In Defense of Sports Betting
It's way less bad than other forms of gambling
In the first eight months of 2024, Americans bet more than $85 billion at regulated sportsbooks. With average losses of around 10%, their wagers generated over $8 billion in revenue for operators.
A billion dollars a month is a lot to lose, and researchers have begun to plot the effects. As Charles Fain Lehman wrote in the Atlantic last month, “a growing body of social-science literature suggests that…the rise of sports gambling has caused a wave of financial and familial misery, one that falls disproportionately on the most economically precarious households.”
Lehman points to studies showing legalized sports betting, particularly online, is associated with less saving, higher rates of bankruptcy, and an increase in domestic violence. His solution is simple: ban sports betting.
I agree sports betting has spread too far too quickly, and that more attention should be paid to the harms. But it’s far less dangerous than other forms of gambling. If critics want to ban gambling altogether, they should make that argument openly. But those who don’t favor prohibition and merely seek to protect vulnerable Americans should instead focus on the games which pose the biggest threat.
Different Ways to Gamble
Since the Supreme Court decriminalized sports betting in 2018, gambling has become ubiquitous. NBA courts and MLB broadcasts are littered with gambling ads, and it’s difficult to get halfway through any form of sports content, whether on TV or a podcast, without having a celebrity tell you to sign up and get a risk-free bet.
This has, rightfully, pissed a lot of people off. Americans love sports, and the majority of them don’t want to bet on it or hear about the announcer’s parlay of the day. Even for the most avid gamblers, the wall-to-wall advertising can be exhausting.
It’s logical to think that sports betting’s meteoric rise has and will continue to result in unprecedented financial misery. But it is worth putting the numbers cited by Lehman into perspective. Last year, Americans lost more than $30 billion playing the lottery, nearly three times what they lost at regulated sportsbooks.1 And of the $15.5 billion Nevada casinos profited in 2023, sports betting accounted for just three percent. When looking at how Americans lose money gambling, sports betting still represents a drop in the bucket.
Sports betting is also less regressive than other forms of gambling. The poorest Americans are most likely to play the lottery: adults in the bottom 1% of earners spend $600 a year, or roughly 5% of their income, on lottery tickets. Sports betting, by contrast, is most popular among the middle and upper middle class. A 2023 study from Ipsos found that the growth in sports gambling was being driven disproportionately by young, white men earning more than $100,000 per year.
None of these are the most dangerous form of gambling, however. That title belongs to online casinos, or as insiders call it: iGaming.
The Rise of iGaming
In 2011 the Justice Department reversed its opposition to internet gambling, allowing states to sanction non-sports related betting. While online casinos weren’t the focus of the decision, which came in response to requests by New York and Illinois to sell lottery tickets online, it paved the way for operators to legally offer blackjack, roulette, slots and more to Americans itching to gamble.
Today, seven states—Delaware, New Jersey, Pennsylvania, Michigan, West Virginia, Connecticut and Rhode Island—have legalized iGaming.
Compared to sports betting, iGaming is a much better business. Operators don’t need to worry about customers who can beat them in the long run, because odds are constant and always stacked in the house’s favor.2 They don’t need to pay leagues and third parties for expensive in-game data, or the .25% federal excise tax applied to all sports bets.
Customer acquisition is simpler, as users don’t need to know or care about sports.3 Products are not reliant on real events, and so can be designed to be as addictive as possible and offered 24/7. Games resolve in seconds instead of hours, encouraging more play—generating higher profits—and allowing users to easily chase their losses and quickly lose large sums.4
Unsurprisingly, the iGaming business is booming. In August, Michigan residents lost $29 million betting on sports. During the same period they lost nearly $200 million playing online casino games.5 In 2024, operators in the seven states have made more than three times as much from iGaming as they have from sports betting.
Many in the industry see iGaming as the future. Flutter, the parent company of Fanduel, anticipates legal online casino games will be accessible to 25% of the population by 2030, up from 11% today, according to their September investor report. Last year, Draftkings CEO Jason Robins said iGaming was a “hidden gem” of their business, and that he “wouldn’t be surprised if [iGaming became] bigger than sports.”
Picking Battles
There is a lot more media coverage on the downsides of sports betting than iGaming. Much of this is due to visibility: sports gambling is more widespread, and it’s impossible to miss the ads if you watch sports or consume any sports-related media. Some of the panic likely comes from the belief that sports betting can serve as a gateway drug to other forms of gambling, or that it’s more dangerous than iGaming, especially for kids, because there’s an illusion of control—if you know sports, you might think you have an edge when you don’t, and bet more than you should.
But a lot of the criticism stems from the belief that legal sports betting is uniquely positioned to steal Americans’ hard-earned money. And that’s wrong.
Legal iGaming poses a far greater threat to Americans’ financial security, and unlike sports betting it hasn’t already become mainstream. From a cultural and policy standpoint, it’s a lot easier to push back against something that isn’t yet legal—or culturally normalized—in most of the country than to try and criminalize what’s already ubiquitous.
As one gambling lobbyist (who asked to remain anonymous) told me, “Even if you think sports betting is as bad as [online] casino, which it’s not, that debate is basically settled… If the concern is addiction and helping Americans lose less, time and money spent fighting against iGaming is probably ten times more effective than trying to make [sports] betting illegal again.”
