- Key insight: In places where sports betting gets legalized, consumer delinquency rates rise in comparison with geographies where sports wagering remains inaccessible, according to research from the New York Fed.
- Supporting data: Three years after legalization, credit delinquency rates had risen by 0.5 percentage points, even though only an estimated 3% of the population was placing bets.
- Expert quote: "Our findings suggest that sports betting can have dramatic implications for household financial stability." — New York Fed blog post
Sports gambling — once confined to Las Vegas casinos and illegal bookmaking operations — has gone mainstream. And consumer lenders have started to feel the effects.
In U.S. counties that allow sports betting, consumer credit delinquencies climbed by a small but noticeable amount in the months and years after legalization, according to research from the Federal Reserve Bank of New York.
"Following legalization, delinquency rose steadily in legal counties and surpassed half a percentage point three years after legalization, representing a noticeable deterioration in repayment performance," the researchers
Delinquency rates rose by a slightly lower amount in nearby parts of neighboring states, the research found. Residents of those places can drive short distances to place legal wagers.
The findings suggest that Americans with sports betting accounts — the industry's leaders include DraftKings and FanDuel — are more likely to miss payments on loans than they would be otherwise.
The New York Fed found relatively small effects on consumer credit performance across county-wide populations, since only an estimated 3% of the population takes up sports betting following legalization.
Three years after legalization, credit delinquency rates were roughly 0.5 percentage points higher in legalized counties than they were in a control group of counties at least 60 miles from a state where sports betting was legal.
But the effects were more dramatic when the focus narrowed to just those people who were actually placing wagers.
Under the assumption that there was no change in the delinquency rate for the 97% of the population that didn't bet on sports, the delinquency rate for the 3% of the population that did gamble rose by a whopping 10 percentage points, the research indicates.
"Our findings suggest that sports betting can have dramatic implications for household financial stability," the researchers wrote.
Sports betting is currently legal in 39 states, plus the District of Columbia, according to the American Gaming Association. Online sports wagers are legal in 32 states, as well as D.C.
