Study Shows Bankruptcies Up 28% In States With Online Sports Betting

A new study from the University of California, Los Angeles, and the University of Southern California reveals that bankruptcies are up 28% in U.S. states with legalized online sports betting.

A new study conducted by UCLA and USC professors and scholars shows the negative consequences of legalized online sports betting

According to the paper, the study was conducted by professors and scholars in the two universities’ business schools – Brett Hollenbeck, Poet Larsen, and Davide Proserpio. In addition to bankruptcies, the study found other finance-related problems.

“We find a substantial increase in bankruptcy rates, debt collections, debt consolidation loans, and auto loan delinquencies,” the study notes. “We also find that financial institutions respond to the reduced creditworthiness of consumers by restricting access to credit.”

The researchers found that the average credit score in states that legalized any form of sports gambling decreased by 0.3% after about four years. The negative impact was stronger where online sports gambling is allowed. Credit scores dipped in those areas by 1%. They also found an 8% increase in debt-collection amounts.

“We look at the general introduction of sports gambling and separately the introduction of online access, which is mostly these mobile apps like DraftKings and FanDuel,” said Hollenbeck, an associate marketing professor at UCLA’s Anderson School of Management. “Where we find the big effects is when the online mobile access goes in.”

About 75-80% of Americans gamble in some form over the course of a year

Furthermore, the authors’ research discovered that about 75-80% of Americans gamble in some form over the course of a year. Another 10% reported gambling twice per a week or more.

From 2018 to 2023, the study found a total of almost $300 billion wagered. Most of that amount was gambled via online platforms.

The study notes that while sports betting can be inexpensive and harmless for most Americans, a fraction become problem gamblers and experience financial stress, poor job performance, criminal activity, family issues, and even suicide. This was more prevalent among young men in low-income areas.

Approximately 1% of U.S. adults have a severe gambling problem, according to the National Council on Problem Gambling. About 2% to 3% have a mild or moderate problem as well.

Study found that legalization of sports betting decreased consumer financial health

A 2023 study in New Jersey found that men had double the rate of high-risk problem gambling than women. Gamblers between the ages of 18 to 44 were at the highest risk.

“Overall, we find that the legalization of sports gambling decreased consumer financial health,” the study notes. “These results seem to be particularly pronounced when states legalize online betting. … The ease of access to gambling increases the problems associated with it.

“While many states may have opted for legalization with the hope of increasing tax revenue, the negative effect we document can partially offset tax revenue benefits as more consumers’ financial health deteriorates.”

A total of 38 states and Washington D.C. allow some form of sports betting since the Supreme Court overturned a ban on sports wagering outside of Nevada in 2018.