The legalization of sports gambling has led to a major deterioration in consumers’ financial health, particularly in states that allow online betting, latest research shows.
“We discover a considerable increase in bankruptcy rates, debt collections, debt consolidation loans, and auto loan delinquencies” in states that supply legal sports gambling, researchers from the University of California, Los Angeles and the University of Southern California say in a latest working paper. “We also find that financial institutions reply to the reduced creditworthiness of consumers by restricting access to credit.”
Legal sports gambling has proliferated across the country since a 2018 Supreme Court ruling struck down a law banning the practice. Betting on sports is now legal in 38 states, in addition to Washington, D.C., and Puerto Rico. Through the primary five months of 2024, revenue from sports betting in these areas reached $5.72 billion, a rise of nearly 25% over the identical period a 12 months before, based on the American Gaming Association.
One reason states embrace sports gambling is that it allows them to boost tax revenues without angering voters by means of mountaineering taxes on income or sales purchases. The Census Bureau reported that sports betting generated $505.96 million in state tax revenues within the third quarter of 2023, up 20.5% in comparison with the identical quarter in 2022.
But latest research indicates the legalization of sports gambling is proving costly and harmful — especially in states offering online betting reasonably than simply in-person and for young men in low-income areas.
Impact of legal sports gambling on credit scores and more
The working paper’s researchers found that average credit scores dropped 0.3% in states that legalized sports gambling in recent times — a decline they describe as “small but significant.” The impact is especially severe in places that allow betting on sports with a couple of quick clicks on a phone or laptop, versus requiring people to put wagers in person. Average credit scores decreased 3 times as much in states that sanction online or mobile sports wagering.
The provision of online sports gambling has also led to a 28% increase within the likelihood of bankruptcy and an 8% rise in debt collection amounts. Overall, the information suggest that “the convenience of access to gambling increases the issues related to it,” the paper’s authors wrote.
Meanwhile, research from the National Council on Problem Gambling (NCPG) points out that online sports bettors are at heightened risk of addiction. “The speed of gambling problems amongst sports bettors is not less than twice as high as amongst gamblers usually,” a 2023 report states. “When sports gambling is conducted online, the speed of problems is even higher, with one study of online sports gamblers indicating that 16% met clinical criteria for gambling disorder and one other 13% showed some signs of gambling problems.”
As for who’s almost certainly to run into trouble betting on sports, one group is disproportionally impacted: Young men in low-income communities “experience higher financial distress, with higher rates of bankruptcy, more usage of consolidation and unsecured loans, and more bank card delinquencies” than other people in states with legal sports gambling, the working paper says. The credit scores and bank card limits of younger low-income men also decrease essentially the most.
If you may have a foul credit rating, it could actually make virtually every aspect of your financial life tougher. It can be harder to get approved for a mortgage, auto loan or bank card with decent terms, and it might even be a red flag when applying for a job, apartment lease or automotive insurance coverage.
In other words? The downsides of a gambling habit can go well beyond how much money these young men lose betting on their favorite teams.
More from Money:
‘A Ticking Time Bomb’: Gambling Addiction Is at an All-Time High (and It’s About to Get Worse)
7 Ways to Improve Your Credit Rating Right Now
How Much Is an Olympic Gold Medal Value? Less Than You’d Think