The App Always Wins

It’s hard to say exactly what prompted me to start betting on the National Football League last year, when I was a sophomore in college. Maybe I wanted to justify the countless hours spent watching the RedZone channel each Sunday by turning it into some profitable side hustle. Maybe it was the deluded arrogance that my intro to stats class had equipped me with the tools to build a winning predictive model, a belief that somehow I could find an edge. Or maybe—and I think I knew this at the start—I was just avoiding the rapidly impending need to choose a career, and the trade-off between making a living and following one’s passion that comes with it. 

I judiciously created a series of rules for my betting: I would only gamble a set amount of money, only at certain times, and only when I had some angle that made the bet worthwhile—and I would bank half my winnings each week. The season started off great; I turned $500 into $5,000 in under five weeks. Confident that I’d cracked the code, I convinced a friend to join in, pitching it as a smart way to put his idle cash to work. (“Do you think rich people just let their money sit around?”) Then, predictably, I broke every single rule and lost nearly all of our money. I started chasing my losses, upping my bets after bad weeks to try to claw our money back. When the season mercifully ended, I had nothing to show for it except the unsettling realization that I desperately wanted to continue gambling. 

I wasn’t alone. Last year, 73.5 million Americans legally bet on the NFL—a staggering 58 percent increase from the year before. Since the 2018 Supreme Court ruling in Murphy v. National Collegiate Athletic Association overturned a federal ban on sports betting, the U.S. has undergone the most rapid expansion of legal gambling in its history. A 2022 New York Times investigation into the legalization of the industry, which examined thousands of documents and conducted extensive interviews, revealed a systematic state-by-state effort to lavish legislators with financial favors in exchange for regulatory regimes light on oversight and heavy on tax breaks. 

In just six years, sports betting has spread to 38 states, with revenues soaring 25-fold. Last year alone, Americans legally wagered nearly $120 billion. Universities, media companies, and the major sports leagues—longtime gambling opponents—have all signed lucrative contracts to evangelize for various sports betting platforms. Sports have become so parasitically suffused with grating gambling propaganda that the comedian Conan O’Brien quipped in 2022, “I haven’t seen an online sports betting ad in almost seven minutes. Am I dead?” Industry analysts predict a continued rosy outlook, projecting $45 billion in annual revenue as the market matures. 

The danger in all of this is that the house only wins when you lose. Unlike most other industries that purport to offer a win-win transaction, in which both the consumer and the producer are better off than before, the gambling industry wants you to lose the most amount of money in the shortest amount of time. Three new studies, employing various methodologies and examining different aspects of the betting industry, all come to the obvious conclusion: Sports betting’s meteoric rise has occurred at the direct expense of consumers’ financial health. 

One study conducted by researchers at Southern Methodist University, Emory University, and the University of California at San Diego examined consumer spending on sports betting and found that a staggering 43 percent of bettors exceeded responsible gambling guidelines—defined as betting no more than 1 percent of monthly income—during the average gambling month. The effects of legalization were particularly acute among low-income individuals; the post-legalization increase in bottom-tercile earners spending 10 percent of their income on gambling was five times greater than that of top-tercile earners. 

A second study, coming from Northwestern University, the University of Kansas, and Brigham Young University, tracked the effects of sports betting on broader economic activity. Contrary to industry claims that legalization would simply redirect spending from illicit gambling or other forms of luxury spending, the study found that “legalization reduces net investment by nearly 14 percent … $1 of betting reduces net investment by just over $2.” (Net investments refers to equity investments.) Again, low-income customers fared worse, cutting net investment by a much higher 41 percent. 

The final study, conducted by researchers from the University of Southern California and the University of California, Los Angeles, quantified legalization’s effects on statewide financial health indicators. States with legalized sports betting experienced a small but significant decrease in the average credit score, with credit scores three times worse in states that allow online betting. Even more alarming, states with online access to betting saw a 28 percent increase in the likelihood of bankruptcy. As Brett Hollenbeck, the lead author, told me, “We didn’t expect to find large effects for the average person because most people are not gambling at all … the fact that we could find any effects suggests that the impacts are quite severe for those who are affected.” 

