For those who have models or analytics to help them determine whether an individual is likely to repay a debt, have you considered whether sports betting in that state is legal or not? You may, after the results of a research paper that was published. The legalization of sports betting across the United States has coincided with concerning trends in consumer financial health, particularly in states allowing online and mobile wagering.
Driving the news: A recent study by researchers from the University of California, Los Angeles, and the University of Southern California reveals that consumers’ financial health has deteriorated in states where sports betting is legal. This finding comes in the wake of the 2018 Supreme Court decision that allowed states to authorize sports gambling, leading to its legalization in 38 states and Washington, D.C.
By the numbers:
- 75-80% of American adults gambled at least once in a year post-legalization, with 10% gambling twice per week or more.
- Nearly $300 billion was wagered in legal sports gambling markets between 2018 and 2023.
- States with legalized sports betting saw a 0.3% decrease in average credit scores within two years, with the decrease tripling in states allowing online and mobile betting.
Key findings:
- Auto loan delinquencies rose across all states that legalized sports betting.
- States with legal online and mobile gambling experienced a 28% increase in bankruptcy likelihood and an 8% increase in debt collection amounts.
- The adverse effects were most pronounced among young men in low-income counties.
The bottom line: The adverse effects of legalized sports betting are most pronounced among young men in low-income counties, highlighting a demographic at heightened risk. As a result, banks and financial institutions are responding by adjusting their lending practices, such as lowering credit limits and increasing the proportion of secured to unsecured loans.