When confronted with the potential harms of iGaming, operators’ response is always the same: people are already doing it, we just want to bring it above ground. Legalization, the case goes, would not only generate lots of tax revenue but cripple the more predatory, unregulated online casinos. Some go as far as to suggest legalization would decrease problem gambling by transitioning users over to more scrupulous casinos concerned about their well-being.
Unfortunately, this isn’t the case. As with sports betting, alcohol, marijuana, and pretty much everything else, legalization leads to easier access and thus to increased use. Even before sports betting was legalized, some people were already gambling at illegal websites. But doing so was moderately difficult and a bit shady, typically requiring gamblers to use a VPN and Bitcoin to access offshore sportsbooks. Now anyone can bet easily from their phone. The same would be true of legalized iGaming. Digital roulette and blackjack would be just an app and Venmo deposit away, making it far easier for users to start and get hooked.
Legal iGaming would boost state coffers, but only by a portion of what citizens lose. Study after study has found that gambling is a net negative for the economy, as any increase in tax revenue is offset by less investment and spending on other activities like shopping and dining.
Moreover, it’s not even clear legalization hurts unregulated operators. By some accounts, offshore sportsbooks’ revenue is higher than ever. Last year, researchers at Penn State published their annual online gambling report, which found that since legalization, the number of Pennsylvanians who gambled with illegal operators—via sports betting and online casino—has doubled.
The same report found that the number of citizens who reported having problems with online gambling increased more than 125% between 2022 and 2023, a reflection of more people playing and a higher risk among new customers.6 The reality is simple: legal iGaming means more people gambling online, which means more losses and more cases of problem gambling and addiction.
(Somewhat) Arbitrary Lines
Finally, it’s worth considering what we mean when we talk about “gambling.” Technically, anything in which you risk money on an uncertain outcome could be considered a bet. That’s true of sports betting, casino games, or the lottery. But it’s also true for buying a house, picking stocks, or any investment where the returns aren’t guaranteed.
After all, while some bets may have a positive expected return in the long run, most people who engage in any form of speculation lose. As Matthew Trenhaile, who has managed risk for brokerages and sportsbooks, said on a recent podcast: “If you think sports bettors lose, it’s nothing compared to people who try their hands at financial trading. It’s just unreal. Over ten years, I think we had less than 5 [retail customers] who sustainably made money.”7
Rather than declaring that all forms of gambling should be illegal, it might be better to distinguish between games of pure chance and games of some chance.8 Sports betting, like poker and stock trading, involves at least some skill. While most people lose at all three, the ability to improve and actually win means gamblers can glean valuable insights about math, randomness, and life.9 Sports betting and poker are also at least a little prosocial: sports bettors are more engaged fans and often place bets alongside friends. Many poker players enjoy the company more than the cards.
iGaming has neither of those redeeming qualities. It is purely random, with odds permanently stacked against bettors, and it is a solitary activity. But most importantly, people lose a lot more. Advocates for iGaming argue that it is logically inconsistent to legalize sports betting but prohibit iGaming. Yet the same case could be made for legal marijuana and illegal fentanyl.
Sports betting is here to stay, whether critics like it or not. Modern betting products are, frankly, incredible, and for millions of Americans they are now inseparable from their love of sports. Should there be fewer and less deceptive ads? Certainly. Should regulators crack down on predatory practices and work harder to ensure that citizens are better informed about odds and risks? Absolutely.
But if the concern is Americans losing their shirts, sports betting isn’t the primary culprit, nor will it ever be. The real danger lies in iGaming, with instantaneous games fine-tuned to maximize addiction. Everyone knows Vegas wasn’t built on winners. But it also wasn’t built on sports bettors.
This number is actually much higher when you account for the fact that lottery payouts are highly concentrated, such as the single person who took home last year's $1.6 billion Mega Millions jackpot. Lottery tickets also have worse odds than most sports bets: the average American who spends $100 on lottery tickets is expected to lose $30, compared to $10 for every $100 they bet on sports.
The reason some sports bettors are able to win is because odds are always shifting and there is uncertainty about what the true likelihood of different events is. For casino games there is no such uncertainty. While some players can win playing casino games in person, most commonly card counters in blackjack, advantage play for online casino games is almost impossible.
This is why women are far more likely to play online casino games than bet on sports.
Below is a clip from streamer Ryan Depaulo, highlighting just how easy it is to chase losses online (in this instance at the blackjack tables). Sportsbooks are trying to decrease the length of bets via micro betting—where users can wager on individual events like whether a pitch will be a ball or a strike—to generate more bets. It’s easier to chase losses at online casinos than real ones, because users are alone and don’t feel the same stigma they might if there were other players or dealers at the table.
These numbers, and all of the figures cited, are from legal, regulated sportsbooks. Many Americans wager with bookies or at offshore sportsbooks, but there is little/bad data on how much they bet.
One potential explanation for this is that long-time gamblers have developed at least some strategies and coping mechanisms and are thus less likely to experience gambling harms than new users.
It is at least a little ironic that the same companies who spent so much time and money arguing that Daily Fantasy Sports should be legalized because they are a game of skill are now advocating for legal iGaming.
As someone who loves and has learned a lot from gambling and currently pays his rent via sports betting, I recognize that I am much more sympathetic to these arguments than most.
Great post. Thank you. Sportsbooks are scams though. They ban consistent winners and often exploit those who lose. What's really needed in the U.S. are betting exchanges and a move away from traditional sportsbooks.
So your defense of sports betting is 'worse forms of gambling exist'?