Posted on: August 15, 2024, 09:01h.
Last updated on: August 15, 2024, 09:01h.
It’s often joked that “the stock market is a casino,” but some bettors are taking that phrase to heart and selling investments to fund sports betting habits.
According to the recently published working paper Gambling Away Stability: Sports Betting’s Impact on Vulnerable Households, researchers from Brigham Young University (BYU), Northwestern University, and the University of Kansas highlight that after the 2018 Supreme Court ruling on PASPA, funds originally earmarked for stocks and investments began to be redirected towards sports betting, impacting the financial stability of households.
In contrast with the sizable effects on equity investments, we find that increases in sports betting do not coincide with decreases in participation in other forms of gambling. Overall, these results suggest that most of the displacement driven by increases in sports betting falls on positive expected value ‘investments’ rather than other types of negative expected value ‘bets’.
The study examined all state-level sports wagering legalizations post-PAPSA through September 2023 and found a correlation between the rise in sports betting and a decrease in investments in stocks.
It’s Hard to Beat Stocks with Betting
The research presents a cautionary tale for young adults, the prime demographic for sports betting, who should be focusing on long-term investments for financial success rather than risking capital on sports wagers.
In a hypothetical example, consistent investment in the stock market over ten years can yield significant returns, highlighting the superiority of equities as an investment vehicle over sports betting.
Attempting to outperform equities through sports wagering is a challenging task that only a fraction of bettors can achieve with any level of consistency.
With the diversion of funds from stocks to sports betting, policymakers are urged to address the financial implications of this trend on household stability and wealth accumulation.
Other Financial Implications from Sports Betting
Recent studies have shown that states allowing mobile sports wagering are experiencing modest declines in credit scores and an increase in bankruptcy filings, highlighting the negative financial consequences of excessive sports betting.
Gambling Away Stability underscores the fact that households engaging in sports betting may face increased financial constraints, leading to higher credit card debt and reduced access to credit, resulting in a cycle of indebtedness to fuel a detrimental habit.