UC San Diego Study Reveals Lower-Income Gamblers Take More Risks Online

A study from the University of California, San Diego reveals that 96% of respondents lose money, and lower-income gamblers are more “irresponsible” with their gambling spending than higher-income gamblers.

UC-San Diego’s Rady School of Management study concluded that legalized gambling has its pros and cons

At UC-San Diego’s Rady School of Management, a study of more than 700,000 North American online gamblers was conducted to determine to what extent a person’s annual salary affects wagering habits.

Researchers worked to identify comprehensive insights into the positive and negative impacts of online gambling legalization on tax revenue and gambling behaviors in the U.S.

The research study goal was to provide credible evidence to help inform policymakers as they evaluate new laws or refine recent guidelines.

According to the study, although gambling enhances state revenues, it also increases irresponsible gambling, especially among lower-income bettors. Of the 700,000-plus gamblers studied, only 4% made money from online betting.

“Our data show that online gambling legalization leads to more irresponsible gambling spending among lower-income consumers than among higher-income gamblers,” said Kenneth C. Wilbur, professor of marketing and analytics at the Rady School and co-author of the study.

“We define gambling irresponsibly as spending a high proportion of their income —for example, 10%—on gambling.”

The authors of the working paper analyzed five years of data from a total of 32 states. They compared 18 states that changed online gambling policies to 14 states that did not have gambling policy changes.

A generalized synthetic control framework is a method used by economists and data scientists to evaluate government policy changes as natural experiments. This tool was used to compare the data.

Framework was applied to data from four sources

Authors applied the framework to data from four sources: Center for Disease Control suicide records, national gambler helpline calls, state revenue and tax data, and digital payment records for a total panel of 717,724 online gamblers.

Study authors found gambling helpline calls did increase as gambling became legal in the 14 states analyzed. Of course, it was the highest in New York. Though, suicides did not increase.

In Canada, responsible gambling initiatives urge gamblers to spend less than 1% of monthly income on gambling. However, the direct deposit dataset revealed that 43% of panel gamblers exceeded 1% of income in gambling months. Approximately 5.3% spent more than 10% of their income on gambling and 3.2% spent more than 15% of their monthly pay.

“Our analysis shows that online gambling legalization leads to far more problematic gambling among lower-income gamblers than among higher-income gamblers,” Wilbur said. “These findings emphasize the high financial risk associated with online gambling.”

For the positives of legalized gambling, the authors concluded that it can generate revenue and reduce illegal wagering. It also makes it easier for bettors to seek help for gambling addiction.

Nonetheless, the authors wrote, “increased accessibility and participation can lead to higher rates of problematic gambling behavior.”

Coauthors of the paper include Wayne J. Taylor of Southern Methodist University and Daniel M. McCarthy of the University of Maryland.