Charles Fain Lehman recently argued in The Atlantic that this new wave of studies justifies banning sports betting altogether. “Unlike regulation—which is complex, hard to get right, and challenged by near-certain industry capture of regulatory bodies—prohibition cuts the problem off at the root.” However, there are three major challenges with this argument. First, after the Murphy decision, a national ban is practically impossible, meaning prohibition would have to happen on a state-by-state basis—a highly unlikely prospect given the recent legalization efforts and the gambling industry’s ability to influence state lawmakers. Second, sports betting bans are theoretically deeply unpopular: Nine in 10 Americans view it as an acceptable form of entertainment, and 75 percent support legal sports betting in their home state. Lastly, people will gamble whether it is legal or not. While legalization certainly increases the number of people who participate, Americans already spend more money on gambling every year than on concerts, plays, movie theaters, sporting events, and all forms of recorded music, combined. Before Murphy opened the door to legal sports betting, offshore operators dominated the market, and they still account for two-thirds of total bets, according to the gambling analysis firm Yield Sec. Criminalizing sports betting would only push the industry further underground, creating a dangerous illicit market that preys on the most vulnerable. Before I turned 21, many of my friends and I used offshore operators; the scope of options was endless (my friend liked to bet on Japanese baseball), and it’s not unheard of for sites to extend six-figure lines of credit to people who can’t possibly afford to pay it back. 

Legalization’s failure isn’t necessarily that it exists—it’s that right now, it’s even more damaging than the illegal industry. The sports betting world has developed highly advanced technology, not to safeguard its most vulnerable users, but to target them and drive them to gamble even more. Thankfully, with sufficient political will, most of the industry’s tactics and technology could be repurposed to protect consumers instead of exploiting them for profit. But without safeguards to prevent problem gambling, the industry is incentivized to pursue an addiction-for-profit business model—exactly what we’re seeing unfold today.

When I told a friend about some of the tragic stories I encountered while researching this piece, she responded, “That’s really sad. But also, like, how can you be so stupid?” Even though public opinion toward addiction has broadly liberalized, roughly half of Americans still believe that moral weakness contributes to problem gambling. The attitude benefits the gambling industry, of course—focusing on individual agency emphasizes a narrow sense of personal responsibility that shields other actors from scrutiny. 

Blaming gambling disorders on stupidity or a lack of willpower is a view emphatically rejected by the medical community. Starting in 1980, the American Psychiatric Association added “pathological gambling” to its Diagnostic and Statistical Manual of Mental Disorders (DSM). Today, the DSM-5 classifies gambling disorder as a behavioral addiction—the only behavioral addiction the DSM currently recognizes. 

The casino industry skirted around most regulation and liability concerns by endorsing the medicalization of excessive gambling while strategically focusing the spotlight on individual pathology. As Shannon Bybee, a former casino executive and the first president of the Nevada Council on Problem Gambling, explained, “Failure to resist impulses to gamble means to me that the problem—and the solution—is found within the individual.” To that end, the industry created the National Center for Responsible Gambling, a research institute with the mission of identifying “an objective measure—a blood test, maybe a genetic marker, saying this person is predisposed to addiction.” The industry’s blinkered approach implies that gambling itself is not inherently corrupting; rather, certain individuals are born corrupted. For everyone besides those unlucky individuals, gambling products are safe to use. 

The betting industry is currently doubling down on the casino approach. DraftKings claims that “the casino … doesn’t cause problem gambling any more than a liquor store would create alcohol problems.” The Guardian recently uncovered through a freedom of information request that FanDuel objected to limits on advertising to problem gamblers by arguing that it was “analogous to a liquor store not being able to advertise to customers who ‘may be’ alcoholics.” In this telling, the industry bears no responsibility—people join their platforms either problem gamblers or not. 

The industry’s framing fosters an incomplete and misleading picture of both addiction and its own involvement in it. Lia Nower, director of the Center for Gambling Studies at Rutgers University, rejects the industry’s notion that problem gamblers are a homogenous group that could be identified with something like a blood test. She developed a classification system for problem gamblers with three “pathways”: behaviorally conditioned, emotionally vulnerable, and antisocial impulsivist gamblers. Nower writes that “the behaviorally conditioned subgroup is characterized by the absence of psychopathology.” In other words, this subgroup of problem gamblers develops issues through their repeated exposure and continued participation in gambling activities, not because of any biological predisposition to addiction. Surprisingly, this subgroup is the largest of the three, accounting for 44 percent of problem gamblers and directly refuting the industry’s stance. These findings echo that of an independent federal commission in Australia, which, after assessing the nation’s legalization efforts, determined that problem gambling stems just as much from the design of the gambling technology as from any individual consumer behavior. 

