Sports Betting and Consumer Finance

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September 12, 2024

Sports Gambling and Consumer Finance

Sports gambling is a common form of gambling where bettors wager on the resultsSports Betting and Consumer Finance

Sports betting involves risking money on the outcomes of athletic events. Before 2018, sports gambling was illegal in most states. In 2018, the Supreme Court held in Murphy vsv. National Collegiate Athletic Association (NCAA) that the Professional and Amateur Sports Protection Act (PASPA, ; P.L. 102-559) was unconstitutional and that states could legalize and regulate sports gambling. Since the ruling, 3839 states and the District of Columbia have legalized sports gambling (LSG).

This growth in LSG has led to scrutiny over its impact on consumer finances. Two recent working papers provide evidence that LSG has led to adverse consumer finance outcomes. state-regulated sports gambling in some form (abbreviated LSG). Recent changes in Commodity Futures Trading Commission (CFTC) posture have led to the rapid expansion of consumer-facing CFTC-regulated sports event contracts on prediction market exchanges, even in states where LSG is illegal. Such changes have led to ongoing litigation. The CFTC is engaged in an ongoing rulemaking on prediction markets. Growth in sports betting has led to scrutiny over its impact on consumer finance. Recent research provides evidence that sports betting has led to adverse consumer finance outcomes. Nascent evidence on event contracts writ large suggests consumer finance concerns. Congress may weigh these concerns with other policy considerations, including taxation revenue from gambling, job growth in sports gambling sectors, and consumer choice. This InFocus focuses on sports gambling opposed to gambling broadly because of this recent legal change and recent legislative action focusing on sports gambling.

Legislation introduced in the 118^th Congress would make changes to sports gambling advertising (H.R. 967, H.R. 7891, S. 2495) and modifications to the federal excise tax for sports gambling (H.R. 6982/S. 3579, S. 4872).

Sports Gambling Background

In 1992, PASPA generally banned sports gambling. The law betting sectors, and consumer choice. These concerns may not be equivalent based on the type. This In Focus focuses on sports betting because of the recent legal and regulatory changes, and recent legislative action, in prediction markets and sports betting.

Sports Betting Background

In 1992, PASPA generally banned legalized sports gambling. The law previously forbade states from legalizing and regulating sports gambling. However, PASPA excluded states with existing sports gambling markets and regulations: Delaware, Oregon, Montana, and most prominently Nevada.

—most prominently—Nevada. Offshore and illegal operators traditionally dominated the U.S. sports gambling marketplace, resulting in limited regulatory oversight. This illegal sports gambling was sometimes linked with organized crime,, and there were a few prominent cases of prosecuting illegalillegal sports gambling outfits.

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New Jersey challenged PASPA as unconstitutional beginning in 2010 in an aim to legalize sports gambling. In 2018, thethe Supreme Court held in Murphy vsv. National Collegiate Athletic Association (NCAA) that PASPA was unconstitutional, as it stripped state governments of their authority to legalize gambling. As stated by the majority opinion stated, ", “Congress can regulate sports gambling directly, but if it elects not to do so, each State is free to act on its own.” For more on this case, see CRS Legal Sidebar LSB10133, The Supreme Court Bets Against Commandeering: Murphy v. NCAA, Sports Gambling, and Federalism, by Jay B. Sykes.

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Online sports gambling is also legalized in 30 of the 38 states that havea vast majority of states with LSG. States vary in their sports gambling restrictions. States have different age requirements (a majority, 21+), and some states permit only tribal-sponsored online sports betting. Other states ban particular types of bets, such as those on in-state professional and college teams or bets on specific players. LSG is generally run by sportsbooks, which set betting odds and take bets on games. These sportsbooks are often associated with traditional casinos and often take bets online and in casinos.

