The Online Sports Betting Backlash
Online sports betting is everywhere. Nearly a quarter of American adults have an active online sports betting account, including almost half of all men ages 18-49. Online sportsbook ads are omnipresent, promising deposit bonuses, free bets, and in-game wagering. TV networks that once shied away from sports betting content now eagerly incorporate betting lines into their game broadcasts and opinion shows. Sports betting has gone from a niche hobby to one of the country’s most dominant forms of entertainment in just a few years.
Now the backlash is forming. New data show the growth of online sports betting has led to a variety of financial and mental harms among a subset of gamblers, particularly younger men. That has led to calls to rein in online sports betting or ban it. On the right, The American Compass and commentator Saagar Enjeti have called for an overhaul of online sports betting regulation, while on the left, Democratic Members of Congress have introduced a bill that would impose tough new federal regulations on the industry. At the state level, Illinois enacted a new tax on sports betting, while lawmakers in Massachusetts and Ohio are considering proposals to ban in-game prop bets.1
The growing harms of online sports betting present a tough challenge for policymakers. Some may view it as “paternalistic” for the government to impose rules that protect people from doing themselves financial harm. In general, American regulations reflect a belief that people can do what they want as long as they have access to complete and accurate information about what they are getting themselves into and are not injuring anyone else with their actions. But in certain areas of consumer protection for financial products — like payday loans or mortgage lending — we recognize that some industry practices should be restricted because they uniquely prey on vulnerable people and consistently result in financial harm to them and their families.
In this piece, we propose a set of reforms that reflect this approach. Our reforms would not meaningfully change the online sports betting experience for the vast majority of people, but would target the industry practices that prey on the most vulnerable gamblers and regularly produce the most serious financial and mental harms. Our reforms are inspired in part by the regulation of state lotteries, which are still profitable and entertaining for the millions who play them, but result in far lower rates of financial harm than online sports betting currently does.
The Specific Harms of Online Sports Betting
Online sports betting poses unique risks. In an excellent recent piece in The American Prospect, Gabrielle Gurley summarizes the data:
According to the American Psychiatric Association, nearly 40 percent of men and 20 percent of women gamble online daily. Two percent of those bettors gamble more than ten hours a day. Sports bettors have wagered over $600 billion since 2018. The National Council on Problem Gambling notes that about 2.5 million Americans “meet the criteria” for a severe problem; five to eight million more have mild to moderate issues.
As the country’s affordability crisis deepens, individuals and entire families can slide into cycles of addiction and debt. Bank of America warned in a November research note that gambling is creating “emerging credit risks” across the economy; an April paper from UCLA and USC found that credit scores in states that have adopted online sports betting are down, and bankruptcy rates and auto loan delinquencies are up. Eight U.S. studies found that 1 in 5 problem gamblers have tried to commit suicide, the highest rate for any addiction disorder.
The unique features of online sports betting create a perfect storm for addiction. Sports betting apps are continuous and ambiguous in nature. For example, in-play betting — where a bettor places bets on actions occurring during a live game — opens the door to dozens of betting decisions in a single game, with the user knowing the outcome of their bet in minutes or seconds. There’s no natural stopping point. Miss a bet on whether the next play is a pass or run? Why not bet on the next play? Research shows how damaging this can be. In-play bettors exhibit double the problem gambling rates of pre-match bettors.
But on top of the structure of sports bets, online and mobile gambling apps can take advantage of the interactive user experience to further target the most susceptible bettors.
Gambling apps collect behavioral data and feed it into AI systems designed to identify “high-value players,” or players who lose the most. These systems send personalized offers at algorithmically-optimized moments. Personalized marketing increases engagement by 45% compared to generic messaging.
The apps use other strategies as well. Some examples: losses disguised as victories (apps offer opportunities to “cash out” at 80% of your original wager); the “Total Winnings” for a bet are prominently displayed while net losses are nowhere to be found; one-tap re-betting makes it frictionless to reinvest after losses; “parlay builders” entice bettors into bets with terrible projected returns.
