The first time Rob Minnick got into debt, he was 19 years old. Now 25, he was sitting in the back of a classroom during his freshman math class when he got in the red betting on the New York Yankees during an MLB spring training game. He promised his parents he’d never do it again.
“Then it will happen five more times over the next five years,” he told Fortune magazine.
Minnick gambled away the unemployment benefits he earned from working on a college campus while waiting out the COVID-19 lockdown at his parents’ home. When the stock market crashed at the start of the pandemic, Minnick withdrew from his stock portfolio and sold his bitcoin and ethereum, using the money to fuel his gambling addiction.
“I was like, I need to get this money out right now and get it back, and then I’m going to buy twice as much as I had and hold onto it,” he said.
Though Minnick now acknowledges his shortsightedness, his financial habits surrounding gambling disorder are hardly unique. A new body of research finds that a growing number of Americans are selling off stocks and dipping into their savings to fund their sports betting habits, plunging them into financial chaos as a result.
Since the U.S. Supreme Court overturned the Professional and Amateur Sports Protection Act in 2018, effectively legalizing sports betting, U.S. sports betting revenue has skyrocketed from $441 million in 2018 to nearly $5.7 billion by 2024, according to Sportsbook Review.
The sports industry has reportedly signed billion-dollar deals between leagues and online platforms like DraftKings and FanDuel. Last year, 73 million Americans planned to place bets on the 2023 NFL season. That’s a lot of money for sportsbooks and the sports industry, but it’s a hole in the hole for many gamblers.
“This is a loss-making proposition for most people,” Scott Baker, an associate professor of finance at Northwestern University’s Kellogg School of Management, told Fortune. “On average, this is a loss for people’s finances.”
Baker authored a study, which has yet to be peer-reviewed, that found that states that legalized online sports betting saw household gambling increase by $1,100 per year, while the study also found that household net investment fell by about 14% after the introduction of legal online sports betting.
Baker said these gamblers aren’t just diverting funds from other parts of their entertainment budgets to support their gambling habits — they’re also using them to attend sports games and watch sports at restaurants and bars, allowing the money they spend on sports betting and the entertainment that comes with it to snowball.
“We know that increased gambling and increased spending is likely to erode some of the long-term equity investments – the positive, easy but risky investments that people have been making – and put further pressure and strain on budgets in general,” Baker said.
Baker’s findings are backed up by his colleague Brett Hollenbeck, a marketing professor at the UCLA Anderson School of Management, who found in a working paper that states that legalize sports betting saw an average decline in credit scores of 0.3% four years after gambling was legalized.
Using consumer credit data from 38 states that have legalized some form of sports betting, the study also found that bankruptcies, debt collections, debt consolidation loans and auto loan delinquency rates increased after legalization.
“What’s really unique about this study is not just that sports betting is a big, important industry,” Hollenbeck told Fortune, “but it gives us insight into how gambling changes people’s behavior.”
Boom and bust
This change in behavior is alarming to experts, who fear the surge in sports betting is increasing the prevalence of gambling disorders.
“I’ve seen people lose their homes, lose everything, not just because of sports betting, but because of where gambling disorder can lead them,” Michelle Malkin, a professor of criminal justice and criminology at East Carolina University, told Fortune.
Because legalizing sports betting is a relatively recent move, it’s hard to know the extent of its impact on gambling addiction, she said. But early studies are beginning to paint a picture. A Gemini Research study conducted by University of Massachusetts professor Rachel Volberg found that in Connecticut, which legalized online sports betting in 2021, 71% of the state’s legal gambling revenue comes from problem or at-risk gamblers, who make up just 7% of residents.
Malkin believes gambling addiction will become a bigger problem unless sports betting is adequately regulated. “You can’t win everything at the expense of those who are suffering the most,” he said.
But legal online gambling platforms have been a boon for states that have legalized sports betting and can impose heavy taxes on winnings. In July alone, the Connecticut Lottery, the state’s official lottery, made $497,000 in gross revenue from more than $4.7 million in customer winnings from retail sports betting. A Connecticut Lottery spokesperson told Fortune that the revenue goes into the state’s general fund and is invested in public health, libraries and public safety. But advocates of tighter gambling regulations warn that this is only one piece of the puzzle.
