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The dark side of the US sports betting boom

This summer, Dylan, a 22-year-old trainee lawyer from the Jersey Shore, decided to come clean to his family and friends about a shameful secret: he had borrowed and gambled $50,000 in just over a year.

His first bet was a promo deal on the Betting app DraftKings on last year’s Super Bowl: bet $5 on the eventual champion, win $300. Thanks to a last-gasp touchdown by the Los Angeles Rams, Dylan won. He then quadrupled his winnings playing online blackjack. He was hooked.

Dylan’s bets quickly became riskier. He maxed out four credit cards to place bets of up to $5,000 on everything from obscure tennis fixtures in China to Venezuelan women’s volleyball matches, using apps including FanDuel and Barstool Sportsbook.

“I had to throw my own intervention,” says Dylan, who asked to be identified by a pseudonym. “I never wanted to stop because the industry just feeds you the idea . . . that if you just keep betting you’ll make your money back.” Telling his family, he says, was “the best thing that I could have done”.

Dylan, who is fighting his addiction with the help of Gamblers Anonymous, is one of a cohort of problem gamblers emerging in tandem with the regulated online betting industry, which has been on the rise in the US since a landmark Supreme Court ruling five years ago overturned a 1992 ban on Sports Betting.

Historically, those who wanted to gamble on sport had to travel to casinos in the likes of Las Vegas, Nevada or New Jersey’s Atlantic City, a short drive down the coast from Dylan’s hometown.

A $5 first-time bet on last year’s Super Bowl set one punter on a path to $50,000 of losses before he sought help © Frederic J Brown/AFP/ Getty Images

But since the court decision, sports betting has been transformed into a high-growth tech business with over $12bn in revenue in 2022 and advertising that is fast becoming ubiquitous in American cultural life. Just this week, Disney-owned sports channel ESPN announced plans to launch a sports book, joining the likes of DraftKings, MGM, and Ireland-based Flutter Entertainment.

Punters can now legally bet on sporting events in 34 states as well as Washington DC. In 25 jurisdictions, they can do so online. Cumulatively, Americans have wagered $245bn on sports since 2018.

But beneath the boom in online betting is an underbelly of addiction of unknown proportions. Nationwide data is limited but a study funded by the New Jersey attorney-general shows that 6 per cent of people surveyed in the state — the first to approve sports betting and online gaming — are problem gamblers and up to 20 per cent of citizens exhibit signs of problematic play, according to people briefed on the findings.

Meanwhile, research from Pennsylvania, one of just seven jurisdictions to allow online casinos, found that 36.7 per cent of online bettors admitted to observing at least one problematic element to their Gambling habit last year. Traffic to the National Council on Problem Gambling’s helpline increased by 21 per cent year-on-year to more than 30,000 calls and texts in March.

“This is not your grandmother’s gambling,” says Brianne Doura-Schawohl, a Washington lobbyist supporting efforts to increase regulation of the industry. “This is about betting on every play of every game anytime . . . the industry is forcing [accumulator bets] down your throat.”

Unsettled by the current climate, legislators in at least nine states, including New York and New Jersey have proposed or passed bills this year aimed at limiting the harms associated with the product, ranging from measures to crack down on betting company partnerships with colleges to a ban on the mention of free and bonus bets in commercials.

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The US gambling industry needs to be on guard for a “regulatory Groundhog Day”, according to Tim Miller, an official from Britain’s Gambling Commission who delivered a speech to industry figures in Boise, Idaho in June.

The liberalisation of British gambling laws just as smartphones were about to take off almost two decades ago swiftly turned the UK into the world’s biggest regulated online gambling market. But a surge in problem gambling, including suicides linked to addiction, led to a regulatory crackdown on operators, who have been hit with £198.4mn in penalties from the regulator since 2017.

The US has since overtaken the UK as the biggest regulated online gambling market, and the industry is at risk of repeating the same mistakes “that we’ve seen on [our] side of the pond”, warned Miller.

Rep. Paul Tonko, a Democratic congressman for New York, says the industry has been operating in “a wild west, largely unregulated environment” and is likely to precipitate a “public health crisis” unless the federal government intervenes.

“When they determined that smoking was a public health crisis, they did something about it,” says Tonko, who has proposed a bill to ban all electronic and online sports betting advertising. “I think we have a situation here that can mimic that same experience.”

‘Can’t lose’

The US online betting industry is not currently subject to federal oversight but instead to a complicated patchwork of regulations overseen by individual states. Consumer protections are typically low, and sometimes non-existent.

