If it looks like a duck and quacks like a duck … you can bet it’s a duck.
That’s what many are saying about “sports-based event contracts” hosted by prediction markets — the loophole that currently allows legal sports gambling in Utah. It’s not “sports betting” in name, but it is in practice.
Right now, Utahns can go online on Polymarket or Kalshi and place bets on whether they believe a certain team will win tonight’s college basketball games, beat the “spread” on those games, or guess whether the total score will finish over or under a certain number. Sports betting in Utah is illegal, but putting money on these predictions is currently allowed because federal law allows prediction markets in the United States.
But there is controversy about that — a number of states have taken action against these prediction markets, action that prompted the Commodity Futures Trading Commission chairman Mike Selig to reassert the CFTC’s “exclusive jurisdiction” over the way these prediction markets operate.
Enter Utah Gov. Spencer Cox, who this week criticized Selig.
“Let me be clear, I will use every resource within my disposal as governor of the sovereign state of Utah, and under the Constitution of the United States to beat you in court,” Cox wrote.
Why is Cox so angry? Because the research is overwhelmingly on his side.
Online sports gambling has been the subject of a lot of research over the last five years as dozens of states have allowed it in more traditional formats. And the results of that research are as definitive as it gets: Sports gambling leads to a lot of societal ills, drains retirement accounts, causes upticks in domestic violence and sets teen boys, in particular, up for lifelong issues.
Let me show you that research, and tell you about what might be coming next in this battle.
How sports gambling hurts the states that allow it
(Bethany Baker | The Salt Lake Tribune) Gov. Spencer Cox cheers on the Utah Jazz during the game against the Los Angeles Lakers at the Delta Center. Cox has spoken out against sports betting via so-called prediction markets like Kalshi.
The two studies here are some of the most alarming and conclusive I’ve ever read.
The first study comes from a research team led by Scott Baker, a finance professor at Northwestern University. They accessed financial transaction data from a representative sample of 60 million Americans, and were able to track anonymized bank account and credit card transactions on a per-user basis from 2018 to 2023. This is remarkable data — probably bad if you’re concerned about privacy, but great if you like understanding the cause and effect of legislation. The researchers compared financial realities for residents of the states where sports betting was legalized, compared to where it wasn’t, while taking into account a bunch of potentially compounding factors.
They found that, in the states that legalized sports betting, most sports bettors don’t just make one deposit into their accounts, but make increasingly large deposits. As the deposits continue, bettors vastly change their financial practices to unhealthy territory: Following the legalization of sports betting, households with low savings increased their credit card balances by about $368. They also reduced their quarterly total credit card payments by $550.
In all, for each $1 spent on online sports betting, net investments decrease by 99 cents. In other words, basically all of the money people spent on sports betting didn’t replace other leisure activities or discretionary income, but ended up in less money in retirement accounts or other investments.
As you can imagine, there are significant negative impacts of reducing the amount one pays on a credit card bill or in retirement accounts. That’s where the second study comes in, from UCLA’s Anderson School of Management, which analyzed credit report records for roughly 7 million Americans.
They found that, across all of the states in which online sports betting was legalized, there were approximately 30,000 more bankruptcies — or about a 10% increase in bankruptcy likelihood. Increases in credit card debt (about a 25% increase) and car loan delinquencies (about a 27% increase) were common. These effects took about two years after the legalization of sports gambling to take effect in each state.
In all, in states with legal online sports betting, the average credit score fell 2.75 points. Not just among those gambled — among everyone.
It’s wild. It’s really clear that legalizing sports gambling basically serves, over the aggregate, to make a state’s citizens significantly more financially insecure.
People get hurt, too
Sports gambling also has a pretty overwhelming effect on people — the rush associated with it really hits hard. A team of Belgian and Luxembourgian neurologists scanned 65 people’s brain activity for sporting events in which gambling was available and compared it to those where it wasn’t. Where gambling was associated, the brain scans lit up.
