Study: Online Gaming Disproportionately Impacts Low-Income Populations

A recent study conducted by the Rady School of Management at the University of California San Diego identifies a link between irresponsible gambling and lower-income individuals in states where specific types of online gambling are permitted. 

Researchers at UC San Diego analyzed five years of data from over 700,000 gamblers across 32 states. They analyzed 18 states that modified their online gambling regulations against 14 states that kept theirs unchanged during that timeframe, discovering that the increase of internet gambling particularly impacted lower-income families.

"'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.

Wilbur stated that irresponsible gambling is characterized by using a large percentage of one’s earnings. A person putting at risk 10% or more of their net income, for instance, would satisfy the criteria. 

 

Advantages Accompany Hazards 

At present, 30 states have regulated online sportsbooks accessible to gambling-age individuals who are physically present within those states. Seven of those states also allow iGaming, which includes online slot machines and table games. 

Internet sports wagering and online casinos have established new tax revenue sources for state governments, although iGaming serves as a significantly stronger tax generator in contrast to the lower-margin enterprise of sports betting. Wilbur’s team discovered that the additional tax revenue from both sectors incurs societal expenses. 

Wilbur reported that among the 700K online gamblers examined via player reports anonymized by operators, 96% incurred 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.”

Although numerous state legislators assert that it's affluent players who generate the majority of revenue in iGaming and online sports betting, as they wager and lose larger amounts, researchers from Wilbur concluded that lower-income players are more likely to bet additional sums when they experience losses, a behavior referred to as chasing losses. Resisting the urge to pursue losses is a fundamental aspect of responsible gambling.

"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.”

In almost every US state and jurisdiction that has permitted online casino games, the handle, or the total amount wagered, rose annually throughout the five-year period examined. 

 

Gambling Awareness 

Wilbur stated that the aim of the research was to perform an analysis that would assist state legislators evaluating online gambling legislation. He stated that a primary issue should be that although iGaming and online sports betting certainly boost tax revenue, those who face the most gambling issues are probably the lower-income, smaller-scale gamblers. 

Wilbur acknowledges that, in addition to tax income, another advantage of permitting online gaming is that it may simplify the process of curbing illegal gambling for law enforcement. Regulated gambling is often claimed to negatively impact illicit gambling operations, or in the case of iGaming, foreign gaming sites. 

The late Sheldon Adelson, who headed the Las Vegas Sands empire and was the richest casino mogul in the world at the time of his passing in January 2021, notably claimed in 2013 that online gambling was “fool’s gold” and stated that states should not permit individuals to “click your mouse and lose your house.”