Legal Sports Betting Expansion Linked to Surge in Americans' Financial Problems

Eight years after the U.S. Supreme Court overturned the Professional and Amateur Sports Protection Act (PASPA) — the 1992 federal law that had effectively banned commercial sports betting in most states — Americans legally wagered more than $157 billion on sporting events in fiscal year 2025 [1]. Thirty-nine states and the District of Columbia now permit some form of legal sports betting [2]. The expansion has generated more than $3.2 billion in annual state tax revenue [1]. It has also, according to a growing stack of peer-reviewed research and a landmark Federal Reserve Bank of New York study published in March 2026, coincided with measurable increases in consumer financial distress [3].

Source: American Gaming Association / Legal Sports Report

Data as of Dec 1, 2025CSV

The Scale of the Expansion

The growth curve has been steep. In 2019, the first full year after PASPA's repeal, the total legal handle — the sum of all money wagered — was roughly $13 billion. By 2021 it had quadrupled to $57.2 billion. It nearly doubled again to $93 billion in 2022, crossed $119 billion in 2023, and reached an estimated $140 billion in 2024 before hitting $157 billion in 2025 [1][4].

Source: American Gaming Association

Data as of Dec 1, 2025CSV

The number of states with legal markets has tracked a similar trajectory: from a single state (Nevada) in mid-2018 to 39 states and D.C. by December 2025, when Missouri became the latest to go live after voters approved a ballot measure in November 2024 [2]. New York has emerged as the single largest market by handle, overtaking New Jersey in early 2025 [4].

The New York Fed Study: Credit Scores, Delinquencies, and Bankruptcy

In March 2026, researchers at the Federal Reserve Bank of New York published what is now the most comprehensive analysis of sports betting's impact on household credit health. Using anonymized consumer credit panel data, they found that credit delinquency rates — primarily driven by missed payments on credit cards and auto loans — rose approximately 0.3% across the general population in states that legalized sports betting [3].

That figure understates the effect on the people actually placing bets. Among the roughly 3% of the population who took up sports betting after their state legalized it, credit delinquencies spiked by more than 10% [3][5]. Among bettors under 40, the share who were at least 90 days late on a credit card payment rose 7.9%, and auto loan delinquencies increased by 5.6% [5].

A separate study by UCLA economist Brett Hollenbeck, using household transaction data and a staggered difference-in-differences framework, reported a 10% increase in the likelihood of bankruptcy and an 8% increase in debt collection amounts in states that allowed online betting — outcomes that tended to appear about two years after legalization [6].

Source: FRED / Federal Reserve

Data as of Oct 1, 2025CSV

The financial distress does not stop at state borders. The New York Fed study found that residents of states where sports betting remains illegal, but who live within fifteen miles of a legal state, experienced roughly 15% of the betting increase seen in legal-state counties, with corresponding rises in delinquency [3][6].

Who Is Harmed Most

The demographic profile of betting-related financial harm is not evenly distributed.

Age: Sports betting is most prevalent among adults aged 25 to 34 (34% of bettors), followed by the 35-to-44 bracket (31%) [7]. A Siena Research Institute poll found that half of men aged 18 to 49 now hold active online sports betting accounts [8]. The average age of callers to North Carolina's problem gambling hotline dropped from 43 to 38 between 2021 and 2025 [9].

Income: Research from UC San Diego found that young men in low-income counties — those with below-median wages — experience greater credit-score declines and higher bankruptcy rates after legalization than their counterparts in wealthier areas [10]. A U.S. News survey found that one in four sports bettors reported missing a bill payment because of their wagers [11].

Race and ethnicity: Pew Research Center data show that Black and Hispanic adults are more likely than White adults to have bet money on sports in the past year — 30% and 27%, respectively [7]. A separate survey found that Black Americans and Latino Americans are the most frequent depositors, with 28% and 22% of each group funding their accounts at least weekly [7]. Latino bettors (63%) were more likely than Asian American bettors (39%) to report chasing losses — continuing to bet in an attempt to recover prior losses [7].

Credit and debt: According to an Odds Assist study, 57% of sports bettors have used credit cards to deposit funds, and 51% of those have gone into debt as a result. More than 15% said they had taken out personal loans to fund bets, and 12% had turned to payday loans [6][11].