Of the 25 jurisdictions with regulated online sports betting in the US, 20 have no restrictions on betting with a credit card. Three have no rules requiring operators to provide a tool for bettors to self-limit deposits, wagering amounts or time spent gambling.

In total, four states, including Colorado and Arkansas, offer no statewide self-exclusion programme for problem gamblers looking to block access to betting sites and a further five require bettors to self-exclude in person. Betting operators do however offer the option to self-exclude on their own individual apps.

Despite the harm they could be unleashing, state authorities are often conflicted because of the tax revenues generated from sports betting, which have contributed more than $3.4bn cumulatively to often-stretched budgets since 2018.

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Having allowed internet gambling since 2013 and having played an instrumental role in the case that led to the Supreme Court verdict, New Jersey has historically been viewed as a model for proper regulation. Earlier this year, it became the first state to legally oblige operators to trawl user data for signs of problematic play.

And in recent months, regulators grappling with online betting in Ohio and Massachusetts have taken operators to task over misleading adverts, in some cases meting out fines, and by implementing robust consumer protections.

“There are great examples of states that have allocated sufficient resources . . . to help prevent and mitigate [problem gambling] . . . and there are some states where that has not been a priority at all,” says Mark Vander Linden, director of research and responsible gaming for the Massachusetts Gaming Commission.

Matt Schuler, executive director of the Ohio Casino Control Commission, says operators made a “callous” attempt as the state developed its regulations to “argue against really basic problem gambling initiatives” but since then they have worked with the regulator to be “on the right side of our regulations”.

Companies’ aggressive promotional strategies have stirred controversy. DraftKings was fined $500,000 by the Ohio regulator for offences including mailing around 2,500 adverts to people under the age of 21 and describing bets as “risk-free” in adverts.

Barstool withdrew a gambling promotion entitled “Can’t Lose” after the Massachusetts regulator probed whether it ran afoul of advertising rules. Both DraftKings and Barstool, from which casino group Penn Entertainment exited its investment this week, declined interview requests.

Actor Jamie Foxx in BetMGM’s ad campaign. Regulators have been clamping down on online betting adverts

The torrent of ads has become so unavoidable that seven sports leagues, including the NBA and NFL, major beneficiaries of the industry’s ad dollars, set up a coalition earlier this year to promote limits on betting commercials.

But Jeff Ifrah, founder of iDEA Growth, a lobbying group representing betting apps, says the backlash against advertising is based on little more than “shooting from the hip and assumptions that people make about how little Jenny is going to steal her mother’s credit card to play online.”

The biggest flashpoint so far of the industry’s aggressive push for more customers was a raft of controversial endorsement deals brokered with colleges, where most students are under 21, the legal age to gamble. The backlash led to all five major endorsement deals with betting brands including Caesars and PointsBet being cancelled.

The industry’s biggest players, however, argue that they go over and above the demands of regulators. FanDuel, which controls nearly half of the sports betting market, says not only does it ban any customer who expresses concern about their gambling habit, but it also proactively monitors for risk factors.

“We don’t need any given regulator to push us in that direction, we’re thinking about it independently,” insists Christian Genetski, FanDuel’s president. “The tenor in the room is . . . to understand that there will be some amount of business that we just do not want.”

Adam Greenblatt, chief executive of BetMGM, the US’s third biggest betting app which is co-owned by UK gambling group Entain, says it is in the industry’s self-interest “to get ahead of draconian regulation”.

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“Addiction as a disease is real . . . the answer to that is not to shut every bar,” says Greenblatt. “Our job is to help those who are vulnerable and need help . . . I don’t want to be responsible for unnecessary suffering.” BetMGM says it has rolled out a problem-gambling AI “behavioral analysis” tool in two US states.

Matthew Platkin, New Jersey’s attorney-general, predicts that his state will ratchet up regulation whether the companies are onboard or not. “This is not the end of history,” says Platkin. “Either we’re going to do this together, or it’s going to be foisted upon you, because no one can accept any . . . product that is causing addiction and dangers to the health of our residents without proper safeguards.”

The human costs

If regulation fails to force operators to act, then the courts might. Richard Daynard, a professor of law at Northeastern University who has spent most of his career making an enemy of the tobacco industry now has the US sports betting industry in his sights.