Perhaps the largest consequence of legalization is that 90 percent of betting is now done online. Simply by making gambling both ubiquitous and frictionless, sports betting platforms are almost certainly exacerbating problem gambling. A 2005 gambling study found that living within 10 miles of a casino led to a 90 percent increase in the odds of becoming a pathological gambler. But even a 10-mile drive represents significantly more friction than today. When I spoke with Nower about online sports betting, she explained, “With rampant gambling on phones, 24 hours a day, there is a large proportion of people who will develop problems because they have access, and they can do this all the time.” 

By adhering to their narrow conception of gambling disorders, which claims that technology plays virtually no role, betting platforms insist that this won’t be the case. On the DraftKings website, they emphasize that only “1 percent of U.S. adults are estimated to meet the criteria for a severe gambling problem … research also indicates that most adults who choose to gamble are able to do it responsibly.” What Draft-Kings conveniently omits is that the rates of problem gambling among its customers are far worse. Recent research indicates that the rate of gambling problems among online sports bettors is at least twice as high as among gamblers in general, and, shockingly, 30 times more than the population average. 

Raymond Estefania, a psychotherapist and addiction specialist with almost 30 years of clinical experience, told me he’s never seen anything like the rise of online sports betting. “The way gambling is being done today is new. It’s automated, it’s online, you can do it right on your phone. It’s become so accessible. We’re going to end up seeing a huge spike in the number of people who end up experimenting and who end up developing a problematic relationship with gambling.” In essence, betting on a phone combines the dopamine-driven instant gratification of social media with the inherently compulsive nature of gambling to create a perfect storm for addiction. 

The problem with gambling goes well beyond its sheer ubiquity, however. Every aspect of the platform has been designed to wring the most value out of each user—by being as addictive as possible. The industry’s insidiousness is that while it claims technology has no impact on addiction, it has poured huge sums of money into optimizing for exactly that. Estefania agrees: “Sports betting platforms are absolutely part of the problem, and they do a lot of things to bait people and get them to engage in gambling. The scale of it just might shock you.” 

For most businesses, the best customers are the most knowledgeable and passionate—the tech enthusiast who buys every accessory along with the latest computer, for example. But in the gambling industry, the most valuable customers are the “whales”—those who think they know the game but don’t, consistently losing large sums of money. Although 96 percent of sports bettors lose money, more than half of the industry’s profits come from just 2.6 percent of its customer base. This dynamic creates the predatory nature of the industry; there is no avoiding the overlap between whales and problem gamblers or between industry profitability and the financial ruin of its customer base. 

These incentives drive the industry’s two-pronged strategy: First, create a platform that maximizes the chances of some users spending excessively; second, leverage detailed customer data to eliminate the winners while encouraging the losers. In the internet economy, the first goal of any enterprise is attentional capture. Sports betting platforms have been relentlessly gamified to maximize engagement. By making betting itself a game, users have the illusion of winning even when they’re losing tons of money. Point systems that track user activity, rewards for the number of bets per week, badges to commemorate win streaks, leaderboards to compete against friends and strangers, and constant push notifications alerting users to time-sensitive betting opportunities are all designed to keep users engaged and continuously betting. 

The goal of gamification is to induce a state of “flow”—a deep concentration where users become so absorbed that they lose self-awareness and track of time. In Natasha Schüll’s fantastic book Addiction by Design, she describes how slot machine players enter a “zone” of suspended animation. Unlike a positive flow state, the zone depletes one’s mental and financial resources, untethering gamblers from the reality of their time and money losses. 

Another crucial part of platform design is figuring out how to get customers to make the least profitable types of bets. The University of Nevada’s Center for Gambling Research found that while a typical sports bet offers a return of roughly 5.5 percent, same-game parlays (SGPs)—which combine multiple wagers into one—offer a return of 31 percent. For bettors to win, all individual wagers within the parlay must succeed; otherwise, they lose everything. This type of betting has only been made possible recently by algorithmic advances, as betting platforms can now simulate individual games thousands of times to quantify the correlation between different in-game bets. The industry and media aggressively promote these bets with their lottery-size returns; when a $20 parlay with odds of 29,000 to 1 hit, it was hailed as the “greatest bet of all time.” As DraftKings CEO Jason Robbins explained, “What we are trying to do is … [make] sure that we have a high parlay mix because people like that. Every quarter, the parlay as a percentage of the total bet mix goes up.” DraftKings’ then CFO Jason Park agreed: “Parlay mix is really the silver bullet.” And it’s working; parlays accounted for more than 60 percent of all sports bets placed last year in Illinois, which releases the most detailed data. Two years ago, parlays accounted for only 20 percent of sports bets in that state.

