The study indicates that while the decline in credit scores in these states has been modest, the average drop is 0.3% after a state legalizes sports betting. As of now, 38 states and Washington, DC permit sports wagering.
Researchers from UCLA and USC examined consumer credit trends in states during the first month after sports betting—either online or at retail locations—was authorized. They distinguished between wagers placed at brick-and-mortar sportsbooks and those made via computers and mobile apps.
Online Sports Betting Impact
The study found that the negative impact on consumer credit and loan delinquencies is more pronounced in states that allow online sports betting.
“In states that permit online/mobile gambling, the decrease in credit scores is approximately three times larger, suggesting that legal sports gambling worsens consumer financial health, especially with mobile access,” the study noted.
This finding is particularly relevant as there is growing evidence, including rising unemployment, that the US economy is slowing. Recently, the Philadelphia Federal Reserve reported the highest number of past-due credit card accounts in the first quarter since the survey began 12 years ago, and the New York Federal Reserve noted that nearly 20% of consumers are maxed out on their credit cards.
Additional Credit Concerns
The study also highlighted that young people and those in lower income brackets are the demographics most vulnerable to financial hardship from sports betting.
“Three to four years after the legalization of online sports gambling, we observe that the likelihood of bankruptcy filing increases by as much as 25-30% compared to pre-treatment levels,” the research team reported.
While the connection between sports betting and financial distress can be debated, WalletHub’s recent survey of state-level consumer financial distress shows mixed results. For instance, two of the 10 most financially distressed states—Texas and Georgia—do not allow any form of sports betting. Conversely, all of the 10 states with the least financially distressed consumers allow sports wagering, and eight of those states permit mobile betting.
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