KU research finds sports betting may be more dangerous than it seems

KANSAS CITY, Mo. — New research from the University of Kansas has revealed that there are massive differences between sports betting and other forms of gambling.

All forms of gambling, whether it be playing cards at a casino, buying a lottery ticket or something else, provide a risky opportunity for cash. However, according to KU researchers, sports betting is quickly taking over household’s income.

“We find that people’s household financial balance sheets are being significantly shaped by an increase in online sports betting,” said Kevin Pisciotta, assistant professor of finance at the University of Kansas.

Pisciotta’s new paper, “ Gambling Away Stability: Sports Betting’s Impact on Vulnerable Households ” points out that online sports betting leads to higher gambling activity. It also shows that these households typically have higher credit card balances, less available credit and see a reduction in net investments. The paper also claims that these effects are pronounced in households that are more limited financially.

“One possible reason is that you think you have some role in the outcome. Most people understand a slot machine is random. With sports betting, you feel a little bit invested and might have some advantage — even though, on average, you don’t,” Pisciotta said.

“Also, with sports, you go to the bar, you’re with friends, you’re watching the game in real-time while responding to what you’re watching. There’s a community engagement with the actual thing you’re betting on. So there’s more of an environmental and social aspect to it. Of course, there are also so few frictions to betting online using your phone.”

Assistant professor of finance at KU Justin Balthrop, Scott Baker of Northwestern University and Mark Johnson and Jason Kotta of Brigham Young University also contributed to the research. The paper reveals these two main findings:

• People use funds that they would’ve otherwise been putting into savings for sports betting.
• Bettors also use available credit on their credit cards for sports betting.

“Credit card balances go up. Their available credit goes down. And they make less payments on their card,” said Pisciotta, who admitted the last time he bet on a game was during March Madness.

The rise in the popularity of sports betting comes from the 2018 Supreme Court ruling that overturned the federal ban on sports betting. While sports betting still isn’t legal in every state, the ruling has generated $120 billion in total bets and $11 billion in revenue in 2023 alone.

Pisciotta and his team’s research includes a database of over 60 million American bettors and billions of transactions from 2010 to 2023.

“We can see transfers of an individual’s amount of money out of, for instance, a Vanguard account and transfers into DraftKings. Then we can look at how these things evolve over time,” he said.

“Sports betting tends to have some addictive components. Some people assume this has a half-life to it: ‘People want to try it out. They like certain aspects of it, but they realize they’re not a net winner, and they just turn off the app.’ We find the opposite. There’s not only an expansion among new users, but the users who tend to be losers are betting more and more over time.”

Pisciotta also mentioned that he’s felt some indirect pushback from Vegas. He says that gambling industry representatives have argued that people also spend their money on other things like video games, Amazon, Starbucks and more.

However, as noted by Pisciotta, people probably aren’t running up huge credit card balances in line for coffee.

“We’re not trying to shut down sports betting. Our goal here is to provide clear estimates of what is happening from the result of online sports betting legalization … and the results are not exactly great for those doing the betting,” Pisciotta said.

“If the sports betting industry strings out their customers until they exhaust every possible dollar, I don’t know if that’s a way for this industry to have staying power. We hope our study might help inform discussions about how to possibly improve the environment and the landscape, but that’s going to take time.”

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