WHILE POLITICAL LEADERS And while politicians have expressed concern about the large number of families living on the edge financially and frequently extolled the value of various government-sponsored savings plans, they have simultaneously legalized sports betting, thereby supporting an industry that directly undermines the goal of retirement planning.

That’s the finding of a major new study examining the impact of sports betting on household finances in the first six years since a U.S. Supreme Court decision in 2018 cleared the way for state-level sports betting to be legalized. The study found that legalizing online sports betting has not led to people diverting money from other forms of entertainment to this new sector, but instead caused them to overstretch their budgets at the expense of savings in investment accounts, particularly among the most financially vulnerable households.

The study linked sports betting to a “sharp decline” in brokerage account deposits, accompanied by “reduced credit availability, increased credit card debt, and higher bank account overdraft rates.” Overall, the researchers said, “access to online sports betting exacerbates financial difficulties among cash-strapped households.”

The study defined constrained households based on lower savings rates, higher credit card debt and a history of bank overdrafts.

Massachusetts jumped on the sports betting bandwagon last year and is one of 38 states plus Washington, DC, where betting on sporting events is now legal.

Scott Baker, an associate professor of finance at Northwestern University’s Kellogg School of Management and lead author of the report, said a key question the research sought to answer was whether people simply switched to sports betting instead of going to the movies or spending their disposable income on other forms of entertainment, including whether they used money already spent on other types of gambling to bet on sports.

Using financial data from 230,000 US households, the researchers found that the introduction of online sports betting does not replace other expenses, but on the contrary leads to new additional spending and “significantly reduces household savings”.

“The lower payments on credit card bills, coupled with rising debt levels, suggest that these households are not just shifting money from one type of entertainment to another, but are instead taking on more and more debt to finance an addictive loss-making business,” the authors write.

In sports betting, we see that “people are going over budget and struggling to make ends meet,” Baker said in an interview.

The study, “Gambling Away Stability: Sports Betting’s Impact on Vulnerable Households,” found that the legalization of sports betting led to a 14 percent decline in household deposits in brokerage investment accounts, with each dollar invested in sports betting reducing net investment by about $2.

In households that placed online sports bets – about 8 percent of all households – the average annual expenditure on sports betting was $1,100. However, the share of their income that households with low savings spent on sports betting was 32 percent higher than the share of higher-income households.

Rachel Volberg, a professor at the University of Massachusetts Amherst School of Public Health and a leading gambling researcher, said that unlike casino gambling, which has grown gradually over several decades, the 38 states that have rushed to legalize sports betting since 2018 have done so with little evidence of the impact before legalization. “So we are in the middle of a gigantic social experiment,” she said.

Volberg said the study’s results did not surprise her. She said they “pretty much agree with what we know about lotteries,” namely that lower-income people tend to spend a larger share of that income on lottery tickets than wealthier people.”

With sports betting already out of the stable, Baker said policymakers should look for ways to mitigate its harmful effects. He said the burden on financially constrained households appears to be most closely tied to online sports betting. That could be an argument for limiting any legalization to in-person locations in the few states that have not yet done so.

While states and the federal government have tried to encourage saving and investing, the rush to legalize sports betting not only sends a mixed message about the value of long-term investing, but also appears to work directly against those efforts, according to the study. “If legalized sports betting gains traction,” Baker and his colleagues write, “it potentially undermines government efforts to encourage saving through tax incentives and financial literacy programs.”

Baker said sports betting would clearly bring new revenue to states. “We’re just saying there are trade-offs when you’re concerned about household finances or the fragility of low-income households,” he said.

Baker said the full impact of sports betting is still unknown, as spending is still rising in states that have legalized it. “It hasn’t plateaued yet,” he said. “We don’t know yet where that will land or stabilize.”

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