This legalization has led to the growth of the LSG industry. According to the American Gambling Association, LSG revenue grew from $0.9 billion to $10.9 billion from 2019 to 2023. LSG states benefited from additional tax revenue associated with LSG, totaling $2.2 billion in 2023. Polling by Sienna College and St. Bonaventure University found that one in five Americans have sports gambling apps on their smartphones and that 39% of men ages 18-49 have sports gambling apps. Among consumers who have previously bet on a sports gambling app and still have an account, roughly 60% place bets at least once a week.

Impact on Consumer Finance

The growth in LSG has led to increased concerns over consumer protections and the impact of LSG on consumer finances. In 1999, research found that 10% of U.S. bankruptcy filings were linked to gambling and that at least 20% of compulsive gamblers filed bankruptcy. Since 2018, there have been increasing calls to gambling addiction hotlines. These calls seem to be largely driven by increases in sports gambling and other online gambling relative to traditional in-person casino games. Some have linked LSG’s rise in popularity with the general trend in increased smartphone usage.

Two recent papers have attempted to quantify the effects of LSG on consumer finances. In one working paper, researchers from UCLA and USC found that after four years the average credit score in LSG states decreased by 0.3%, while credit scores decreased by 1.0% in states that also allowed online LSG. This suggests that online LSG was driving much of the decline. In general, LSG states also had 8% increases in debt transferred to debt collections, increases in auto delinquency rates, and ultimately a 28% increase in bankruptcy rates.

In another working paper, economists from Northwestern, BYU, and the University of Kansas found that LSG led to increases in sports gambling. This trend decreased consumers’ savings and investments and most affected financially constrained households. Further, this sports gambling increased gamblers’Total handle wagered on LSG has grown from $4.9 billion in 2017 to $166.9 billion in 2025. Polling by Siena University and St. Bonaventure University found that roughly one in four Americans have an active online sportsbook account, rising to 52% for men aged 18-49. The CFTC under current leadership asserts that it has "exclusive jurisdiction" over derivatives markets, including event contracts on registered designated contract markets, and that as a result such sports event contracts are not subject to state or tribal regulation over LSG. (For a more general introduction to prediction markets, see CRS In Focus IF13187, Prediction Markets: Policy Issues for Congress.) Currently, such contracts are generally available in states where other forms of sports gambling are illegal. Several states and tribes have challenged these conclusions in court, and this overarching issue is currently being litigated, with differing opinions issued by courts. Sports event contracts often involve equivalent outcomes as LSG bets, with certain differences (participants trade against each other, facilitated by "market makers," rather than against the house; contracts can be bought and sold throughout the process; a broader array of event markets are available) and less of an emphasis on certain kinds of bets. As of May 2026, roughly 87% of the volume traded on Kalshi (the largest CFTC-registered operator) in the past year was on sports. Some industry analysis estimates Kalshi's total handle in the past 12 months, as of February 2026, would be fourth among the largest sports betting operators, trailing DraftKings, FanDuel, and Fanatics (with 19% of the handle of leading operator DraftKings). Volume traded, the typical measurement for prediction markets, is not equivalent to sports gambling handle.

Impact on Consumer Finance

The growth in LSG has led to increased concerns over consumer protections and the impact of LSG on consumer finance, because of its potentially addictive qualities. Certain research has attempted to quantify the effects of LSG on consumer finance. One working paper found that after four years, the average credit score in LSG states decreased by 0.3%, while credit scores decreased by 1.0% in states that also allowed online LSG, with additional adverse effects on bankruptcy rates. This suggests that online LSG was driving much of the decline in consumer financial health. Research from the Federal Reserve Bank of New York found that rising LSG is driven by broader consumer participation, as opposed to rising bet size. In addition, the New York Fed's report documents that such consumer finance effects may spill over from areas with LSG to adjacent counties in states without LSG.

