As online sports betting becomes increasingly accessible across the United States, millions of Americans can wager on their favorite teams with a few taps on their phones. Research by Justin Balthrop, assistant professor of finance at the University of Nebraska–Lincoln College of Business, reveals how that convenience can come at a significant cost to their long-term financial security.
“Online sports betting does more than compete for consumers’ entertainment dollars. It can lead to spending money they planned to invest, particularly among those already facing financial constraints,” Balthrop said.
The findings appear in “Gambling Away Stability: Sports Betting’s Impact on Vulnerable Households,” published in the Journal of Financial Economics in September. The study analyzed financial transactions from 183,821 U.S. households to examine how investing, spending and debt management changed following the legalization of online sports betting in 26 states.
“When online sports betting becomes legal, it spreads quickly in the number of participants and frequency of bets. This increase does not displace other gambling or consumption but significantly reduces savings," Balthrop said.
The concern extends beyond how much people wager to where that money comes from and what they sacrifice financially to continue betting.
“People are taking money out of their retirement and out of their savings,” he said. “It is not synonymous with entertainment funds in practice. It's synonymous with money that you should be saving or putting to some more productive use.”
Balthrop brings an unusual perspective to the research. Before entering academia, he spent nearly two decades in quantitative investment management. He is also an experienced sports bettor.
“People can be fooled into believing they're an expert in this in a way that a lot of other forms of gambling can't do,” Balthrop said.
Fans who closely follow their favorite teams may believe their knowledge gives them an advantage, he explained, even though understanding a sport does not necessarily mean they can consistently beat the betting markets.
One of the study's most significant findings is that households with limited savings experienced the greatest financial consequences. Frequent bettors also tended to have lower incomes, smaller investments and higher credit card debt than infrequent bettors and non-bettors.
However, financial vulnerability isn't limited to lower-income households. Balthrop said even high earners can face similar risks if they have little money left after covering their expenses.
“Households with substantial earnings but limited money remaining after expenses can be equally susceptible. We defined it as budgetarily constrained,” he said. “You can make a lot of money, but if you're already spending close to all the money you make, you are similarly budgetarily constrained.”
The consequences may extend beyond individual bettors, affecting their families and communities.
“The blast radius is much larger than the individual. It’s much bigger in terms of who it affects and how much,” Balthrop said.
He hopes the research will inform policymakers as they weigh the tax revenue generated by legalized sports betting alongside its potential long-term social costs.
“I don't want to abolish sports betting, but we need guardrails that don’t exist now,” Balthrop said. “The real issue is people are not just losing money today. It's the social cost that's going to show up 20 to 30 years from now.”
Journal of Financial Economics
Data/statistical analysis
People
Gambling away stability: Sports betting’s impact on vulnerable households
1-Sep-2026
The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.