New study says low-income consumers at high risk from sports betting

A new comprehensive study conducted by the University of California San Diego Rady School of Management, has taken a harder look at the state of state in the sports betting industry, and how the mass legalization of the activity has impacted consumers.

Low-income consumers are ill-equipped to participate in the betting bonanza

A recent episode of Radio Atlantic, a podcast, featured sports journalist Jemele Hill who has likened the sports betting industry to the tobacco industry from decades ago, and criticized the tendency to sell gambling as a harmless way to enjoy athletic competitions.

The study coming from the Rady School of Management seems to bear this claim out, at least partially. The study focused on analyzing both the positive and negative impacts of the 2018 decision which made it possible to legalize sports gambling across the United States.

The biggest issue, argues Kenneth C. Wilbur, professor of marketing and analytics at the Rady School, who co-authored the study, is that irresponsible gambling seems to be on the rise among lower-income consumers, even if states are driving revenue and tax fall.

For example, a recommended 1% expenditure of income on gambling. However, the research flags much more aberrant behavior across the board. For 3.2% of gamblers, the monthly gambling bill amounts to 15% of their monthly income. Another 5.3% of gamblers spend more than 10%. Still, another 43% of the observed gamblers based on the data trawling by the university show that players exceed the recommended 1% guideline.

"We define gambling irresponsibly as spending a high proportion of their income —for example, 10%—on gambling," Wilbur said in fleshing out the details and methodology of the survey.

The study first focused on identifying a sample size, tapping into state revenue and tax data, gambler helpline calls and more grimly, Center for Disease Control suicide records, as well as digital payments records, all of which have proven invaluable in constructing the study’s methodology.

Sharp bettors can still turn a profit, but 96% of all bettors lose

A sample size of more than 700,000 gamblers was chosen this way, Wilbur explained, adding quickly that 96% of these people lose money on gambling. The other 4% were indeed able to turn money on gambling, but there is a catch. Wilbur justly observes that online gambling websites tend to suspend the accounts of high winners, evidence of which abounds.

This issue has been so prominent that players have actually come together to form a player gambling association that will seek to protect the interests of the so-called "sharp" bettors, or the gamblers who intentionally bet to win.

They usually fall foul of online gambling operators’ ill-defined rules of "recreational gambling," which give gambling companies a justification to expel non-recreational players, i.e. players who tend to win too much consistently.

Regardless, Wilbur has focused not on the woes of high-flyers, but rather on the fact that low-income consumers are ill-equipped for the onslaught of sports betting legalization, often over-spending money and mistakenly – in the hopes of winning money.

Wilbur hopes that these findings can help not only inform the remaining states in choosing to regulate sports betting but to spur a much more significant policy change that could help engage the industry in a way that does what it has set out to do – protect consumers first.

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