Mobile Sports Betting Drives Up Credit Delinquency, NY Fed Says

When mobile sports betting is legalized, consumers’ financial health suffers, according to a study released Wednesday (March 25) by the New York Fed.

Although only about 3% of the population takes up sport betting when the activity is legalized, overall credit delinquency rises by 0.3 percentage points, according to the study.

The study also found that legalization of sports betting has an impact across borders, as there is an increase sportsbook deposits among residents of counties in which sports betting is illegal, but which are within 15 miles of a county in which it is legal. In these counties, online betting deposits rise 15% as much as those in the counties in which the activity is legal, the study said.

When the activity increases, so do delinquencies. In legal counties, the share of the population with any account 90 or more days past due showed a “noticeable deterioration,” according to the study. In nearby counties, the trend was the same though at a lower magnitude.

In legal states, tax revenue from sports betting can help offset some of this negative impact. In nearby areas in which the activity is not legal, there is no such offset, per the study.

“As we show in the Staff Report, the negative consequences without compensating tax revenue may create incentives for states to legalize, particularly those with population centers near legal states,” the study said.

The PYMNTS Intelligence report “Disbursements Satisfaction Report 2023: Instant Payouts Reach an Inflection Point” found that the legalization of online sportsbooks ushered sports betting into the mainstream market.

At the time of that report, it was estimated that a record 20% of Americans bet on the most recent Super Bowl.

It was reported March 23 that two U.S. senators want to curb prediction markets’ involvement in the sporting world. The lawmakers are set to introduce legislation that would bar these platforms from listing contracts related to sporting events.

The legislation is the first bipartisan Senate bill aimed at regulating the prediction market space. It also includes language blocking “casino-style games” like bingo, slot machines and blackjack from being listed on the platforms.