The legalisation of sports betting, combined with the rapid growth of mobile platforms such as DraftKings and FanDuel, has made wagering more accessible than ever. While these apps market sports betting as an exciting form of entertainment, new research suggests that increased accessibility is also changing household financial behaviour. Rather than simply shifting spending away from other leisure activities, many individuals are reducing their long-term savings and investments to fund gambling.
A study by BYU Marriott School of Business professors Mark Johnson and Jason Kotter, published in the Journal of Financial Economics, analysed financial transaction data from approximately 184,000 households. The researchers found that households reduced their net investments in brokerage accounts by an average of 20% after sports betting became legal in their state. Among the most frequent bettors, investment deposits declined by more than 50%, with roughly 20 cents of every dollar wagered representing money that otherwise would have been invested for the future.
The findings suggest that many people increasingly view sports betting as a legitimate investment opportunity rather than simply a recreational activity. Although betting may occasionally produce large payouts, the researchers emphasise that long-term financial outcomes are overwhelmingly negative. Unlike diversified investments, such as index funds, sports betting rarely generates consistent returns over time, making it an unreliable strategy for building wealth.
Johnson and Kotter were initially surprised by the source of gambling funds. They expected sports betting to replace other discretionary spending, such as dining out or attending entertainment events. Instead, the evidence showed that many households reduced regular investment contributions to finance betting activity. The repeal of the federal ban on sports betting has therefore shifted gambling beyond entertainment by creating the perception that it offers a realistic opportunity for financial gain.
The researchers argue that sports fans may be particularly vulnerable to overconfidence. Because many people closely follow their favourite teams and players, they often believe they possess unique knowledge that gives them an advantage over other bettors. In reality, only a very small proportion of gamblers consistently outperform the odds or achieve profits over extended periods.
The study also found that perceptions of sports betting become more favourable during periods of economic uncertainty. When confidence in traditional investments declines, some individuals begin viewing gambling as an alternative means of achieving financial success. This tendency appears especially common among younger adults, many of whom perceive major financial goals, such as home ownership, as increasingly difficult to achieve through conventional saving and investing alone.
Beyond reducing savings, frequent bettors also increased spending in sports-related categories, including restaurants, bars, and cable television. These complementary expenses further increase the financial impact of gambling, as betting often becomes part of a broader social and entertainment experience. Consequently, households experience both reduced investment contributions and higher overall discretionary spending.
Johnson and Kotter conclude that sports betting is likely to remain a permanent feature of the financial landscape, making education and harm reduction increasingly important. They argue that public awareness should focus on correcting misconceptions about gambling as an investment by highlighting the actual probabilities of long-term financial success. Helping individuals distinguish between entertainment and investing may reduce the financial risks associated with the growing accessibility of online sports betting.
More information: Scott Baker et al, Gambling away stability: Sports betting’s impact on vulnerable households, Journal of Financial Economics. DOI: 10.1016/j.jfineco.2026.104330
Journal information: Journal of Financial Economics Provided by Brigham Young University