Sports gambling has been legal in many other countries for a awhile now. Since 2018, 38 states (including Missouri) and the District of Columbia, have legalized sports gambling. That is a long enough time period to start to see some knock-on effects.
There is some preliminary research to indicate that the legalization of sports gambling tends to increased financial distress and reduce investment. Neither of which are great. Even outside of Las Vegas people were betting on sports illegally before 2018, but the industry’s huge advertising push has likely attracted a slew of novice bettors.
Whenever you legalize any activity, you have a tendency to see more of that activity. Or at the very least you get more people to admit to that activity. Derek Thompson highlights the increase in reported marijuana use compared to alcohol use over time. Not surprisingly you see a steady increase in the number of marijuana users. The question is when (or if) we will see any health-related downsides.
Sports betting is now a mainstream activity. It is hard to turn on a game these days without being bombarded with celebrity-filled ads for the major online sports books. All of the sports leagues are now partners with sports books. It is no wonder more people are attracted to sports betting, especially when you layer on their overly optimistic expectations.
Sports betting isn’t the only form of degeneracy these days. There is no shortage of ways for people to bet/speculated. In addition to sports betting, memecoins, zero-day options, and leveraged single-stock ETFs are all growing in popular. Teenage video gamers are even getting hooked on trading ‘skins.’ Given the momentum in all of these businesses it hard to see and end the boom.
In fact, many of the players in the space seem to want to spread their reach. Robinhood has speculated about getting to sports betting after launching its own prediction market business. Prediction market player Polymarket reportedly wants to get into sports betting. Draftkings has talked about getting into prediction markets. It makes perfect sense that all of these players would want to try and gain more ‘wallet share’ from their existing customers.
While that might be the case, it’s not clear as currently constituted that sports betting is all that great a business. By all accounts, the online sports books have to offer less than ideal prices and emphasize the most profitable (for them) markets to survive. Zvi Mowshowitz at Don’t Worry About the Vase notes:
Predation is where the money is. There is no physical overhead at an online casino, but after paying for all the promotions and credit card payments and advertisements and licenses and infrastructure, the only way to make all that back under the current laws and business models is the above-mentioned 10%-style hold that comes from toxic offerings.
Sports gambling has plenty of detractors, including pro athletes, but it also has its defenders. If you compare sports gambling to lotteries or iGaming, i.e. online casino games, it doesn’t look that bad in comparison. Isaac Rose-Berman at How Gambling Works writes:
Rather than declaring that all forms of gambling should be illegal, it might be better to distinguish between games of pure chance and games of some chance. Sports betting, like poker and stock trading, involves at least some skill. While most people lose at all three, the ability to improve and actually win means gamblers can glean valuable insights about math, randomness, and life. Sports betting and poker are also at least a little prosocial: sports bettors are more engaged fans and often place bets alongside friends.
Maybe the solution to this is to make the sports betting market more like an actual market. As current constructed, the sports books have the ability to (severely) limit the bets of bettors who actually show some skill. In short, only losing bettors need play. Kris Abdelmessih at MoonTower recommends:
Make me czar and I kill the current system. Instead…all betting is on an exchange. You bid and offer just like futures markets. It won’t solve addiction but now smart bettors are valuable and rewarded, everyone gets better prices, and the incentives are towards volumes not seeking out sick people to cross faded markets.
Betting on an exchange would completely change how sports betting operates. The current model would be obsoleted. Right now the only sure way to make money in sports betting is to open accounts with all the relevant sports books, scoop up all the deposit bonuses and free bets you can and then quit. If you keep betting the chances are the high costs and poor odds will eventually take its toll. Assuming you don’t have an addiction issue.
One common theme across all of these speculative, i.e. degenerate, activities these days is that you are on your own. No one is going to prevent you from blowing yourself up. The best solution isn’t to play at all, but if you do you have to have the self-awareness to put limits on your actions and recognize when you might have a problem.
Nearly three years ago I wrote a post talking about sports gambling as it was ramping up across the country. Admittedly most people can bet on sports will little ill effect, but I cautioned that just because sports gambling is now legal doesn’t mean you have to participate. The same is true across the degenerate landscape. Just because someone else is betting on Fartcoin doesn’t mean you have to.
Relevant links:
Today’s sports betting boom may be tomorrow’s investment issue (Sherwood News)
Growth in sports betting may be linked to financial woes, new studies find (Indiana Capital Chronicle)
The descent of a modern sports fan (The Athletic)
What sports betting is really doing to players, games and fans (Art of Manliness)
Sports gambling thrives on clicks, not community (Defector)
Teens and young adults are hooked on a different kind of gambling (Barron’s)
In defense of sports betting (How Gambling Works)
The online sports gambling experiment has failed (Don’t Worry About the Vase)
How professional sports gamblers make money (Odd Lots)
You are on your own (Abnormal Returns)
Just because sports gambling is now legal, doesn’t mean you should participate (Abnormal Returns)
