Shut Down the Sportsbooks

Examining the Causes and Consequences of Legalized Sports Betting

Photo by rupixen on Unsplash

A few hours before Mike Tyson was slated to fight Jake Paul, I placed my first sports bet. It was small—I’ve never had much interest in gambling—but I figured it was a sure thing that the former champion would more than hold his own against a YouTuber. So much for that. But I was just as surprised to find that my small wager entitled me to two hundred dollars in “risk-free” bonus bets. Any EC10 student could guess why: the sportsbooks expect to make more money off of new customers attracted by those free bets than the bets themselves will cost.

It is reasonable enough, I suppose, that the lifetime value of the average sportsbook customer more than compensates for the cost of providing those free bets. But that isn’t quite what the promotion indicates. In fact, it says that DraftKings thinks that those customers—who would not have bet at all without those promotions—will lose enough money to make up for the free bets. This group includes people who, like myself, are not all that interested in gambling, many of whom will not add any additional money to their accounts after that first small bet. So where is the money coming from?

The answer, like the reason why these apps offer these deals in the first place, is obvious, though worth stating directly—the apps rely on some of their customers becoming addicted to gambling. Their business model relies on the fact that some people who make a few bets will not take their winnings and walk away but will instead lose it all and then keep going. Taken on its own terms, this is a very successful business model. The industry was worth over ten billion dollars in 2023, which marked a forty-four percent growth from 2022. ¹Additionally, a recent study from Northwestern University indicates that, on average, sports gambling does not replace other forms of gambling, it just adds to it, causing many consumers to cut into their savings.² The same study stated that “these changes to people’s spending patterns led to decreased credit availability, increased credit-card debt, and a higher incidence of overdrawing from bank accounts,” especially among poor households.³ Sports gambling appears to be a particularly pernicious form of gambling in this respect; another study from 2023 shows that sports bettors make up “almost all (96%) of those [gamblers] frequently relying on others to pay their debts or bills.”⁴ That study also indicated that from 2018 to 2021, when states began legalizing sports betting, the number of people “displaying risky gambling behavior” rose by about eight million.⁵

These consequences are mostly avoidable. Indeed, until a few years ago, when the Supreme Court overruled a federal law that made sports betting illegal in most states, this kind of betting simply wasn’t an option for most people. Even after that decision, however, individual states weren’t obligated to allow online sports betting within their jurisdictions. One reason so many have done so (the practice remains illegal in only about a dozen states) is that sportsbooks have spent a lot of money lobbying legislatures. FanDuel and DraftKings donated millions to state parties and legislators between 2016 and 2022 and spent over one hundred million dollars to influence ballot initiatives on the topic.⁶ Hundreds of thousands of dollars were spent lobbying state politicians on the topic here in Massachusetts alone.⁷ Additionally, like any industry, sports betting also produces taxable revenue, which is attractive to state governments facing tight budgets (although, especially in states where the sportsbooks successfully lobbied to make those promotional bets tax-deductible, these tax revenues have often proved far smaller than originally predicted).⁸ The states that have legalized these apps either accepted a trade-off between indebtedness and addiction and these financial benefits or ignored these consequences entirely.

But let us not be like those who assume every policy change they dislike is the fruit of corruption or greed. Many legislators who voted in favor of legalized sports betting likely did so with good intentions. These changes are more reflective of a misguided but common theory of government which understands the purpose of politics to be the minimization of interference with individual freedoms. There are various ways to arrive at this position. Some people get there through a misunderstanding of the principles of the Founding; others cannot imagine other standards by which to judge policy in the first place. Most people just don’t trust the government and don’t much care what other people do as long as it doesn’t directly impact them. To give them their due, some of these are good instincts. It is true that good intentions don’t necessarily result in good policy, and we need to be extremely thoughtful about what the threshold ought to be between activities which should merely be discouraged and those which need to be banned.

