Online sports betting may reduce household savings

A study led by finance professor Justin Balthrop of the University of Nebraska-Lincoln found that legalizing online sports betting may reduce households' savings and investments. The findings were published in the Journal of Financial Economics. The study used financial transaction data from about 184,000 U.S. households and examined the effect of online sports betting in 26 states on investment decisions, spending patterns, and debt management.

Balthrop said that his background in quantitative investment management and his experience as an experienced bettor gave the research a different perspective. In his view, sports betting can create a false sense of expertise that leads people to overestimate their ability to predict outcomes. Fans who know their team very well may think this knowledge is an advantage. However, following a sport closely does not mean consistently beating the betting markets.

According to the research, the most serious financial effects were seen in households with limited savings. Frequent bettors were generally found to have lower incomes, fewer investments, and higher credit card debt. Balthrop stressed that high-income individuals may face similar risks when a large part of their income goes to expenses. The study defined such households as "budget-constrained" households.

Balthrop said his aim is not to eliminate sports betting, but to encourage the adoption of measures that protect consumers. He hopes his findings can guide policymakers who weigh tax revenues together with long-term social and economic outcomes. In Nebraska, voters recently rejected proposals to legalize mobile sports betting, and online betting remains illegal in the state.