- A new academic study said people are diverting stock investments into legal gambling.
- The researchers founded that household investments are reduced by roughly $2 for ever dollar wagered.
- This has had a disproportionately negative effect on lower-income households, the study found.
The surging popularity of legal sports betting has been met with fanfare from American consumers. But a new working study finds its rise is coming at the expense of stock investments.
The research, which has yet to be peer-reviewed, found that the net investments held by a household is reduced by roughly $2 for every dollar directed towards a bet.
“Our results suggest that access to online sports betting comes at the expense of equity market attachment and exacerbates financial difficulties faced by constrained households,” a group of five academic researchers wrote.
Betting took over the modern American sports experience in 2018, when the Supreme Court overruled a federal law prohibiting it. States were left with the control, and 38 have since legalized it.
With gambling made as simple as downloading an app, billions have been wagered. Where the total amount bet in the US stood at $1.1 billion in January 2019, this figure catapulted to $14 billion the same month this year, data from the Sports Book Review shows.
The study said US households bet an average of $1,100 per year, or $280 a quarter — a number that’s continued to grow by $25 per quarter.
Meanwhile, the researchers found that net investments typically fell nearly 14% in the two to three years after a legalization occurred in a state.
Further, the study noted that financially constrained households tend to contribute a larger chunk of their income toward sports gambling, and are therefore hit harder by the negative effects.
“These households, already in relatively bad financial shape, are more likely to divert funds from their investment portfolios to betting activity,” the researchers wrote. “Given that sports betting has a negative expected value, this finding underscores the potential for sports betting legalization to exacerbate financial vulnerability and hardship.”
A separate recent working paper reached a similar conclusion, outlining how credit has been damaged in areas where sports gambling is legal. In these areas, credit scores have dipped 1%, while debt collection and bankruptcies have jumped 8% and 28%, respectively.
“It’s never enough,” Michelle Malkin, the director of East Carolina University’s Gambling Research & Policy Initiative, previously told Business Insider. “You’ve got to keep on gambling. So it’s this cyclical thought pattern of, ‘I can fix my problems by keeping gambling and getting that next win.'”
