Online gambling: Fears of US gambling crisis as online betting rises

When Asher first attended a Gamblers Anonymous meeting in 2022, there were only a dozen people there, but now as many as 60 show up and most of the newcomers suffer from online sports betting addictions.

Asher, who asked the Thomson Reuters Foundation to use a pseudonym to protect the privacy of his recovery group, was drawn to gambling through online poker.

“It’s very easy to open online gambling accounts,” he told the Thomson Reuters Foundation. “At one point I lost over $500,000 to this addiction and almost lost my family.”

Dr. Timothy Fong, co-director of the Gambling Studies Program at UCLA, said clinics used to be inundated with older people who had lost their savings in casinos or were addicted to slot machines.

But today they are young men, addicted to online gambling, risky trading in cryptocurrencies and stocks and, increasingly, online sports betting.

“Everything has changed,” he said. “We’re in the second inning of a gambling crisis. We don’t know … if it could be an opioid-level crisis.”

In 2018, the U.S. Supreme Court transformed online gambling by striking down a nationwide ban on sports betting. Since then, 38 states and the District of Columbia have legalized sports betting, according to the American Gaming Association, an industry group, generating more than $11 billion in revenue for the sector last year.

The ability to tax those new revenue sources is attractive to state and municipal officials facing the post-pandemic economic upheaval, said Richard C. Auxier, a senior policy associate at the Urban-Brookings Tax Policy Center, a think tank.

“You’ll hear people say things like ‘this will fund schools,'” he said. “Politicians are deliberately saying ‘we won’t need to raise property taxes!'”

But, Auxier warned, governments tax companies on their income, so the state only makes money when players lose.

“It’s not free money, it’s residents’ money. And since this is extending to phones, it’s possible that it’s coming from addicted residents,” he said.

Joe Maloney, a senior vice president at the American Gaming Association, cited state-level studies showing that rates of “problem gambling” remained low even in some places that recently legalized online gambling.

“Responsible gaming is the foundation of sustainable growth,” he said.

Maloney said a legal and well-regulated industry is best placed to help combat gambling addiction. “The industry has no vested interest in creating problem gamblers.”

‘SIGNIFICANT’ INCOME

Sports betting revenue for state governments was more than $505 million during the third quarter of last year, up 20% from the same period a year earlier, the Census Bureau reported in February.

Sports betting tax rates differ significantly, up to 51% in New York and Rhode Island.

In recent years, gambling revenue has accounted for about 1 percent of state and local budgets, Auxier said, an amount he called significant.

But like other “sin taxes” such as those on alcohol or cigarettes, gambling revenues offer a “twisted incentive” for local officials, said Kamolika Das, director of local policy at the Institute on Taxation and Economic Policy, a think tank.

Such taxes typically serve in part to “deter consumption, but that reduces revenue,” he said, noting that long-term growth in sin taxes tends to be fairly weak.

“A lot of localities are doing this as an immediate way to plug budget holes, but it’s not really a long-term solution,” Das said.

Meanwhile, the legalization of online sports betting often leads to a corresponding rise in gambling addiction, according to some experts. Last year, Florida saw calls to its gambling addiction helpline double after an online sports betting app was launched in the state.

“Many people who call the helpline have gambling debts that are more than twice their annual income,” said Keith Whyte, executive director of the National Council on Problem Gambling.

The group operates a national helpline that saw calls and texts nearly double between 2020 and 2023.

Maloney, the gaming industry executive, stressed that calls to helplines were not a direct measure of gambling addiction rates and could be the result of increased awareness of the helpline number.

SAFEGUARDS AND TREATMENT

In Massachusetts, a nonprofit that has worked with gambling addiction problems for decades has seen its work transformed by apps.

“You don’t have to get in your car, no one is watching you, you can access the games constantly — these are big concerns,” said Marlene D. Warner, executive director of the Massachusetts Gaming and Health Council, which receives state support.

The group has long operated on-site experts who can help with gambling problems at casinos, and now offers similar services via online chat, though Warner said more needs to be done to ensure minors are kept off gambling apps.

While Massachusetts has received praise for its robust funding of such support services, gaps remain in other areas.

States set aside nearly $100 million to address problem gambling last year, almost all of which came from taxes paid by the industry itself, according to the American Gaming Association.

However, there are eight states that do not offer publicly funded services for gambling addicts, said Whyte, of the National Council on Problem Gambling. “In many states, you may only get six treatment sessions, but that’s not enough,” he said.

The council advocates that 2% of gambling revenues be allocated to treatment programs. It estimates that the social cost of gambling in the United States amounts to $10 billion a year, including health care and incarceration costs.

The council also calls on states to institute 39 safety standards for online gambling, including deposit limits, tools for users to block certain apps and direct links to addiction help.

The industry has set its own “responsible advertising” standards for online sports betting, including a directive to target ads to users over 21 and guidelines to make clear that betting involves risks.

Many major players have implemented tools that allow users to set gambling limits or opt out of the app, as well as offering information on how to seek help for addiction.

Still, policymakers are increasingly recognizing the risks. In July, state lawmakers met in Pittsburgh to craft Internet gambling legislation, which is expected to be released this month.

Meanwhile, some say the rise of online gambling could bring new opportunities for protection.

“There are a lot of game-changing elements online in terms of responsible gambling,” said Warner of the Massachusetts Gaming and Health Council, such as allowing people to set limits on winnings, losses or the amount of time spent.

Artificial intelligence tools could also assess a person’s risk before it becomes problematic, he said.

“It’s changing our world in a radical way. If we can send a message to someone who is starting down a problematic path, whether through artificial intelligence or through humans, that will be fantastic.”