“This is a partnership between sports leagues, teams, players, media, online technology companies and gambling companies all with the state government,” Harry Levant, a clinician and gambling policy director at the Public Health Advocacy Institute, told Fortune.
But legalization of sports betting alone has not made it so popular, Levant argues, but rather the growth of online platforms and apps that allow users to place bets frequently and enjoy the instant gratification that comes with it.
“Since sports betting has been legalized, and now since online casinos have been legalized in seven states, the product has been made as fast and instantaneous as possible,” he said. “You can bet on the speed of every ball in a baseball game.”
Sports betting apps attract users with aggressive sign-up bonuses and incentives to make their first bet and trust that the platform’s convenience and ease of use will help them retain users.
“This gives users another activity they can do on their phone,” said Hollenbeck, the marketing professor.
Game Industry Trends
Growing concerns about gambling disorders are a top concern for online sportsbooks and their partners, and the NFL announced a $6 million, three-year extension of its partnership with the National Council on Problem Gambling last week to raise awareness of resources and educational materials.
The American Gaming Association (AGA), an industry group, has touted its efforts to raise consumer awareness of responsible gaming resources like wagering and deposit limits. DraftKings offers stat sheets to help users track their spending, and FanDuel has partnered with financial literacy nonprofit Operation Hope. Both groups are members of the Responsible Online Gaming Association (ROGA).
“Currently, there is a misconception that responsible gambling programs are only for problem gamblers, which leads to these programs and tools being underutilized or ignored,” ROGA Executive Director Jennifer Shatley told Fortune. “In reality, [responsible gaming] These programs are designed to help players continue gaming within their own personal limits and are therefore aimed at all our customer base.”
At the same time, the industry is skeptical of early data that suggests there is a significant relationship between legalized sports betting and gamblers’ financial behavior. Not only is legal sports betting still in its infancy, Shatley said, but personal financial data collected after legalization could be disrupted by the pandemic.
Joe Maloney, senior vice president of strategic communications for the AGA, told Fortune that previous data on gambling (albeit at brick-and-mortar casinos, not online) has not found a significant relationship between gambling and financial outcomes such as bankruptcy. Moreover, he argued, gamblers understand that sports betting is a form of entertainment and set their financial expectations accordingly.
“Consumers in today’s legal and regulated sports betting markets view this activity as a value add to their entertainment budget, rather than an expected positive value investment,” Maloney said.
Gen Z’s big spenders
Minnick’s own gambling habit began with the legalization of sports betting in 2018, which led to the emergence of dozens of apps that seemed tailor-made for him. He and his group of friends in college, who mirrored the sports world’s largely male fanbase, found themselves targeted by marketing for betting apps.
“If Vanessa Hudgens is showing us around, it’s clear who they’re trying to appeal to. [a virtual casino]”Right?” Minnick said, referring to the early 2000s Disney Channel actor who recently appeared in a BetMGM ad. “It’s not a big secret.”
While the open door to sports betting is risky for anyone, Hollenbeck’s early modest findings suggest that men who experience gambling disorders, especially those of Gen Z, are at higher risk of financial ruin as a result of their gambling. Men experience gambling disorders at nearly twice the rate of women. That could be because they are more attracted to sports betting and receive targeted advertising from sports betting platforms, he said.
“Wall Street sage” Meredith Whitney even says that the love of sports betting could impact the housing market because young men are not interested in getting married and leaving their parents’ homes.
“They’re all young men. [betting on sports]”And then I put that against a Pew Research Center study, which says 63% of young men are single, which is the highest number ever. And 50% of those young men are not interested in dating, don’t even want casual dating,” she said in a December 2023 interview with CNBC.
Minnick, who hasn’t bet in years, is fighting the odds that Gen Z men are turning to sports betting. He’s a full-time content creator who works with teletherapy companies and state legislatures to design marketing for gambling disorder resources for young people.
“The underlying purpose of it all is to help other people not make the same mistakes I did,” he said.
He dumped his sportsbook app and stopped investing altogether, fearful of reverting to risky options trading, which is akin to gambling. Instead of the emotional and financial ups and downs that once defined his life, Minnick has chosen firmer financial footing.
“Right now, all I have is a personal 401k,” he says, “and I haven’t even put any money into it yet.”