A new academic study suggests the rapid growth of sports betting is weakening the financial health of many households, with gambling increasing debt, reducing savings and crowding out long-term investments rather than replacing other spending.
The research, published in the Journal of Financial Economics, analysed transactions from more than 180,000 households and found that sports betting adds to consumer spending instead of replacing activities such as shopping, lottery tickets or casino visits.
Researchers said many bettors mistakenly view gambling as an investment strategy, even though “risky bets crowd out positive expected-value investments” such as buying a home or saving for retirement.
The study comes as prediction markets continue to expand rapidly. Monthly trading volume on Kalshi and Polymarket, much of it linked to sports, jumped from around $2 billion in early 2025 to nearly $50 billion in June 2026.
Other research points to similar trends:
- The Federal Reserve Bank of New York linked legalised sports betting to higher consumer loan delinquencies.
- Another study found that every $1 wagered on sports betting reduced net investment in stocks and other financial assets by more than $2.
The findings are also attracting political attention. Billionaire investor John Arnold has urged lawmakers to address the financial risks of sports betting, arguing that its negative effects deserve greater public discussion.
Investor takeaway: The betting industry continues to grow rapidly, but mounting evidence of financial harm could increase pressure for tighter regulation, creating potential risks for sports betting and prediction market operators.
Source: Journal of Financial Economics
Disclosure: This article does not represent investment advice. The content and materials featured on this page are for educational purposes only.
