As sports betting becomes legalized in more and more states, people are gambling away thousands of dollars a year—all while believing they are investing for the future. This is a trend that has been underway for some time, but it has accelerated dramatically in the past year, according to a new report.
The troubling findings come via personal finance site NerdWallet, which surveyed more than 2,000 U.S. adults about their sports betting behaviors. It found that 20% of Americans say they have bet on sports in the past year (not including dog or horse racing), which amounts to a 67% increase from the 12% of Americans who reported the same one year ago.
Sports bettors reported spending $3,284, on average, in the past 12 months on gambling (the median was $750). That's 80% higher than the average $1,827 that Americans wagered on gambling of all sorts during the same time period.
What's potentially worse is the mentality some bettors are bringing to the practice: Almost one-third—31%—of sports bettors view gambling as an investment, the survey finds. Some 65% say they place bets to make some extra spending money, while 61% say they do so because they enjoy gambling.
And while 14% say they have gone into debt as a result of their gambling, 29% of bettors say they plan to increase the amount they bet this year compared to last.
That's a worrisome trend, as research has found online sports betting leads to higher credit card balances, more frequent account overdrafts, and fewer investments, particularly among already financially vulnerable households.
"Evidence from other gambling contexts indicates that bookmakers exploit bettors' cognitive biases and lack of skill, making betting a detrimental financial activity for most households," researchers write. "The increase in betting and associated consumption leads to heightened financial instability as households run-up credit card balances and more frequently overdraw their bank accounts."
Sports betting is more akin to day trading than it is to long-term investing, says Stephen Shapiro, a sports and entertainment management professor at the University of South Carolina who has researched sports betting. While sports gambling is almost always high risk, traditional investments are better at balancing risk and reward.
"Typically, risk is evaluated and considered more heavily in investing, and although there is risk involved in both activities, it can be accounted for in more depth within the context of investments," says Shapiro. "Sport gambling pits an individual against a betting platform that has a significant mathematical advantage. Investing is not individual versus firm; both entities can grow wealth simultaneously."
A risky proposition
The U.S. Supreme Court overturned a federal ban on sports betting in 2018. Since then, some 39 states and Washington, D.C., have legalized the practice in one form or another.
Elizabeth Ayoola, NerdWallet personal finance expert, says there is nothing necessarily wrong with betting so long as it isn't putting your personal finance goals at risk or causing other problems. Almost 45% of sports bettors say they rarely make bets larger than $20, according to the survey.
But any form of gambling is a slippery slope for some, and many bettors can jeopardize their finances, whether by spending money they could be saving for another goal or by going into debt.
And while it is possible to make more money, it is a highly risky way to go about it, NerdWallet notes. A better investment strategy for most is to invest in a low-cost, well-diversified index fund.
All of this is important to keep in mind, as the Super Bowl approaches on Feb. 9—the biggest sporting event in the country and a huge day for sports betting.
If you or a loved one is struggling with gambling, NerdWallet suggests reaching out to the National Problem Gambling Helpline at 1-800-GAMBLER. You can also text 800GAM or chat with someone online for free and confidential help.
