Only Losers in the Building
Since Congress allowed states to legalize online sports betting in 2018, the growth of the industry has been staggering. Over the past few years, 39 states have opted in, and the amount wagered monthly has increased from about $309 million in June 2018 to $11.1 billion in November 2024.
It’s not all fun and gazillions. Sports gambling, and in particular sports gambling from a device you always have with you, appears to be particularly addictive. A study led by Northwestern University and the University of Kansas found that, after legalization of sports gambling in states, households in which someone was gambling made 14% less in net investments. Overall, in the year following the introduction of sports gambling, bankruptcies in those states increased by 28%. Other studies have linked participation in the new industry to lower consumer credit scores, higher credit card debt, higher use of debt consolidation loans, more auto loan delinquencies and lower household savings. Brett Hollenbeck of UCLA’s Anderson School of Management concludes, in what appears to be an understatement, that “the ease of access to sports gambling is harming consumer financial health by increasing their level of debt.”
Sports betters overall are more likely to be male (72%), Frequent sports bettors are much more likely to be under age 30 (45% of males under 30 report at least one characteristic of “problem gambling”) and men under 30 are also most likely to be full-on problem gamblers (10% meet that standard).
The fastest-growing group of sports bettors is college students. A 2023 NCAA study found that 67% of students living on college campuses (it did not break the survey out by gender) were betting on sports, with mobile sports betting their most frequent choice.
The NCAA was shocked — SHOCKED - to find 2/3 of students gambling on campus.
And that’s a big future problem, says Michael Lewis, the best selling author of, among other things, MoneyBall and The Big Short. Lewis, who now has a podcast called “Against the Rules,” has just completed an excellent series on the growth and dangers of sports gambling. In a recent conversation about the series on Scott Galloway’s “Prof G” podcast, he described the growth of sports gambling as an “epidemic.” But unlike the opioid epidemic, which was highly visible, sports gambling, he said, “is invisible…so you wonder: if it takes us 20 years to get our hands around the opioid industry, how long it is going to take us to get our hands around the gambling industry?”
Galloway compared betting on sports by cell phone to having a “casino in your pocket,” a constant source of dopamine-releasing entertainment:
Everybody young person needs a casino in their pocket, right?
“When you put that kind of an on-demand dopa bag in people’s pockets just as they’re hardwiring their life and learning about rewards, we’re just setting them up to be dopa monsters, and if they can’t get it from gambling because they run out of money, they’re gonna find it somewhere else.”
There are three things you need to know about the new online sports betting companies, the “sports books.”
Mostly males in the building: First, sports books devote large amounts of their promotional budgets to the young male market. The aim appears to be to create what Lewis refers to as “a pool of future gambling addicts,” with an endless barrage of ads, not just on network TV but on every social platform. "Absolutely. That is their target population. That is where they're going to grow their market," agreed Mark Gottlieb, executive director of the Public Health Advocacy Group, in an interview with CBS News. The NCAA study found that among students who see the ads, 58% admit the ads make them more likely to bet on sports, particularly the offers of “free bets” if you join the betting platform. Gottlieb says the free bets strategy is obvious: "The goal of course is similar to the heroin dealer. It's to get their customer to continue to use the product as much as possible until they can't not use it because they've developed an addiction." Draft Kings contests this charge, claiming it “takes consumer protection and responsible gaming seriously” and that it fully explains free bets to new customers in ways that are “detailed, clear, conspicuous and informative.”
Bet on everything in the building: Once sports books identify the customers they want to bet, the books need to make sure that the players bet more and more. Sports books make it easy to bet not just before but throughout the game -- which team will score next? Will the next play be a run or a pass? – and on wild combinations of events. You can get great odds if you place $20 on a bet that Kansas City AND Detroit AND Minnesota will all win by 10 points or more AND that the final points will be scored by someone in an odd-number jersey – so hey, why not?
How about this as a new tag line for sports gambling companies?: “Only Losers in the Building”
Only losers in the building: Finally, and less well-known, is that the “recreational” sports books – those that depend on advertising and new customers for their growth, are increasing their profit margins by eliminating consistent winning bettors. In the old days, “the house” took a cut of every bet -- a built-in profit margin of 4-5%. DraftKings (35% market share) and FanDuel (32% of the market) still have that built-in profit, but that’s apparently not enough. So they’ve created algorithms that systematically kick out or marginalize any bettors who appear to know what they are doing. Place too many winning bets and you receive a notice putting a limit on how much you can wager or kicking you off the platform altogether. The NCAA survey found that 59% of students betting on mobile apps do so expecting to make money. The sports books know differently: Essentially, if you are allowed to bet through one of the big online sports books, it’s because they know you are going to lose money.
So that’s how these new apps work. Addict people early. Convince people to make more and dumber bets. Kick out anybody who actually wins.
Still, this is a free country right? If the companies can get away with that, our tendency as Americans is just to say “more power to them.” it’s not like we are shutting down casinos or lotteries. And my friends who bet online make a pretty compelling argument: what’s the difference between wasting $50 of their money on a bet that makes the game more entertaining than wasting $50 at a bar watching the game?