Economists from Northwestern, Brigham Young University, and the University of Kansas found that LSG led to increases in sports gambling. This trend decreased consumers' savings and investments and most affected financially constrained households. Further, this sports gambling increased gamblers' overdrafts and credit card debt. In general, betting deposits, or the amount gamblers overdrafts and credit card debt. In general, betting deposits, or the amount gamblers

Sports Gambling and Consumer Finance

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put into their gambling accounts, grew as a share of income over time in response to LSG. These trends were most acute for low-income households, as seen in Figure 1. For consumers who made at least one sports bet, nearly 40% of them made 10 or more deposits into sportsbooks.

Figure 1. Sports Betting Deposits as a Share of Income

Source: Scott R. Baker et al., “"Gambling Away Stability: Sports Betting’'s Impact on Vulnerable Households,” July 12, 2024, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4881086. The gambling industry says it already takes steps to counteract the potential negative effects by encouraging responsible gambling. For example, advertisements for sports gambling are generally accompanied by disclosures encouraging responsible gambling and provide information on support help lines. States spent about $100 million in 2023 to combat problem gambling and fund gambling help lines—largely using taxes from gambling revenue.

Policy Tradeoffs

The associated potential negative effects of LSG on consumer finances may be weighed with consumer choice, additional tax revenue, and the impact on illegal gambling. Based on the growth in LSG, consumers appear to desire legal gambling. Policymakers may also determine that LSG allows consumers increased ability to decide where to spend their money. Enabling consumers to gamble legally can spur on business revenues, new jobs, and tax revenue.

Imposing additional restrictions on LSG could help to re- entrench illegal and offshore gambling, which are unregulated, with limited consumer protections and little governmental benefit in terms of tax revenue. Local, state, and federal governments benefit from the LSG tax revenues, but this revenue comprises only a small fraction of total revenue for most localities. Sports gambling can also create local jobs for LSG states, but many of these jobs may be relatively low-wage. For more on gambling’s impact on economic development, see CRS In Focus IF12461, Casino Gambling and Economic Development, by Adam G. Levin.

Selected Legislation: 118^th Congress

Advertising In part, LSG has benefited from increased consumer awareness partially driven by prominent advertising on sports media. Previously cited polling by Sienna University and St. Bonaventure found that three-fourths of all Americans have seen sports gambling advertising.

Critics such as Northeastern University’s Public Health Advocacy Institute argue that sports gambling advertisements use popular celebrities and risk-free bets to encourage sports gambling, which could in turn lead to addiction. Research by the NCAA found that more than half of young adults who saw sports gambling ads said those ads made them more likely to gamble. Research in other countries linked gambling advertising to riskier or more frequent betting. Massachusetts has restricted sports gambling advertising targeted at younger audiences, while Ohio has fined sportsbooks for false advertising.

Others contend that self-regulation is sufficient to stem these concerns. The American Gambling Association has adopted a responsible marketing code that includes provisions to limit college advertising and support responsible gambling. The National Football League has self-regulated the number of sports gambling commercials during their games. Overall, spending on sports advertising is declining, meaning this issue might become less salient. Spending on sports gambling television advertisements fell by 15%, or $200 million, from 2022 to 2023. In total, sports gambling ads are less than 1% of total spending on television advertising.

There is legislation in the 118^th Congress focused on sports gambling advertising. H.R. 967 would ban sports gambling companies from advertising on any platform regulated by the Federal Communications Commission including television, radio, and internet. H.R. 7891, a broader bill targeted at potentially protecting minors from online harms, has a provision that social networks and other covered platforms should take “reasonable measures” to prevent and mitigate the promotion and marketing of gambling to minors. S. 2495, another broader bill focused on college athletics, has a provision to prohibit college athletes from entering into name, image, and likeness contracts with gambling companies. Such contracts generally include marketing and promotional materials for the companies.

Federal Treatment Congress could alter the federal treatment of sports gambling activity. The federal code currently imposes an excise tax of 0.25% for LSG and 2% on illegal sports gambling on the total amount wagered. This tax contrasts with those at the state level, which are generally based on the total revenue an entity generates.

