Sports Betting in a Free, Competitive, and Well-Monitored Market

Since the Supreme Court struck down the federal ban on sports betting in 2018, 38 states and the District of Columbia have legalized the activity in some form. Critics of legalization often warn of a looming explosion in problem gambling, but new research suggests those fears are unfounded.

A new report published in April by the American Consumer Institute (ACI), “Betting on the Future: Crafting Smart Policies for a Thriving Online Sports Betting Market,” finds that widespread legalization did not lead to significantly more spending on gambling in states where sports betting was legalized compared to states that maintained a prohibition.

Using 2015 and 2023 data from the Bureau of Labor Statistics’ Consumer Expenditure Survey, the study compared per capita gambling spending in states before and after those states legalized sports betting, as well as those that did not. The results were striking:

• $60: Average annual gambling spending in states with no legal sports betting.
• $65: Average in states with only in-person sports betting.
• $28.50: Average in states with both online and retail sports betting.

Contrary to popular belief and media portrayals, easier access to legal sports betting has not fueled reckless spending. In fact, states with the most accessible markets, including online betting, saw the lowest per capita expenditures.

This snapshot of overall household expenditures on gambling pre- and post-legalization does not offer a complete picture of how sports betting legalization might affect problem gambling rates. However, it does indicate that broad legalization has not driven significant increases in spending on the activity compared to states that did not legalize. This aligns with decades of research on gambling disorders, which have remained remarkably steady around the world over the decades.

Globally, around one percent of world’s adult population meets the clinical definition of disordered gambling—also known as pathological gambling or gambling addiction, which is defined by the Diagnostic and Statistical Manual of Mental Disorders, Fifth Edition as persistent and harmful gambling patterns, including increased spending of time or money on the activity, an inability to control spending, harm to one’s professional or personal life due to gambling, and concealment of gambling activities.

Another 2-3% of adults are considered at risk for disordered gambling. These rates have remained remarkably consistent for decades, even as legal gambling opportunities have expanded dramatically since researchers began tracking the behavior in the 1970s.

The United States is no exception despite its massive shift toward legalized gambling in recent decades. States that legalize gambling activities may see short-term spikes in spending (driven primarily by novelty and tourism), but problem gambling rates, if they rise, typically stabilize within a few years, aligning with global averages.

Maryland’s experience with legalized casino gambling is one telling example. In 2010, when the state had no legal casinos, surveys estimated that 3.4% of adults met the criteria for disordered gambling. Yet, by 2017—after the introduction of six casinos—the problem gambling rate had fallen to 1.9% according to a Maryland Department of Health study.

That report concluded that Marylanders’ gambling habits had not significantly changed; they were spending roughly the same amount of time and money on the same types of games, but they were now doing it at legal Maryland venues.

The evidence that gambling legalization has little effect on pathological gambling has not quelled calls for more restrictive regulations or outright bans on certain types of gambling, particularly online betting. For example, both state and federal lawmakers have introduced bills seeking to impose new and often intrusive rules aimed at controlling how Americans gamble with their money, including mandatory spending limits, invasive financial disclosures, or “affordability checks” (limiting bets based on player income or finances), and bans on advertising.

But, as ACI’s study contends, greater restrictions on legal gambling opportunities would not only fail to reduce gambling harm, but likely push consumers toward more convenient illicit gambling platforms where fraud can thrive and problem gambling tools don’t exist.

If lawmakers wish to address problem gambling without pushing players toward illicit markets or losing out on potential tax revenue, a smarter approach would be to focus on sensible rules that keep gambling safe, legal, and competitive, encouraging compliance from operators and incentivizing players to migrate from the illicit to the regulated market:

• Keep taxes low: High tax rates make legal operators uncompetitive. Rates under 15% discourage black-market activity.
• Encourage competition: States with many operators, both in the online and retail space, see faster player migration from the illegal to the legal market. Monopolies and state-run operations do the opposite.
• Fund voluntary safeguards: Redirecting a small portion of tax revenue to problem gambling treatment, education, and self-exclusion programs—which allow players to voluntarily ban themselves from gambling venues—is more effective than blanket restrictions.

The ACI report’s findings should reassure policymakers that legalized sports betting has not significantly increased problem gambling. Rather than resorting to heavy-handed rules, states should embrace light-touch regulation that ensures legal markets are so convenient and secure that illicit markets can’t compete.

The data is clear. Overregulation helps no one except criminals. A free, competitive, and well-monitored market is the best way to keep betting fair, safe, and aboveboard.