I get those arguments. I really do. So what is it about mobile sports betting that gets me so ticked off?
It’s just not a fair fight: Unregulated intense marketing to people at a young age has lifelong implications. I have a deep hatred of the companies that have addicted so many of our kids to social media apps, vapes, porn and, now, gambling. In the 1980’s we developed guidelines on advertising of cigarettes to young people. There must be a way to do the same with gambling apps.
It's not gambling for the companies: The big sports books are selling the swank of gambling, but they aren’t taking any risk themselves. The “only losers allowed” approach violates my sense of fairness, in the same way I’m offended by insurance companies that revoke coverage once you make a claim. Similarly, if you are going to run a “gambling” platform, you should be willing to absorb some of the risk yourself.
It perverts what “sports” is: And I’m ticked off that the sports books have ruined one of the best things about sports. Sports used to be a place where young people learned the virtue of hard work – the harder they practiced their dribbling or shooting or passing or running, the more successful they would be competing in a fun activity. They learned — typically from caring adults — the value of teamwork and discipline. Sports books send the opposite message. You don’t need anyone else’s advice.You don’t need skills or hard work or discipline to enjoy sports – BET NOW!!!
What could be done?
The NCAA apparently has no interest in limiting gambling on campus — they just want to make sure student gamblers don’t try to bribe players. Various states and commissions are making some lame efforts to put vague controls on misleading advertising, or to limit who can bet, or how often, but are not really focused on the age issue:
· The Public Health Advocacy Group in Massachusetts has filed a class action suit against sports books, claiming the signup bonuses are misleading.
· New Jersey has moved to limit prop bets – focused on a single player – for college games. Thirteen other states already do this.
· Most states have set up “problem gambling helplines” to give folks a place to call if their gambling is getting out of control.
· Various state gaming commissions devote part of their revenue to support mental health services for problem gamblers.
· Congressional Democrats, describing state-level regulations as “faint-hearted and half-baked,” have introduced a series of measures to limit sports book advertising during games, limit the number of bets someone could make in a 24-hour period and authorize research on gambling growth, but those measures appear unlikely to make it to the floor.
What if having these apps on your phone was no longer a source of pride?
To which I say “fine.” Maybe some of those approaches will work. But I think a better strategy might be one Michael Lewis suggests. Get the word out that if you have an account in good standing with Draft Kings or Fan Duel “and you’re doing a lot of sports gambling, (that means) you don’t know what you’re doing…if you make it a point of shame that you are in good with the industry, that might stigmatize it in a way that makes it less dangerous.”
Consider this my attempt.
Notes:
Growth of legal sports betting in the US 2018-2024: https://www.legalsportsreport.com/sports-betting/revenue/
Sports gambling projected growth: https://www.goldmansachs.com/insights/articles/why-us-sports-betting-could-become-a-45-billion
Who bets on sports?: https://www.fdu.edu/news/fdu-poll-finds-online-betting-leads-to-problems-for-young-men/
Gender of sports bettors: https://www.statista.com/statistics/1105283/sport-gambling-interest-gender/
The financial consequences of sports betting: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4903302
NCAA attempts to protect student athletes from pressure from gamblers: https://www.ncaa.org/news/2024/3/19/media-center-ncaa-launches-draw-the-line-to-address-sports-betting.aspx#:~:text=According%20to%20a%202023%20NCAA,having%20engaged%20in%20sports%20betting.
NCAA study of sports gambling on campus: https://www.ncaa.org/news/2023/5/24/media-center-ncaa-releases-sports-wagering-survey-data.aspx
Lancet commission on gambling: https://www.thelancet.com/commissions/gambling
Stateline report on state perspectives on sports gambling: https://stateline.org/2024/12/05/growth-of-sports-betting-may-be-linked-to-financial-woes-new-studies-find/#:~:text=In%20a%20working%20paper%20released,and%20higher%20rates%20of%20bankruptcies.
Northwestern/Kansas study on diversion of dollars to sports gambling: https://stateline.org/2024/12/05/growth-of-sports-betting-may-be-linked-to-financial-woes-new-studies-find/#:~:text=In%20a%20working%20paper%20released,and%20higher%20rates%20of%20bankruptcies.
Bankruptcies increasing in betting app states: https://stateline.org/2024/12/05/growth-of-sports-betting-may-be-linked-to-financial-woes-new-studies-find/#:~:text=In%20a%20working%20paper%20released,and%20higher%20rates%20of%20bankruptcies.
Gottlieb on CBS News re sports books marketing to young men: https://www.cbsnews.com/pittsburgh/news/sports-betting-young-men-gambling-addictions/
Recreational sports books limit or kick off “smart” gamblers: https://www.washingtonpost.com/sports/2022/11/17/betting-limits-draft-kings-betmgm-caesars-circa/
The fascinating Season 5 of Michael Lewis’ “Against the Rules” podcast is all about the rise of sports gambling. Episode 1 here: https://podcasts.apple.com/us/podcast/against-the-rules-with-michael-lewis/id1455379351?i=1000670207869
Prof G podcast conversation between Scott Galloway and Michael Lewis: https://youtu.be/j9ETYFli2tI