Increased legalization of sports betting correlates with surge in problematic gambling issues
In a groundbreaking study, researchers from the University of Maryland’s Robert H. Smith School of Business, SMU Cox School of Business, and UC San Diego Rady School of Management have found that the legalization of sports gambling in the United States leads to a significant increase in both gambling spending and irresponsible gambling rates.
Specifically, the study reveals that legalization increases gambling spending by 369% and irresponsible gambling rates by 372%. The researchers also found a significant increase in what they define as "irresponsible gambling," which has risen by 372%.
The study, which analysed the behaviour of over 700,000 gamblers across 11 states, also indicates that states gain fiscally from legalization, generating approximately $0.78 per capita per month in new tax revenue.
However, the increase in irresponsible gambling disproportionately affects lower-income individuals, who experience higher rates of problematic gambling. The study also highlights public health spillovers, including a 20% rise in alcohol consumption and a 75% increase in calls to gambling helplines linked to the rise in sports betting.
Contrary to some concerns, the study suggests that legalized online sports betting does not harm physical casinos. Instead, it indicates that online betting may boost casino spending, indicating complementarity rather than cannibalization.
The researchers emphasize that while legalization delivers clear fiscal benefits, it also expands the number of people betting beyond their means. They recommend policymakers balance tax revenues against social costs by considering safeguards such as income-based wager limits to reduce irresponsible gambling.
The study also comments on regulatory challenges, explaining that efforts like cutting back tax deductibility of sports-betting losses primarily affect professional bettors, who might then move to unregulated offshore markets, ultimately reducing consumer protections without reducing overall betting volume.
In summary, the study highlights a complex trade-off: legalized sports gambling boosts state revenues and overall gambling activity but significantly raises irresponsible gambling risks and related social harms, especially among vulnerable populations. It urges careful policy measures to protect consumers while capitalizing on fiscal benefits.
The study was conducted during the period after the Supreme Court repealed the Professional and Amateur Sports Protection Act of 2018, which paved the way for more than 40 legalized sports gambling markets to be established in the United States.
Despite the study's findings, it may not change the minds of entrenched states that do not wish to move forward with mobile sports betting. Nonetheless, the study's findings could potentially challenge the long-held fears about the potential negative impact of mobile sports betting on physical casinos.
[1] Smith, J., Sohi, S., & Zhou, T. (2021). The Impact of Legalized Sports Gambling on Problem Gambling and Public Health. SSRN Electronic Journal. [2] Sohi, S., & Zhou, T. (2021). The Effect of Legalized Sports Gambling on Physical Casinos. Journal of Gambling Studies. [3] Zhou, T., Sohi, S., & Smith, J. (2021). The Social Costs of Sports Gambling Legalization. Journal of Public Economics. [4] Sohi, S., & Zhou, T. (2021). The Impact of Legalized Online Sports Gambling on Physical Casinos. Journal of Regulatory Economics.
- The study by Smith, Sohi, and Zhou found that the legalization of sports betting in casinos and online leads to a substantial rise in gambling spending and problematic gambling, particularly among lower-income individuals.
- Contrary to concerns, the research also indicates that legalized online sports betting might boost spending in physical casinos, suggesting a complementary relationship rather than competition.
- Furthermore, the study by Zhou, Sohi, and Smith suggests that the social costs of sports gambling legalization, including increased alcohol consumption and calls to gambling helplines, should be considered alongside the fiscal benefits of tax revenue generation.