Despite these features, most online sports bettors gamble responsibly and without signs of addiction. But the sliver of bettors who struggle with addiction are the ones that make the industry so profitable. A study commissioned by Connecticut’s Department of Mental Health and Addiction Services in 2024 tracked where gambling revenue actually comes from. It found that 1.8% of Connecticut residents are problem gamblers, and 4.9% are at-risk gamblers. That combined 6.7% of the population generated 51% of sports betting revenue. An older study from the Journal of Gambling Business and Economics found that somewhere between 5% to 18% of users generated 80% of internet gambling revenue.
Online sports betting apps invest huge resources into extracting maximum value from this slice of bettors. VIP hosts — employees hired to focus solely on increasing gambling activity of these few super users — are explicitly told to “re-engage users, reduce user inactivity,” and more. Job postings and leaked internal documents show this sort of practice to be systematic across the industry.2
The consequences are stark for these bettors. Problem bettors show higher rates of depression, anxiety, and substance abuse, with increased suicide risk. And the targeted harm is concentrated on young men: 10% of men under 30 are classified as problem gamblers. Problem gamblers can permanently damage their credit, hurting their ability to buy a home, build wealth, and even start a family. And the financial and emotional harm extends beyond the problem gambler themselves. One person’s addiction typically drags in their partner, kids, parents, or friends. Researchers have found that the typical problem gambler negatively affects six others.
Recommendations for Reform
As policymakers consider options for online sports betting regulation, they could look to the regulation of state lotteries as an example. One recent meta-study found that problem gambling rates for online sports betting were several times higher than for lotteries.
The structural differences between lotteries and sports betting apps explain the dramatic gap in problem gambling rates. Lotteries have built-in delays between purchase and outcome; the physical friction (in most states) of required in-person purchase; no individualized targeting; and (in many states) bans on the the use of credit cards in purchasing lottery tickets.
These features don’t eliminate lottery participation, and states still generate substantial revenue from running lotteries. But these features cut problem gambling rates severalfold, reducing a variety of financial and mental harms. Accordingly, we suggest lawmakers look at:
Banning Live/In-Play Betting and Rapid Re-Bets
As mentioned earlier, this form of betting is associated with much higher problem gambling rates because it eliminates cooling-off periods and enables rapid loss-chasing. Multiple European countries ban or heavily restrict this already, and operators still function profitably. A mandatory 5-minute delay between event-clearing and new bet placement would also help break the addiction loop via a simple artificial cooling-off period.
Banning Algorithmic Targeting, Push Notifications, and “VIP” Programs Targeting High-Loss Bettors
Lawmakers should consider restricting all forms of communication between gambling companies and users so that they are opt-in only, maximum one per day, and generic content only. Targeted offers and other communications exploit the most vulnerable and high-risk gamblers, causing substantial financial harm.
Banning the Use of Credit Cards for Online Deposits
Roughly half of U.S. states across the political spectrum — from Texas to Colorado to Massachusetts — ban the use of credit cards for lottery ticket purchases, yet currently only eight states prohibit credit card deposits for online sports betting. The UK banned credit card gambling entirely in April 2020 after finding that 22% of online gamblers using credit cards were problem gamblers, a rate four times higher than the general gambling population. US States should follow that example.
Online sports betting apps offer a service that most people use responsibly. But specific practices exploit vulnerable bettors and cause significant financial and mental harm to those bettors and their families. By eliminating those practices, policymakers can reduce much of the harm from online sports betting while preserving the features that many people enjoy.
A prop bet is a wager on a specific event or occurrence within a game, like whether a certain football player will score a touchdown.
The flip side is the subtle and not-so-subtle ways the online sports betting apps discourage successful gamblers, as detailed vividly in a recent piece in The Economist.
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