Sports betting platforms also made the introduction of “live betting”—in which users can bet on games in real time—possible. This form of betting is  “incredibly dangerous,” according to Nower. “There’s a huge amount of impulsivity because you’re in this enhanced emotional state.” Short feedback loops between stimulus and reward have also proved to be more reinforcing. “It’s not just betting on the outcome; it’s placing bets as you go on what could happen next. There’s an addictive component where you lose the last bet and then you place another bet to make up for it,” Hollenbeck warned. And yet, companies like BetMGM have made it a “core theme.” Last year, they added the ability to live-bet player props—like how many points LeBron James will have in the second quarter—which caused live betting to grow more than 160 percent year over year. 

After making betting as addictive and financially damaging as possible, the industry then seeks to identify which customers have been affected the worst. “It was originally the casino industry that pioneered this business model, observing every movement of the players and focusing on the most addicted, giving them rewards to keep them coming back,” explains Wolfie Christl, a Vienna-based data rights activist with whom I spoke to better understand the industry’s surveillance techniques. Last year Christl published a report that turned the tables on the betting industry by tracking their tracking of him. 

Christl first created an account on Britain’s largest online gambling platform, Sky Bet Gaming (SBG). After using their website 37 times, Christl monitored 2,154 unique data transmissions to 44 companies. The majority of the data flow goes to surveillance tech firms like Signal and Iovation. These firms then build a customer profile with at least 186 different attributes, including details like a player’s frequency of gambling, number of “free” bets used, favorite sport to bet on, and email open rate. SBG takes the data and runs it through algorithms that calculate variables like each customer’s lifetime value, specific products they might use, and even something called the “winback margin,” which refers to how much money SBG should spend trying to win a customer back. The reason for it all, as Christl explained, is to “personalize the marketing.” 

In a surprisingly candid moment during an earnings call in 2022, DraftKings CEO Robbins boasted, “There’s a lot of data science and customization at a player level to serve up parlays—Same Game Parlays to the customers that we think have proclivity to engage with that type of bet.” In other words—actually, in their own words—the sports betting industry is currently identifying who the most problematic gamblers are and then targeting them with tailored ads to further spend on their platforms. Christl views this as predatory: “This type of surveillance is specifically dangerous when an industry is able to destroy lives.” Not only that, but the surveillance of online gambling platforms far exceeds what traditional casinos could have dreamed of; the ability to track users through their phones grants the companies access to a continuous stream of data to optimize for further gambling. 

Anyone who still thinks it’s possible to earn money on these sports betting apps should read The Wall Street Journal’s analysis of the industry’s use of surveillance practices to identify and ban winners. Although companies do not disclose how often they exercise this power, they are transparent about the practice. Speaking at Goldman Sachs in 2022, Robbins said, “What we are trying to do is get smart at limiting the sharp action.” Or, as he noted a year earlier, “This is an entertainment activity. People who are doing this for profit are not the players we want.”

The notion that the sports betting industry bears some responsibility for problematic gambling behavior should be uncontroversial. Yet American culture often struggles to reconcile the neoliberal ideal of consumer sovereignty—the notion that consumers are the best judges of their own welfare—with the stark reality of harmful and abusive relationships developing with certain products. History shows that when harm becomes undeniable on a large enough scale, change follows, as has happened in the tobacco and opioid industries. There are now hopeful signs of change within the social media industry, as well. 

Rather than wait for a full public health crisis to unfold, the federal government should enact comprehensive legislation based on the harms documented in the handful of most recent studies. While the clearest implication of the evidence is that online sports betting is very harmful, it is safe to assume for now that the industry could muster the necessary political capital to defeat what would essentially be a return to a prohibition on sports betting. If the industry is going to remain online, then federal regulation is clearly needed. 