In a republic like ours, our government helps shape how we live together. Law, whether we like it or not, has an educational function—people take many of their intuitions about right and wrong from what the law does and does not bind. It is good to leave one another breathing room when it comes to the cultivation of virtue. But, in a sense, it does pick my pocket when my neighbor goes into substantial debt to fund his FanDuel addiction. It certainly hurts his wife and children. When the government appropriates funds to address gambling addiction or, through welfare systems, provide for those who have lost the ability to take care of their own finances, that costs the rest of us. And when a significant and growing number of our generation are getting sucked into yet another digital tool intended to keep them unproductive and disconnected from one another, that affects me too, because the strength of our communities is determined largely by the character of our neighbors. Especially in a republic reliant on its citizens’ active participation, we cannot turn a blind eye to practices which train them to be wasteful and threaten to take away their self-reliance. It makes little difference to me that gambling addicts started gambling of their own accord. In the absence of some significant countervailing benefit which would justify its proliferation, they shouldn’t have had to face the temptation in the first place.

After all, what is gained when we allow DraftKings and its ilk? Freedom? No—merely the dull anesthetic of consumption for its own sake, waste for its own sake. The addictive qualities of gambling are reason enough to limit its reach. Even those who do bet responsibly, however, are taught by it to see money as a product not of effort but of luck, and as something not to be stewarded wisely but to be risked pointlessly. It is entertainment of the worst kind—it brings with it no social connection, no personal growth, no deeper connection to those things which make us human in the best sense of the word. It teaches us to be governed by our passions. In making us more dissolute people, the proliferation of vice reduces our freedom in practice. No doubt there is a point at which government action against vice is too zealous. But though we certainly should not punish the users of these apps, we can restrict their ability to access them in the first place. A similar regulatory regime would have been the appropriate response to marijuana, and has been, in some jurisdictions, the de facto legal treatment of that drug for some time: consumption (at least in private) goes effectively unpunished, but dispensaries are not allowed to sell the drug for recreational use, restricting access to it.⁹ Even if we accept that some people will always want these things enough to find a way to get them, or that these things can sometimes be used responsibly, we can still work to minimize the harm they cause.

Our love of freedom does not obligate us to abandon prudence. Time will tell just how big the economic and psychological effects of putting a casino in every pocket will become, but they are big enough already to recognize that we have made a mistake. Restricting online sports betting again wouldn’t get rid of it in casinos, nor would it get rid of occasional bets between friends. But there is a difference between such casual wagers and systems designed to squeeze you for all you’ve got. Our leaders should remember that even if they can’t drag people toward virtue, they have the option to limit vice. As for me, I deleted DraftKings once the last of my free bets settled. After all, states should take the sportsbooks out of our hands, but we don’t need to wait before finding better things to do.

MARCUS PORCIUS CATO

A version of this article originally appeared in Wealth of Nations, the February 2025 print issue of the Salient.

1. Quick, J. “‘I literally can’t stop.’ The descent of a modern sports fan.” The Athletic. October 14, 2024.

2. Baker, S. et. al. “Gambling Away Stability: Sports Betting's Impact on Vulnerable Households.” SSRN. July 9, 2024.

3. Kellogg Insight. “Online Sports Betting Is Draining Household Savings.” December 1, 2024.

4. National Council on Problem Gambling. National Survey on Gambling Attitudes

and Gambling Experiences 2.0, p. 19.

5. Ibid, p. 6

6. Lipton, E. & Vogel, K. “Cigars, Booze, Money: How a Lobbying Blitz Made Sports Betting Ubiquitous.” New York Times. November 20, 2022.

7. Buskirk, C. “Sports betting companies spent hundreds of thousands on lobbying firms in Mass.” MassLive. February 14, 2023.

8. Lipton, E. & Vogel, K. “Cigars, Booze, Money: How a Lobbying Blitz Made Sports Betting Ubiquitous.” New York Times. November 20, 2022.

9. As one might expect, marijuana consumption appears to increase in states where it is legalized compared to states where it is not. Via Marples, M. “Legalizing recreational cannabis increases its use, research shows.” CNN. August 29, 2022.