Problem Gambling Hotline Data

State-level hotline data provides a real-time signal of gambling-related distress that largely tracks the legalization timeline.

In Kentucky, calls to the state's problem gambling hotline tripled after sports betting went live, with some callers reporting suicidal ideation [12]. Florida's hotline saw a 138% increase in calls after legalization: online sports betting accounted for 56% of calls and 242 total calls in 2023 (pre-legalization year for online), compared to 70% and 650 calls in 2024 [13]. In North Carolina, hotline calls more than tripled in the two years following legalization [9]. Ohio's United Way 211 saw a 277% increase in sports-gambling-related calls in January 2023 compared to January 2022, the month legalization took effect [14]. By February 2023, sports betting had surpassed lottery and casino slot machines as the top form of problematic gambling reported to Ohio's helpline [14].

NBC News reported in 2024 that gambling addiction hotlines nationwide were seeing elevated call volumes as online sports betting expanded [15].

Who Profits: The Revenue Concentration Question

Between 95% and 97% of sports bettors lose money over time [16]. In 2023, Americans wagered about $119.8 billion on sports, and sportsbooks retained $10.9 billion in revenue — a hold rate of roughly 9% of all money wagered [16]. That revenue figure represents, in aggregate, the sum of bettors' losses.

The industry's fastest-growing and most profitable product category is parlays — multi-leg bets where all selections must win. Parlay hold rates range from 20% to 35%, compared to roughly 5% for straight bets, and parlays now account for over 30% of total handle, up from less than 15% in 2019 [16]. These products are marketed aggressively and are structurally more likely to generate losses for bettors.

While precise data on the share of revenue derived from problem bettors is not publicly disclosed by U.S. operators, research from lottery and casino contexts has consistently shown that a small share of heavy users generates a disproportionate share of revenue. Problem gambling affects an estimated 12% to 16% of frequent sports bettors, and these players acknowledge gambling-related debt [16]. The structural parallel to documented patterns in lottery revenue — where the top 10% of players often account for the majority of sales — raises questions about whether the sports betting industry's profitability depends on a similar concentration.

Advertising, Promotions, and User Acquisition

U.S. sports betting operators spent $1.1 billion on advertising in 2023, down from $1.4 billion in 2022 [17]. FanDuel alone spends over $225 million annually on U.S. advertising, followed by DraftKings at roughly $80 million and BetMGM at $64 million [17].

The average cost per acquisition — what an operator spends to gain a single new betting customer — ranges from $500 to $800 [17]. Promotional credits, often structured as "bonus bets" (the industry moved away from the now-restricted term "risk-free bets"), are a primary tool for acquiring new users. These credits function as loss leaders: the operator absorbs an initial cost in exchange for establishing a betting habit. FanDuel has reported a 1.2x return on its user acquisition spending, meaning each dollar spent on acquiring a customer eventually generates $1.20 in lifetime revenue [17].

Critics argue that the promotional structure — sign-up bonuses, ongoing "boosts," and push notifications during live games — is designed to establish habitual betting patterns rather than casual entertainment. The American Gaming Association has countered that advertising spending and volume have actually declined from their 2022 peak and that operators are increasingly focused on retention and responsible gaming tools rather than aggressive acquisition [18].

The Tax Revenue Gap

States collected more than $3.2 billion in sports betting tax revenue in fiscal year 2025, a 382% increase from $190 million in the third quarter of 2021 alone [1][19]. That money flows into general funds, education, pensions, infrastructure, and, in theory, problem gambling treatment.

In practice, the treatment funding is minimal. A 2021 survey by the National Association of Administrators for Disordered Gambling Services found that per capita allocations for problem gambling services ranged from less than half a cent in Colorado to $1.66 in Oregon. The national average across the 42 states with any publicly funded services was $0.40 per person [20].

Source: National Association of Administrators for Disordered Gambling Services

Data as of Jan 1, 2024CSV

By comparison, New Zealand spends approximately $2.50 per capita, Australia $1.80, and Canada $1.20 on problem gambling treatment and prevention [20]. The U.K., despite having one of the world's oldest regulated gambling markets, spends only about $0.55 per capita — a figure that U.K. researchers themselves have called inadequate [21].

