It's time to rein in sports betting

When it comes to your finances, sports betting may be one gamble you don't want to take.

Wagering on sports can lead to poorer debt management and worse credit scores. Bettors are also more likely to increase their spending and shrink their investments, according to a pair of recent studies. The consequences are biggest among financially vulnerable populations.

What's worse, per a third study, is that the way sports betting is evolving could make it one of the most addictive forms of gambling.

It's time for policymakers to step in and regulate this budding betting industry six years after it was legalized in the US to help people avoid their worst impulses — before it's too late.

"As individuals, voters, [and] policymakers, I think our results are concerning," Justin Balthrop, a co-author of one of the studies and an assistant professor of finance at the University of Kansas, told Yahoo Finance.

"But it's very hard to make prescriptions before you have a diagnosis. And what I think our paper is really trying to do is get very precise estimates of exactly what the problems are."

A sign calls attention to sports betting at Encore Boston Harbor casino Jan. 31, 2023, in Everett, Mass. (AP Photo/Steven Senne) · (ASSOCIATED PRESS)

The financial consequences of sports betting

Sports betting began to take hold after the Supreme Court struck down the Professional and Amateur Sports Protection Act in May 2018, allowing states to set their own sports gambling laws.

So far, sports betting is legal through retail and/or online sportsbooks in 38 states and the District of Columbia. Revenue has jumped, growing 30.3% to $7.56 billion year to date through July from the same period last year.

In his study, Balthrop — who refers to himself as "a pretty avid and voluminous sports bettor" — took advantage of the staggered rollout of sports betting across the US after its legalization, giving him and his colleagues time to understand the before and after effects of this betting.

What he found was for every $1 deposited into online sportsbooks, those households reduce their investment allocations by $2. The doubling effect — from $1 to $2 — comes from the additional spending outside of the bets to support their gambling. Think extra streaming services or more sports bar tabs to watch games.

Additionally, sports betting increases the number of times households overdraw their bank accounts, Balthrop found. These effects were worse for financially constrained households, which also reduced their credit card payments while increasing their balances.

"The core of this effect is taking place in households that may not have budgetary slack," Balthrop said.