According to a recent study from the Rady School of Management at the University of California, San Diego, consumers in jurisdictions where some types of online gambling are legal are more likely to be irresponsible gamblers.

Researchers at UC San Diego examined five years' worth of data for over 700,000 gamblers from 32 states. They discovered that lower-income households were disproportionately impacted by the expansion of online gambling, comparing 18 states that amended their rules about it to 14 that did not.

"Our data show that online gambling legalization leads to more irresponsible gambling spending among lower-income consumers than among higher-income gamblers,” said Kenneth Wilbur, professor of marketing and analytics at the Rady School and co-author of the study.

According to Wilbur, excessive gambling is when a person wagers a large percentage of their earnings. For example, someone who risks ten percent or more of their take-home earnings might be considered.

Benefits Entail Risks

Currently, customers of gambling age who are physically present within the borders of 30 states have access to regulated online sportsbooks. iGaming, or playing slots and table games online, is also legal in seven of those states.

State governments now have additional revenue sources thanks to online casinos and sports betting, although iGaming generates far more revenue than sports betting, which has very low profit margins. Wilbur's team discovered expenses to society associated with the additional tax revenue from both verticals.

96% of the 700K online gamblers analyzed using operator-anonymized player reports, according to Wilbur, suffered financial losses.

“Only 4% made money from online betting,” Wilbur explained. “That is by design. Online gambling platforms often ban or throttle frequent winners’ accounts. There is no right to gamble.”

Wilbur's researchers came to the conclusion that lower-income players often bet more after they lose, a tendency known as chasing losses, despite the claims of many state lawmakers that wealthier players generate the majority of the revenue from iGaming and online sportsbooks. One of the main components of prudent gambling is resisting the need to chase losses.

"Our analysis shows that online gambling legalization leads to far more problematic gambling among lower-income gamblers than among higher-income gamblers,” Wilbur reported. “These findings emphasize the high financial risk associated with online gambling.”

Over the course of the five years under investigation, handle—a measure of the amount wagered—increased annually in almost all US states and jurisdictions that approve online casino games.

Be Wary of Casinos

According to Wilbur, the study's objective was to carry out an analysis that state legislators considering legislation pertaining to internet gambling would find helpful. He stated that while online sports betting and iGaming undoubtedly boost tax revenue, the fact that smaller-scale, lower-income players are likely to encounter the greatest number of gambling-related difficulties should be of utmost concern.

Wilbur acknowledges that legalizing internet gaming has advantages beyond just increasing tax income. One such advantage is that it may facilitate law enforcement efforts to curtail illicit gambling. It's also commonly claimed that regulated gaming harms black market casinos, or, in the case of internet gaming, offshore gaming portals.

The world's richest casino tycoon at the time of his death in January 2021, Sheldon Adelson of the Las Vegas Sands empire, is well-known for having declared in 2013 that internet gambling is "fool's gold" and that states shouldn't permit someone to "click your mouse and lose your house."