Wall Street vs. Vegas: The New Battle for American Wallets (Guess Who's Winning)

New research reveals online sports betting isn't just entertainment—it's a structural force systematically devouring household finances, particularly among those who can least afford the loss. The $120 billion gambling industry has found a perfect business model: digitally streamlined addiction masked as casual recreation.

Once upon a time, “putting your money on the game” was a figure of speech. Now it’s a business model—one that’s legally sanctioned, digitally streamlined and disturbingly effective at separating vulnerable households from their savings.  

A recent study, Gambling Away Stability: Sports Betting’s Impact on Vulnerable Households, offers a stark look at the financial fallout from America's sports betting surge—and the results are anything but benign. 

Since the 2018 Supreme Court decision that dismantled the federal prohibition on sports betting, state legislatures have scrambled to cash in. By 2023, more than half the country had legalized online betting, fueling a staggering $120 billion in wagers and over $11 billion in revenue for the industry. The speed and scale of this expansion suggest something far more serious than a harmless pastime—it’s a structural shift in how Americans interact with risk, money and sport. 

This isn't your uncle scribbling picks into what this year is estimated to be a $3 billion March Madness pool. (In 2023, an estimated 56.3 million Americans filled out at least one bracket.) It’s a full-scale shift in household finance, with long-term implications for savings, investment and debt. 

When risk becomes routine 

The study, conducted by researchers from Northwestern University, Brigham Young University and the University of Kansas, doesn’t rely on polling or anecdotes. Instead, researchers examined transaction-level data from more than 230,000 U.S. households over a five-year period—roughly 4.9 million household-quarter observations. The findings are sobering. 

Following the legalization of online sports betting, households began diverting significant funds into betting apps. Importantly, this wasn't money previously earmarked for scratch-offs or casinos—it came directly out of investment accounts. Deposits to stock brokerages, robo-advisors and other savings vehicles declined sharply. Net investment fell by about 14% after legalization, and among lower-income, financially constrained households, the drop was even more pronounced. 

The researchers estimate that every dollar deposited into a betting app reduces financial investment by nearly a dollar—it’s a zero-sum game where the house always wins, and the household loses. 

Betting with borrowed money 

The impact is particularly brutal for households already teetering on the edge of financial solvency. Those with low savings or recent overdrafts not only bet more as a share of their income, but also take on more credit card debt. Post-legalization, credit card balances among these households increased by an average of $368. Available credit shrank. Overdrafts multiplied. And, crucially, payments toward credit card balances fell—suggesting not just accumulation of debt but also worsening debt management. 

This is not recreational spending. It’s a feedback loop of risk, loss and desperation. And it’s increasingly funded by high-interest debt and depleted savings, not surplus income. 

But the effect isn’t limited to displacing investment or credit metrics. The researchers observed a shift in broader spending behavior. Households that bet on sports increased their spending on complementary consumption—restaurants, entertainment and cable subscriptions. Betting isn't just a line item; it’s become a lifestyle that drives spending outward in all directions. 

This spike in consumption might look like economic activity, but it's often financed by shrinking savings and swelling debt. Among constrained households, it represents a tangible deterioration in long-term financial stability. 

Betting on regulation 

While some argue that sports betting offers states a lucrative new tax stream, the study suggests any fiscal benefits come with hidden costs: lost investment income, increased reliance on credit and a rising number of financially distressed households. 

The authors propose modest regulatory interventions—geo-fencing, frictional design elements, perhaps even a return to physical sign-ins—to curb impulsive betting without banning the practice altogether. The goal isn’t prohibition; it’s mitigation. 

Online sports betting isn’t going away. But left unchecked, it risks becoming the payday lending crisis of the 2020s—another system that profits from desperation and exacerbates inequality. 

Conclusion 

The study doesn’t argue that every bettor becomes a compulsive gambler or that financial ruin is inevitable. But it does make a clear, data-backed case that the rapid expansion of online sports betting is pulling money out of savings accounts and brokerage firms and channeling it into a high-cost, negative-expectation activity. For financially vulnerable Americans, the consequences are real and measurable. 

Betting, like any form of entertainment, has its place. But when it starts to replace—not supplement—responsible financial behavior, we have a problem. The cost isn’t just the lost bet. It’s the foregone investment, the maxed-out credit card, the missed mortgage payment and the future that slowly slips away. 

Legalized sports betting is here to stay. The question now is: What kind of financial future are we willing to gamble for it? 

Jeff Joseph is Luckbox editorial director.