Through his Public Health Advocacy Institute, Daynard was the driving force behind litigation which led to a 1998 court settlement with Big Tobacco conglomerates in which they agreed to pay out $206bn for suppressing smoking’s links to cancer following lawsuits from 48 states.

Daynard is now working on litigation against a major sports betting operator over misleading adverts and promotional bonuses which he believes are designed to make gamblers chase their losses. He intends to organise a class-action lawsuit by the year-end.

“I think there’s a huge backlash brewing,” says Daynard. He is convinced that the disclosure process in litigation, whereby companies are forced to offer up tens of thousands of internal documents, will help unravel the shoddy consumer protections of the betting companies. He believes litigation against betting operators could precipitate the same shift in sentiment experienced by the tobacco industry over the 20th century.

The human costs of inaction are not hard to find. In a brownstone manor house nestled on 430 acres of farmland in rural Virginia, the Williamsville Wellness rehabilitation retreat treats people addicted to casino slots and roulette games, as well as drugs and alcohol.

A dependency on betting can be just as destructive as one on stimulants. “If you’re a gambling addict, you’ll do anything to bet on every single damn game,” says Bob Cabaniss, Williamsville’s founder, who is himself a recovering gambling addict. “You’ll steal, you’ll get into your college loan, your retirement funds, whatever.”

Williamsville Wellness rehabilitation retreat in Virginia has been inundated with applications for treatment since the liberalisation of online betting

David, a 51-year-old recovering addict from New Jersey, credits Williamsville with saving his life. Three years ago, his addiction drove him to such a point of despair he plotted out in minute detail how he was going to kill himself.

Over three decades of gambling, David’s losses mounted to $1.1mn, largely funded by a life insurance payout after his father died by suicide 15 years ago, the pain of which he believes was the root of his addiction.

The progression of his habit reflects the changing face of the US betting industry: as a college student he recalls long drives to Atlantic City to go on 72-hour binges; then when the offshore betting sites popped up in the late 2000s he signed up; by the time sports betting was legalised in New Jersey in 2018 his habit was spiralling out of control.

David says legal sports betting had the effect of “legitimising” his habit among his friends. “What none of them knew was their $10 bet was my $10,000.”

In May 2020, David confessed to his wife and within a few weeks checked into Williamsville. “When I finally came clean . . . she was like: ‘you’ve told me a million lies’,” recalls David. “My whole life was a lie.” But David realises he is one of the “lucky ones”: his health insurance covered the $18,000 cost of his three-week stint at Williamsville.

In 2013, the American Psychiatric Association’s diagnostic manual, which is essential for accessing health insurance for a disorder, put gambling on par with drug and alcohol addiction. But receiving insurance cover for gambling as a primary diagnosis is difficult, according to NCPG executive director Keith Whyte, and it usually needs to be paired with a mental health diagnosis or another addiction to get a referral.

Collectively, all 50 US states allocated just $110.9mn to publicly-funded problem gambling services this year. Nine states, including Arkansas, where online betting is legal, provided no funding at all to problem gambling services last year.

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Even the most basic interventions are in short supply. In lieu of healthcare, many addicts turn to Gamblers Anonymous. But 11 per cent of certified in-person groups closed nationwide during the Covid-19 pandemic, leaving 1,160 in-person GA meetings to serve the entire country, as well as 308 online groups.

“It really does boggle the mind that so many states have legalised sports betting without ensuring that some level of resources is available . . . to deal with the negative impacts,” says Rachel Volberg, a gambling researcher at the University of Massachusetts Amherst. “It’s very predictable that there are vulnerable people who wouldn’t have gotten into trouble except that sports betting came along.”

In the absence of greater resources, facilities like Williamsville are left to pick up the pieces.

The retreat, which treats around 200 inpatients and 500 outpatients every year, has been inundated with applications since the liberalisation of online betting, Cabaniss says. For the past year, Williamsville has had to put its referrals on a waiting list because of excess demand. Next year, it will nearly double its capacity to 38 beds to cope, as more younger people require help.

“The stories [of gambling addiction] haven’t changed that much,” says Cabaniss of the boom in online betting. “It’s just exposed more people to gambling . . . The bookies and casinos were never your friends, and the online sportsbooks definitely aren’t your friend.”

If you are affected by gambling problems, services are available to provide support and advice in confidence. In the US, the National Problem Gambling Helpline is 1 800 522 4700. In the UK, Gamcare can be reached on 0808 8020 133.

The post The dark side of the US sports betting boom appeared first on Bloomberg News Today.

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The dark side of the US sports betting boom


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