Legalizing Sports Gambling Was a Huge Mistake
5 min read
Over the weekend, millions of Americans watched football. They cheered, they ate, and—more than ever—they gambled. The American Gaming Association expects $35 billion in bets to be placed on NFL games in 2024, about one-third more than last year’s total.
If you follow sports, gambling is everywhere. Ads for it are all over broadcasts; more than one in three Americans now bets on sports, according to a Seton Hall poll. Before 2018, sports gambling was prohibited almost everywhere. Now it’s legal in 38 states and the District of Columbia, yielding $10 billion a year in revenue.
Readers may be quick to dismiss these developments as harmless. Many sports fans enjoy betting on the game, they say. Is it such a big deal if they do it with a company rather than their friends?
A growing body of social-science literature suggests that, yes, this is in fact quite different. The rise of sports gambling has caused a wave of financial and familial misery, one that falls disproportionately on the most economically precarious households. Six years into the experiment, the evidence is convincing: Legalizing sports gambling was a huge mistake.
Starting in 1992, sports betting was generally banned throughout most of the United States under the Professional and Amateur Sports Protection Act. PASPA forbade running gambling “schemes” tied to competitive sports. Americans could still make bets with one another about Super Bowl results, but neither government nor businesses could get a cut of the action.
That approach held until 2012, when New Jersey, fearing that Atlantic City was losing its competitive edge, legalized sports gambling. The NCAA brought suit, alleging a violation of PASPA; the state responded that PASPA itself was an infringement on its sovereignty. The case came before the Supreme Court, which in 2018 ruled that PASPA violated the Tenth Amendment’s prohibition on the federal government exercising powers reserved for the states.
With PASPA gone, states were eager to let sportsbooks set up shop. Within a year and a half, Goldman Sachs estimated, Americans were betting about $50 million a month. By late 2023, that figure exceeded $1 billion a month—a 20-fold increase.
Because different states legalized sports gambling at different times, social scientists can compare different measures of well-being in states that did legalize with those that did not, before and after legalization.
Alarming patterns have started to emerge. Two recent working papers look at the economic impacts of legalization. One, by Northwestern University’s Scott Baker and colleagues, finds that legal sports gambling depletes households’ savings. Specifically, for every $1 spent on betting, households put $2 less into investment accounts. States see big increases in the risk of overdrafting a bank account or maxing out a credit card. These effects are strongest among already precarious households.
A second paper, from the economists Brett Hollenbeck of UCLA and Poet Larsen and Davide Proserpio of the University of Southern California, tells a similar story. Looking specifically at online sports gambling, they find that legalization increases the risk that a household goes bankrupt by 25 to 30 percent, and increases debt delinquency. These problems seem to concentrate among young men living in low-income counties—further evidence that those most hurt by sports gambling are the least well-off.
A third recent paper, from the University of Oregon economists Kyutaro Matsuzawa and Emily Arnesen, shows another, perhaps more surprising—and certainly more harrowing—harm of gambling legalization: domestic violence. Earlier research found that an NFL home team’s upset loss causes a 10 percent increase in reported incidents of men being violent toward their partner. Matsuzawa and Arnesen extend this, finding that in states where sports betting is legal, the effect is even bigger. They estimate that legal sports betting leads to a roughly 9 percent increase in intimate-partner violence.
Because of the studies’ design, these results reveal what sports gambling causes, not merely what it correlates with. And the numbers they reveal are of course not only numbers but human lives. Sports gambling is addictive; although many people can do just a little of it, some keep playing compulsively, well past the point of no return. This yields not only debt and bankruptcy but emotional instability and even violence. The problems don’t stop there: Gambling addiction has been connected to anxiety, depression, and even suicide.
The industry may claim to want to prevent problem gambling, but its profits largely come from the compulsions of people with a problem. A small number of people place the large majority of bets—about 5 percent of bettors spent 70 percent of the money in New Jersey in late 2020 and early 2021, for example. The costs of gambling concentrate among those least able to pay, setting back those who most need help. That dollar that could have gone to buying a home, getting a degree, or escaping debt instead goes to another wager. Such behavior is irresponsible, but it’s hard to blame bettors alone when companies make their profits by pushing them to bet more.
Legalization isn’t yielding many benefits, either. Tax revenue—one of the major justifications for legalization—has been anemic, with all 38 legal states combined making only about $500 million from it a quarter, less than alcohol, tobacco, or marijuana. And it hasn’t even shrunk the illegal market, at least in Massachusetts, where bettors were just as likely to use unauthorized betting sites after legalization.
Against this backdrop, PASPA-era prohibition looks comparatively benign. Americans could bet with one another, but businesses couldn’t profit off of it. Arrests for gambling were basically nonexistent, meaning prohibition had limited human cost.
For little obvious gain, most states have permitted businesses to make billions of dollars off of the most economically precarious among us. Some commentators and politicians have—falteringly—recognized these costs, and suggested careful regulation around the edges to address them.
But the more elegant solution is the blunter one: ban sports gambling once again. Unlike regulation—which is complex, hard to get right, and challenged by near-certain industry capture of regulatory bodies—prohibition cuts the problem off at the root. No legal sports gambling, no sports-gambling industry.
For the dozen states, including Texas and California, where sports gambling is still illegal, the solution is simple: change nothing. For the other states, undoing the damage may be harder. But it is damage worth undoing. If the states are “laboratories of democracy,” then the results of their experiment with sports gambling are in, and they are uniformly negative. Better to end the study now than prolong the suffering.