In March 2026, a bipartisan group of lawmakers introduced the POINTS Act (Providing Opportunities for Individuals In Need of Treatment & Support), which would redirect a portion of the existing federal excise tax on sports betting into a dedicated fund for problem gambling prevention, treatment, and recovery. If enacted, it would represent the first dedicated stream of federal funding for gambling addiction services in U.S. history [22]. As of April 2026, the bill has not advanced out of committee.

The Industry's Defense and the Causation Question

The American Gaming Association and individual operators have pushed back on the narrative that legalization is producing a net increase in financial harm. Their core argument has several components.

First, they contend that legal sports betting has brought consumers out of illegal offshore markets, providing regulated channels with consumer protections, self-exclusion tools, and deposit limits that the black market never offered [23]. The AGA has pointed to the decline in advertising spending as evidence that the industry is maturing past its initial land-grab phase [18].

Second, they argue that correlation does not establish causation. Credit delinquencies have risen across many consumer categories since 2022, driven by inflation, rising interest rates, and the expiration of pandemic-era relief programs. The question is whether sports betting legalization caused additional distress beyond these macroeconomic trends, or whether it simply correlates with them.

This is a legitimate methodological challenge. Researchers acknowledge that disentangling sports-betting-specific harm from broader economic stress requires careful design. The Hollenbeck study and the New York Fed analysis both used difference-in-differences designs — comparing outcomes in states that legalized versus those that did not, before and after legalization — specifically to isolate the effect [3][6]. Both found statistically significant effects attributable to legalization after controlling for macroeconomic factors. But the Hollenbeck study also found that the increase in sports betting spending does not displace other gambling or consumption but significantly reduces savings, suggesting net new financial risk rather than mere channel-shifting [6].

A 2025 longitudinal study published in Addictive Behaviors tracked individuals before and after legalization and found an increase in problem gambling prevalence that was not explained by pre-existing trends [23]. However, some researchers, including those funded by Arnold Ventures, have called for additional causal research with larger sample sizes and longer follow-up periods [24].

The honest answer, based on the current literature, is that the evidence is stronger than pure correlation but not yet at the level of a randomized trial — an ethical impossibility in this context. The weight of evidence from multiple independent studies using different methodologies and data sources points toward a causal relationship, but the precise magnitude of harm attributable specifically to legalization, versus broader economic conditions, remains a subject of active research.

Regulatory Proposals and Industry Lobbying

The most comprehensive federal regulatory proposal is the SAFE Bet Act (Supporting Affordability and Fairness with Every Bet), introduced by Rep. Paul Tonko (D-N.Y.) and Sen. Richard Blumenthal (D-Conn.). The bill would require operators to limit deposits to five per 24-hour period, prohibit credit card deposits, and conduct affordability checks before accepting wagers exceeding $1,000 in a day or $10,000 in a month. The affordability check would verify that a proposed deposit does not exceed 30% of the individual's monthly income [25].

The American Gaming Association has called the bill "a slap in the face to state legislatures and gaming regulators," arguing that states already provide adequate oversight and that federal intervention would create regulatory confusion [25]. The bill has not advanced in Congress.

At the state level, regulatory approaches vary widely. Some states require operators to offer self-exclusion lists and voluntary deposit limits. Few mandate them as default settings. No U.S. state currently requires the kind of mandatory affordability checks that the U.K. Gambling Commission implemented in 2024, which require operators to verify customers' financial capacity before allowing large or sustained losses [25][21].

The American Institute for Boys and Men has published a policy framework calling for default opt-in loss limits, restrictions on parlay marketing, and mandatory cooling-off periods during live-game betting — measures that would require either federal legislation or coordinated state action to implement [26].

What Comes Next

The political dynamics are complex. States are now dependent on billions in betting tax revenue, creating an incentive structure that makes aggressive regulation politically costly. Operators spend heavily on lobbying to preserve favorable regulatory terms [25]. Meanwhile, a growing body of research — from the Federal Reserve, from UCLA, from UC San Diego, from peer-reviewed journals — is documenting financial harm that tracks legalization with increasing precision.

A Pew Research Center survey published in October 2025 found that Americans increasingly view legal sports betting as bad for society and bad for sports, with the share holding negative views rising across all demographic groups, including among younger men who are the most active bettors [7].

The question is no longer whether legal sports betting affects household finances. The research increasingly suggests it does. The question is what states and the federal government are willing to do about it — and whether the $3.2 billion in annual tax revenue creates a conflict of interest that makes meaningful regulation unlikely.