(2024-11-11) Zvim The Online Sports Gambling Experiment Has Failed

Zvi Mowshowitz: The Online Sports Gambling Experiment Has Failed. I have previously been heavily involved in sports betting. That world was very good to me. The times were good, as were the profits.

I knew it wasn’t the most socially valuable enterprise, but I certainly thought it was net positive.

When sports gambling was legalized in America, I was hopeful it too could prove a net positive force, far superior to the previous obnoxious wave of daily fantasy sports. It brings me no pleasure to conclude that this was not the case. The results are in. Legalized mobile gambling on sports, let alone casino games, has proven to be a huge mistake. The societal impacts are far worse than I expected.

Table of Contents

• The Short Answer.
• Paper One: Bankruptcies.
• Paper Two: Reduced Household Savings.
• Paper Three: Increased Domestic Violence.
• The Product as Currently Offered is Terrible.
• Things Sharp Players Do.
• People Cannot Handle Gambling on Smartphones.
• Yay and Also Beware Trivial Inconveniences (a future full post).
• How Does This Relate to Elite Hypocrisy?.
• The Standard Libertarian Counterargument.
• What About Other Prediction Markets?.
• What Should Be Done.

The Short Answer

*The short answer is that it is clear from studies and from what we see with our eyes that ubiquitous sports gambling on mobile phones, and media aggressively pushing wagering, is mostly predation on people who suffer from addictive behaviors.

That predation, due to the costs of customer acquisition and retention and the regulations involved, involves pushing upon them terrible products offered at terrible prices, pushed throughout the sports ecosystem and via smartphones onto highly vulnerable people.

This is not a minor issue. This is so bad that you can pick up the impacts in overall economic distress data. The price, on so many levels, is too damn high.*

Paper One: Bankruptcies

We start with discussion of one of several new working papers studying the financial consequences of legalized sports betting. The impacts include a 28% overall increase in bankruptcies (!).

*Legalized online sports betting is currently a deeply, deeply horrible deal.

I wish it were different. I am all for letting people do things, and I have enjoyed and benefited greatly from the ability to bet on sports.*

The problem is if a majority get a small benefit, and others get a huge loss, that is on net a disaster.

Paper Two: Reduced Household Savings

We can then add a second paper, “Gambling Away Stability: Sports Betting’s Impact on Vulnerable Households.” They found that sports betting greatly reduced traditional net investments, while traditional gambling stays unchanged.

Eating dramatically into savings rather than shifting the consumption basket, while not even reducing traditional gambling, says that consumers are clearly not responding rationally, and do not understand the choices they are making.

Paper Three: Increased Domestic Violence

Here’s a third paper, showing that sports betting increases domestic violence. When the home team suffers an upset loss while sports betting is legal, domestic violence that day goes up by 9% for the day, with lingering effects.

The Product as Currently Offered is Terrible

Almost all of the legal implementations (e.g. everyone I know about except Circa) are highly predatory. That’s what can survive in this market.

There is no physical overhead at an online casino, but after paying for all the promotions and credit card payments and advertisements and licenses and infrastructure, the only way to make all that back under the current laws and business models is the above-mentioned 10%-style hold that comes from toxic offerings.

Anyone showing any skill? They are shown the door.

Things Sharp Players Do

what pros do in order to disguise themselves and get their wagers down. That to do that, they make themselves look like the whales. Which means addicts.

People Cannot Handle Gambling on Smartphones

Vices and other distractions are constant temptations. When you carry a phone around with you, that temptation is ever present.

consider that at least several percent of people have an acute gambling addiction or vulnerability. For them, this is like an alcoholic being forced to carry a flask around in their pocket 24/7

It was plausible that this was an acceptable situation, that people could mostly handle that kind of temptation. We have now run the experiment, and it is clear that too many of them cannot.

Yay and Also Beware Trivial Inconveniences (a future full post)

I am coming around to a generalized version of this principle. There is a vast difference between:

1. Something being legal, ubiquitous, frictionless and advertised.
2. Something being available, mostly safe to get, but we make it annoying.
3. Something being actively illegal, where you can risk actual legal trouble.
4. Something being actively illegal and we really try to stop you (e.g. rape, murder). We’ve placed far too many productive and useful things in category 2 that should be in category 1. By contrast, we’ve taken too many destructive things, too many vices, that we long had the wisdom to put in category 2, and started putting them in category 1.

How Does This Relate to Elite Hypocrisy?

elite hypocrisy is not the failure to impose paternalistic rules on the non-elite, it is that we constantly imposing extreme and expensive consumption requirements and restrictions on the non-elite when they are trying to live their lives and get their needs met. see 2024-08-10-PiperEliteHypocrisyGambling

The Standard Libertarian Counterargument

What About Other Prediction Markets?

Most other prediction markets do not pose the same problems. They would not even if they greatly expanded and became more ‘normie’ friendly.

sports markets are highly related to and integrated into the most ‘normie’ of activities and into the related media, and they pay off quickly, and they’re ubiquitous, with something for you every day.

What Should Be Done

The legalized mobile online sports betting experiment is a clear failure. It should end.