the researchers studied the differences between online and in-person gambling and found that consumer stress was similar but higher in states that allow online gambling, and that this was reflected in average credit scores, which declined slightly but about three times more in states that allow online gambling.
“We found pretty significant and compelling evidence that when states legalize sports betting, people significantly increase their problem gambling, and this is especially true when states legalize mobile betting,” Hollenbeck said.
Conversely, sports bettors’ credit card delinquency rates have fallen, a trend that emerged several years after legalization and surprised Hollenbeck.
“Credit card limits have been significantly reduced, which suggests that credit card companies are aware of this and are discouraging consumers from gambling,” he said.
