Will Sports Gambling Foster Addiction? You Can Bet on It.
Aaron Paul, the actor who only played an addict in “Breaking Bad” and waved off hard drug use himself after seeing his girlfriend consumed by addiction, is a spokesman for Bet365, a sports wagering app. It has more than 63 million global users and offers newcomers a $500 credit to join. “You need to ask yourself, why am I not a member of the world’s favorite sports book?” Paul asks in one ad.
Those who scroll through both these apps are offered sports betting mainstays — wagers on money lines, touchdowns, parlays, fight outcomes, total hits and other outcomes. At the bottom of the screen is this bit of advice: “If you or someone you know has a gambling problem and wants help, call 1-800 GAMBLER.”
Call me old-fashioned, but as sports betting enjoys a pandemic-fueled expansion across the country, shouldn’t we worry more about the possibility of a spike in gambling disorders? And isn’t it jarring that people who should know better are enthusiastically pushing this?
A reminder: For most gamblers, betting is recreation. Based on historical data, only about 1% of adults in the U.S. have a severe problem such as compulsive gambling. Some 2% to 3% of adults have less severe problems; they’re not addicts, but gambling causes them financial and social miseries. Most people wager for fun.
The trouble is, those small percentages represent 6 million to 8 million people. And most academic and clinical studies of gambling disorders in the U.S. were undertaken when legal sports gambling was confined to Nevada, and backroom wagering with bookies wasn’t digital. The sports gambling boom that began three years ago after the U.S. Supreme Court overturned Nevada’s monopoly, together with the accessibility provided by mobile devices and apps, mean that a significantly larger, and younger, share of Americans is now at risk. It will take time for researchers to catch up with the current sports betting world and the troubles that may be visited on individuals and communities.
“We’ve been engaged in a massive cultural experiment with gambling, and we’re delivering gambling to America in ways that are unprecedented worldwide,” said Keith Whyte, executive director of the National Council on Problem Gambling, a research and advocacy group. “No one, at least from an addiction standpoint, has been able to look at what the impact will be on problem gambling.”
“Groups like ours are being asked to examine possibly negative impacts of new tools and technologies without being given any access to private companies’ internal data and product information,” he added, while also flagging regulatory lapses. “State gambling commissions are close to being captives of the industry. They defer to the industry and don’t understand some of the new technologies.”
When mainstream corporations took over the gambling business decades ago, they were more disciplined than their organized-crime predecessors about analyzing which forms of betting were most profitable and most magnetic. Slot machines quickly displaced table games at the center of casino floors. The wealth of data that such machines could gather about what gamblers liked helped casinos make their games more lucrative and potentially more addictive. Apps and other digital gambling offerings are even more data-centric than slots and can be fine-tuned to capitalize on features that make gambling compulsive, such as a faster pace of play, stimulating sensory feedback and frequent near-misses.
The Irish gambling company Flutter Entertainment PLC doubled its revenue last year, thanks to many of its brands, but especially FanDuel, one of the most popular sports betting apps in the U.S. Last year, Flutter also acquired a Canadian company, The Stars Group Inc., and with that purchase got control of Sky Bet, the most popular gambling app in the U.K.
The New York Times recently reported that Sky Bet used its app’s data-profiling software to scrutinize one compulsive gambler’s betting history and favorite sports with such precision that it could essentially stalk and hook him — even when he was trying to quit. “They had taken his addiction and turned it into code,” a lawyer representing the gambler told the Times. Sky Bet told the Times that it didn’t target vulnerable gamblers and took “safer gambling responsibilities incredibly seriously.”
The British government, concerned about how quickly gambling has expanded in the digital era, is conducting a review of its 2005 Gambling Act, which loosened the country’s betting prohibitions. But now the government is examining whether the industry has since shed safeguards that once protected younger or compulsive gamblers. The U.K. has banned the use of credit cards for gambling, has limited sports betting advertising and is considering further marketing constraints. (Spain has similar restrictions; Italy banned all sports teams from pursuing sponsorships or ad partnerships with gambling companies in 2019.)
A parliamentary study of the U.K. gambling market published last year highlighted the large sums the industry spent on advertising and noted that most its profits came from a small number of problem gamblers. “The unscrupulous methods and ingenuity of some gambling operators makes for shocking reading,” the report said. “New games are constantly being devised, often highly addictive, sometimes with a particular appeal to children.”
“Addiction to alcohol or drugs is high profile and highly resourced,” the report also said. “The comparable harm caused by gambling addiction has not received the same attention and is only now beginning to be recognized.”
Don’t expect a comparable review at the federal level in the U.S. With the Supreme Court empowering states to legalize and regulate gambling as they see fit, the onus is on states to monitor the industry. But as Whyte points out, states are increasingly beholden to gambling companies that create new jobs and tax revenues. Legislatures are unlikely to make an issue of problem gambling if it threatens their new cash cows.
Few guardrails exist. The use of credit and debit cards for gambling is permitted in the U.S., although some card companies still won’t allow it. In Nevada, however, debit card readers sit atop gambling tables, and limits on the dollar amount and number of card swipes have been lifted. Digital innovations present a multitude of fresh challenges. Gamblers’ one-to-one relationship with their mobile devices, the use of push notifications, geolocators and information harvested from social media allow companies to tailor advertising to millions of bettors — with negligible outside scrutiny. Some gambling companies such as Entain PLC say they use the data they harvest to identify and cut off problem gamblers before their troubles worsen, but there’s no empirical evidence to suggest that is something operators routinely do.
In 2020, commercial gambling and sports betting enterprises paid $6.7 billion in state taxes, yet little of this revenue is budgeted to track the prevalence of gambling disorders. Most research is funded by the gambling industry, which spends that money to help mitigate the fallout from rampant gambling — and burnish their reputations. But the amount of information they share with outsiders is limited, leaving independent analysts struggling to assess gambling’s impact. “We’re completely unable to keep up, even with the forms of gambling we already know, much less new technologies,” said Whyte.
States are embracing digital sports gambling even though it is a low-margin business for operators and generates less tax revenue than lotteries and brick-and-mortar casinos. In New Jersey, the country’s largest sports betting market, the wagering has brought in about 1/20th as much tax revenue as the lottery and only a fraction of that from casinos. But those figures are likely to shift as sports gambling continues its march, especially if betting on the Super Bowl is any guide.
Last February, 23.2 million Americans bet about $4.3 billion on the Super Bowl in what the American Gaming Association described as “the largest single-event legal handle in American sports betting history.” Approximately 7.6 million of those gamblers bet online, a 63% increase from 2020. The rush overwhelmed sports betting companies’ computer servers, leading to outages.
Some problem gamblers will be among the swarm that bets on the Super Bowl again in February. Ignoring this problem will carry costs for everyone involved. While compulsive and problem gamblers haven’t historically drawn the kind of interest or support that society has bestowed on alcoholics and drug abusers, their numbers are bound to increase as the sports betting boom continues. Money is the substance that problem gamblers abuse — and there are more dealers out there peddling a chance to win some than ever before.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Timothy L. O'Brien is a senior columnist for Bloomberg Opinion.
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