PROVO, Utah — If you think an app on your phone is the key to financial gains, don't bet on it. A new study by BYU researchers is showing that legalized betting has led to households saving significantly less money.
The study, published in the Journal of Financial Economics by professors Mark Johnson and Jason Kotter at the BYU Marriott School of Business, examined transaction data from 184,000 households.
Researchers say American households cut their net investments in brokerage accounts by 20% following the legalization of sports betting. And the heaviest bettors cut their investments by more than half.
"In other words, more and more people — including those who had little savings to begin with — are treating gambling as an investment, even though the data shows sports betting is a terrible financial strategy," the study's authors stated.
The study's authors stated they started the study believing that betting funds were displacing other entertainment spending, like concert tickets or nights out, but found it's increasingly common that someone will cut planned savings deposits in half in order to fuel their betting accounts.
According to researchers, bettors see their online sports gambling as a form of investment, with the same odds as traditional investments.
“You see people talking about buying equity in the stock market as if it's a gamble,” Kotter said. “Particularly for younger people, accumulating the kind of wealth you might need to buy a house feels so far out of reach. So sports betting also becomes about the potentially immense returns. You take a long shot bet you're almost surely going to lose, but if you win, it's big.”
Further hurting the gamblers, researchers say they were shown to increase their spending in sports-adjacent categories like restaurants, bars, and on television packages.
“It creates an exacerbating effect where they not only draw money from investment accounts but also spend more in places they wouldn't have without the legalization of sports betting,” Johnson said. “They view it as both entertainment and investing; they go to a restaurant with friends to watch the game and discuss their bets together.”
You can find more on the study here.
