In the United States, sports betting, once seen as a weekend pastime, is being reappraised by young investors as a way to grow asset. As home prices and living costs surge and the view spreads that it's hard to catch up with earlier generations by saving diligently, money that would have gone into stocks and retirement accounts is flowing into betting accounts.
According to a survey released on the 12th (local time) by U.S. asset manager Betterment, 26% of Generation Z (born 1997–2010) investors said they are using sports betting "as a sustained vehicle in their long-term financial plans." By contrast, the figures were 14% for millennials (born 1981–1996), 6% for Generation X (born 1965–1980), and 1% for baby boomers (born before 1964). More than half of Gen Z investors also said "in the past year, there were times when they diverted money they originally planned to invest into sports betting," and 14% said "that happened multiple times a month."
Betterment conducted the survey not on all Americans but on 1,000 investors who already manage financial assets, splitting them by generation into groups of about 250. Those with only retirement accounts were excluded from the sample. It is interpreted to mean that among younger people already interested in investing, the barrier between funds to invest and money to bet has broken down. Among Gen Z, those who said they "don't do sports betting at all" were about one-third, half the overall average of 63% across the four generations.
In the United States, sports betting spread rapidly across all 50 states after the Supreme Court ruled in 2018 that a federal ban was unconstitutional. According to the American Gaming Association (AGA), the amount wagered on legal sports betting in the United States last year reached $166.94 billion (about 236 trillion won). Of that, $16.96 billion (about 24 trillion won) was recorded as operator revenue. That means 10.2% of the total handle was money bettors failed to take home. Citing experts, Bloomberg said, "Stocks share in corporations' profits and economic growth in proportion to equity, but sports betting skims off participants' share first by adding its own margin to the odds," adding, "You can't say an individual loses 10.2% every time, but overall, from the design stage, it's a market tilted toward individuals losing."
Young U.S. investors say saving and stocks alone cannot close the wealth gap with earlier generations. In a survey last year by the Financial Industry Regulatory Authority (FINRA), 62% of investors under 35 said they "need to take big risks to achieve financial goals." Among all investors regardless of age, the same response was about one-third. Among investors under 35, 29% bought trendy names like meme stocks, 43% engaged in futures and options transaction, and 22% borrowed money to invest, all relatively high shares.
Online in the United States, individual investors who stack on risk like this are called "degenerates," or "degens." In a survey by life insurance company Northwestern Mutual, the share of degens who said they felt financially behind and were drawn to speculative investments reached 80% among Gen Z. In a survey by the Urban Institute, 65% of Gen Z said they were "in a tougher economic environment than the previous generation," and 52% said "they need to take more risk to achieve goals." Among those 30 and older, the share saying they need to take risk was 35%, 17 percentage points lower.
It is extremely rare to succeed in building wealth through sports betting. Participants generally thought they would at least break even, but according to Stanford researchers, actual sports bettors lost an average of 7.5 cents per $1. In a 2014 paper co-authored by Brad Barber, an emeritus professor at UC Davis, habitual sports bettors who consistently generated revenue made up less than 1%.
Researchers including those at the Kellogg School of Management, who tracked financial transactions at about 230,000 households, also found signs that betting funds cannibalized long-term investment funds. After online sports betting spread, net investment by participating households fell by about 14%. For every $1 that went into sports betting, about $2 less went into investment accounts. Researchers at UCLA and USC said, "In areas that legalized online sports betting, credit scores declined and debt collection and personal bankruptcies increased."
Sarah Levy, Betterment's chief executive officer (CEO), released the survey results on the 12th and said, "When prediction markets or sportsbooks start to feel like a retirement strategy, that's when trouble begins," adding, "These products are designed not to help you prepare for the next 10 years but to keep you chasing the next big hit."