Comparing how brain images looked when 65 respondents were asked about sports events where betting was available, compared to where it wasn't. (https://orbilu.uni.lu/handle/10993/63295)
Now, it’s not necessarily bad when mass brain activity is measured. Falling in love and rollercoasters both do the same. (Falling in love on a roller coaster has yet to be studied, but it should be.) But in this case, it’s relatively clear from a number of studies that sports gambling does not create the good kind of brain activity.
Indeed, it has all the hallmarks of addictive behavior. The Baker study showed that those who make at least one deposit into an online sportsbook have a 70% chance of making at least two more deposits, and a 40% chance of making 10 more deposits. Fascinatingly, those deposits go up in size on average, time after time.
Once people start sports betting, they typically continue to make deposits into their accounts — of greater and greater amounts. (https://www.nber.org/system/files/working_papers/w33108/w33108.pdf)
Those who bet online make larger bets than those who bet in person. This probably won’t surprise you, but people who were hungry — or were under the effects of drugs and alcohol — also bet more.
Also not surprising: Those who engage in sports betting early in life are more likely to become problem gamblers later on. The American Psychiatric Association publishes the Diagnostic and Statistical Manual of Mental Disorders (DSM), generally agreed on as the authoritative list of psychiatric issues. Gambling Disorder is one documented concern, and young men who bet on sports are especially susceptible to developing Gambling Disorder later on. Regularly participating in daily fantasy bets “was the strongest statistical predictor for at-risk gambling” later on among 13-15 year olds.
And then once one enters the disorder stage, gambling wrecks lives. For those who entered gambling treatment centers, 96% reported low self-esteem, 93% reported significant debts, 90% communication issues and anxiety, 76% depressive symptoms, and 73% weak family cohesion.
Just like economically, we can see society-wide issues as a result. In states where sports gambling is legal, intimate partner violence increases between 6% and 7% after professional football teams lose in unexpected fashion when compared to other states.
We also see crime increases of 30%-70% in larceny, assault, and vehicle theft from the time games start to four hours after a game in states where sports betting is legalized.
Again, it’s kind of stunning how the second-order effects cascade out here. You wouldn’t necessarily think legalizing sports betting would cause this level of chaos! But here we are.
So ... what’s to be done about it?
This research undoubtedly shows sports betting is a societal ill. But it’s worth noting that nearly all of the negative effects of the above also occur due to alcohol and, well, Prohibition didn’t go that well. As it was with alcohol, fully banning sports betting is a long shot.
Sports betting is currently illegal in Utah. Instead, Utahns who gamble on sports online recently have largely done so through prediction markets like Polymarket or Kalshi.
Originally, those were created mostly to place bets on future events, like the winner of a political race or whether the Federal Reserve would raise interest rates. As a result, they largely fell under the jurisdiction of federal financial market regulators.
But in recent years, these markets have realized that sports are also future events, and they could get a piece of the lucrative sports gambling market for themselves by allowing “contracts” such as “who will win the game between Utah and Texas Tech” to be listed on their exchanges.
As states seek to control gambling while prediction markets seek to continue operating these markets, there has been litigation. So far, different courts have ruled in different directions, with some asserting the federal government’s laws supersede the states and others ruling the opposite.
Right now, the U.S. Courts of Appeals’ Third, Fourth and Ninth circuits are all considering cases about this issue. I imagine we’re headed for the Supreme Court to decide this ultimately, but it’ll probably take years.
What’s the right approach? Ultimately, I’d probably favor action designed to minimize sports betting’s impact in society — along the lines of how we’ve significantly lowered tobacco use. Prohibiting companies from advertising sports betting would be a real start, and extreme levels of taxation would also make it so much harder for participants to imagine themselves as long-term winners. Teach parents of teenagers, young men especially, that even small sports betting can lead to huge problems later on.
But I completely understand why those like Cox want to simply enforce their sports betting bans entirely. We’ll see what the courts decide in the end, but this is a relatively new issue worthy of gubernatorial attention and statewide legislation.