In the 118^th Congress, H.R. 6982 and S. 3579 propose using part of the federal gambling tax revenue to award grants to states to address gambling addiction and award other grants for general research on gambling addiction. This proposal contrasts with S. 4872, which would exempt sports gambling from the federal excise tax. For more general

Sports Gambling and Consumer Finance

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information on excise taxes, see CRS Report R46938, Federal Excise Taxes: Background and General Analysis, by Anthony A. Cilluffo.

Karl E. Schneider, Analyst in Financial Economics

IF12761

Disclaimer

This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress. Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the United States Government, are not subject to copyright protection in the United States. Any CRS Report may be reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you wish to copy or otherwise use copyrighted material.

," July 12, 2024.

The CFTC noted in its recent notice of proposed rulemaking (NPRM) that some prediction market trading characteristics are "generally associated with addictive potential" and "can lead to financial harm." The NPRM notes that event contracts "can concentrate losses among retail segments with lower financial literacy or higher susceptibility to salience and longshot bias." Early results looking at the effects of event contracts on consumer finance have shown some cause for concern. Research from one Citizens Bank analysis for consumers with more than 10 trades has documented larger losses on prediction markets (-8% median return on investment) relative to LSG (-5% median return on investment). Research by some economists on Polymarket's international exchange found that "the top 1% of users capture 76.5" of all profits while 69% of users overall lose money. Some have raised concerns that as prediction markets are currently offered nationwide, they might grow the potentially negative effects of sports betting on consumer finance. This may be particularly true when they are offered on platforms where such contracts are intermingled with traditional financial products that are not zero-sum (or negative when accounting for fees), like stocks.

Policy Tradeoffs

The associated potential negative effects of LSG on consumer finance may be weighed with consumer choice, additional tax revenue, and the impact on illegal betting. Based on the growth in legalizing betting, consumers appear to desire this option. Policymakers may also determine that sports betting allows consumers increased choice. Imposing restrictions on LSG could entrench illegal and offshore providers. The IRS has not issued guidance on how prediction market income should be taxed: that decision (which could include taxation as ordinary income, capital gains income, gambling treatment, and regulated futures contract income, among others) could affect the relative appeal of prediction market bets compared to LSG and other options. Under current law, such sports event contracts are generally not subject to federal gambling excise taxes or state gambling taxes. Outside of taxes, there are certain state-level gambling regulations (e.g., disclosures encouraging responsible gaming) that are not applicable to prediction markets. The degree to which such protections in the LSG market are effective is debated.

Selected Legislation: 119^th Congress

Minimum Federal Standards

S. 1033/H.R. 2087 would among other things create certain minimum federal standards for sports betting and create a national self-exclusion list. S. 4060 would generally create a new regulatory framework for event contracts under the states with certain minimum standards, and limit event contracts from individuals under age 21, among other things. These bills also have advertising-related restrictions.

Advertising

S. 4555 would make it unlawful for a covered digital advertising platform (such as a social media platform, search engine, or other online source that derives revenue from advertising) to display targeted advertising directed at minors that promotes a sports gambling platform with a definition that explicitly includes prediction markets. H.R. 6484/S. 1748, a broad bill targeted at potentially protecting minors from online harms, has a provision that social networks and other covered platforms should take "reasonable measures" to prevent and mitigate the promotion and marketing of gambling to minors. H.R. 7757 includes similar provisions. It is unclear whether prediction markets would be covered, as no explicit definition of gambling is presented in the latest versions of these bills.

Regulation of Sports Event Contracts

Some Members of Congress have contemplated how to regulate event contracts and whether further clarification of the Commodities Exchange Act is necessary to clarify treatment of sports event contracts. Some Members signaled support for the recent changes by the CFTC, with others voicing opposition. Legislation introduced in the 119^th Congress would directly prohibit contracts related to sports (H.R. 7477; S. 4160; H.R. 8123/S. 4226); another bill would prohibit such contracts but enable a state opt-out (H.R. 7840).