A new study from the University of California San Diego’s Rady School of Management reveals a troubling correlation between irresponsible gambling and lower-income consumers in states where certain forms of online gambling are legal. UC San Diego researchers analyzed five years of data from over 700,000 gamblers across 32 states. They compared 18 states that had changed their online gambling laws to 14 states that had not during that period, finding that the expansion of gambling to the internet disproportionately affected lower-income households.
“Our data show that online gambling legalization leads to more irresponsible gambling spending among lower-income consumers than among higher-income gamblers,” said Kenneth Wilbur, professor of marketing and analytics at the Rady School and co-author of the study.
Wilbur explained that irresponsible gambling was defined as spending a high proportion of one’s income on gambling. For instance, someone risking 10% or more of their take-home pay would meet this classification.
Benefits Come With Risks
Currently, 30 states have regulated online sportsbooks available for consumers of gambling age who are physically located within their borders. Seven of those states also permit iGaming, which includes online slot machines and table games.
Online sports betting and internet casinos have generated new tax revenues for state governments, with iGaming proving to be a more robust tax generator compared to the small-margin business of sports betting. However, Wilbur’s team found that these added tax revenues come with significant societal costs.
Wilbur said that among the 700,000 online gamblers studied through anonymized player reports, 96% lost money.
“Only 4% made money from online betting,” Wilbur explained. “That is by design. Online gambling platforms often ban or throttle frequent winners’ accounts. There is no right to gamble.”
While many state lawmakers argue that wealthier players generate the bulk of the iGaming and online sportsbook revenue by betting and losing more, Wilbur’s researchers found that lower-income players tend to bet more when they lose—a practice known as chasing losses. Avoiding the temptation to chase losses is a fundamental principle of responsible gambling.
“Our analysis shows that online gambling legalization leads to far more problematic gambling among lower-income gamblers than among higher-income gamblers,” Wilbur reported. “These findings emphasize the high financial risk associated with online gambling.”
In nearly every US sports betting state and jurisdiction that has authorized online casino games, handle—the amount bet—increased each year during the five years studied.
Casino Caution
Wilbur said the goal of the study was to provide an analysis useful for state lawmakers considering online gambling bills. He stressed that a paramount concern should be that while iGaming and online sports betting undoubtedly increase tax revenue, those who experience the most gambling problems are likely to be the smaller-scale, lower-income gamblers.
Wilbur acknowledged that, along with tax revenue, another benefit of online gaming authorization is that it potentially makes reducing illegal gambling easier for law enforcement. Regulated gambling is also frequently said to hurt underground gambling operations and, in the context of iGaming, offshore gaming websites.
The late Sheldon Adelson of the Las Vegas Sands empire, the world’s richest casino magnate at the time of his January 2021 death, famously said in 2013 that online gambling is “fool’s gold” and that states shouldn’t allow someone to “click your mouse and lose your house.”
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