Online Gambling Laws Intensify Financial Strain on Lower-Income Groups, Study Finds

A recent study from the University of California San Diego’s Rady School of Management has revealed a significant correlation between irresponsible gambling behaviors and lower-income consumers in states that have legalized certain forms of online gambling. The study highlights the social and economic impact of online sports betting and internet casinos, suggesting that these activities disproportionately affect lower-income households.

Researchers analyzed five years of data from over 700,000 gamblers across 32 states, comparing trends between 18 states that altered their online gambling laws and 14 states that did not. The findings indicate a clear increase in irresponsible gambling spending among lower-income individuals in states that expanded online gambling.

Kenneth Wilbur, a marketing and analytics professor at the Rady School and co-author of the study, explained that irresponsible gambling was defined as spending a significant portion of one’s income on betting—specifically, those risking 10% or more of their take-home pay. According to Wilbur, the expansion of online gambling has led to increased financial vulnerability among lower-income gamblers.

Currently, 30 states have regulated online sportsbooks available for consumers, with seven of these states also permitting iGaming, which includes online slot machines and table games. While online sports betting and internet casinos have created new tax revenues for state governments, iGaming has proven to be a more lucrative tax source compared to the relatively small-margin business of sports betting. However, these financial benefits come at a societal cost, as Wilbur’s team discovered.

The study revealed that among the 700,000 online gamblers analyzed, a staggering 96% of players ended up losing money. Wilbur noted that only 4% made money from online betting, a disparity that is intentional. Online gambling platforms often limit or ban accounts that frequently win, underlining the idea that there is no inherent “right to gamble.”

Contrary to some state lawmakers’ claims that wealthier players contribute the most to iGaming and online sportsbook revenue due to their larger bets and losses, the study found that lower-income players tend to chase losses—a behavior where gamblers continue betting to recover lost money. This practice compounds their financial strain and underscores the high risks associated with online gambling.

Wilbur emphasized that the study aimed to inform state lawmakers contemplating online gambling legislation. He advised that while online gambling increases tax revenue, it also significantly exacerbates gambling problems among lower-income individuals.

Additionally, Wilbur acknowledged that regulated online gambling could potentially reduce illegal gambling activities, assisting law enforcement in curbing underground and offshore gaming operations. This point aligns with the perspective of the late Sheldon Adelson, a prominent figure in the casino industry, who famously cautioned against the risks of online gambling, suggesting that it could lead individuals to substantial financial loss with little more than a mouse click.

In conclusion, the study from UC San Diego serves as a crucial analysis for lawmakers, highlighting the financial and societal implications of expanding online gambling, particularly for lower-income consumers who are most susceptible to its harms.