Although the Supreme Court won’t allow Congress to ban sports betting outright, it should uphold a law granting the federal government the authority to regulate it. In Murphy,the Court ruled that the Tenth Amendment prevents Congress from directly regulating state legislatures. But, importantly, it didn’t give sports gambling any special constitutional protection under standard federal regulation. While Congress can’t directly regulate states, it frequently regulates industries and private companies. Take, for instance, Moyle v. United States,a recent case in which the Biden administration argued that the Emergency Medical Treatment and Labor Act (EMTALA) preempted Idaho’s abortion ban provision that omitted protections for the health of the pregnant woman. EMTALA doesn’t regulate states directly; rather, it ensures that hospitals comply with federal regulations. A similar approach should be applied to sports gambling—federal regulations imposed on corporations shouldn’t run afoul of Tenth Amendment concerns. While betting on this radically anti-regulatory Court is, well, a gamble, it’s certainly a chance worth taking. 

Congress should establish a gambling regulatory agency, analogous to what exists in nearly every European country where gambling is legal. The primary objective of that agency should be to hold the sports betting industry liable for problem gambling that occurs on their platforms. A story in the December 2016 issue of The Atlantic followed the tragic case of Scott Stevens, a compulsive gambler who took his own life. His family tried to sue the casinos for their role in fueling his addiction, but American courts have been notoriously resistant to such claims, because no such regulation exists. Other countries, however, demonstrate the benefit of a more proactive approach. In Sweden, for instance, “The general starting point of the law is that a license holder shall protect its players from excessive gambling and actively monitor and follow up in order to help players reduce their gambling when there is reason for it,” according to The International Comparative Legal Guide. Sweden has successfully used that law to sue multiple gambling companies, demonstrating the promise of robust regulation. The goal of similar legislation in the U.S. wouldn’t be to ban sports betting any more than airbags ban driving—it would simply make it safer.

Three areas in particular stand out in need of reform. 

Surveillance

The sports betting industry is carefully monitoring its users—but for profit, not protection. Instead of using data to calculate a user’s lifetime value to a company, companies should be required to use the same data to identify and address users’ risk for problem gambling. 

Researchers using machine learning have been able to successfully identify players exhibiting signs of problem gambling. “By identifying key variables that measure the intensity of gambling, such as the number of bets placed and the frequency of betting sessions, we can easily detect the group displaying problem gambling,” researchers from the Corvinus University of Budapest write. Private market solutions also exist, like the British company BetBuddy, which sends out personalized and targeted messages to potential problem gamblers helping them to understand their own behavior. 

Transparency 

The probability and expected value of betting is poorly understood by the public. To rectify that, the gambling platforms should clearly display the expected value of every bet. 

For example, imagine a user makes a bet that they feel has a 30 percent probability of occurring. The odds they see are +150, which means that in order for the bettor to profit $150, they only have to win $100. That appears good! But the expected value of that $100 bet (the probability of winning × the amount won − the probability of losing × the amount lost) nets out to −$25. For wagers like SGPs or live bets, the expected values are almost always terrible. But they appear deceptively lucrative because their associated probabilities are so small.

Previous research with food labels indicates the potential of such a reform. A meta-analysis found that labels reduced unhealthy dietary choices by 13 percent. Even more promising, labels caused the food manufacturers to create healthier products, reducing sodium content by 9 percent and trans fat content by 64 percent. 

Deposit Limits 

Users should be restricted to depositing only a certain amount of money each month. This kind of gambling regulation could effectively cap the financial damage—something that isn’t as easily achievable with other addictions. Three states already enforce monthly deposit limits: Massachusetts caps deposits at $1,000, Tennessee at $2,500, and Maryland at $5,000. These limits seem entirely reasonable; no betting platform should be extracting more than $12,000 a year from any individual user. 

The betting industry would likely argue that mandatory deposit limits are unnecessary since their platforms already offer voluntary limits. But that claim is misleading. A quick look at user experiences makes it clear just how ineffective the industry’s current “Responsible Gaming” guidelines really are. Despite the industry’s incessant marketing, you rarely hear about these limits, and users would only find them if they actively sought them out. This points to the biggest flaw of voluntary limits: Almost no one uses them until it’s too late. Recent studies show that just 2 percent to 8 percent of customers take advantage of voluntary limit setting. Moreover, these limits are easily bypassed, as many platforms allow users to change them within 24 hours, rendering them nearly useless. 

My grandfather, a journalist with the Associated Press and sports editor for The Christian Science Monitor, was one of the most intelligent people I’ve ever met. He lived a full life, with accomplishments such as interviewing Muhammad Ali and covering six Olympic Games, as well as raising six children. He also suffered from alcoholism and a gambling disorder. He died seven years ago, and I wish that he could have read something I published. 

I also enjoy sports betting, probably more than the average person. While writing this piece, I redownloaded a sports betting app. And even after extensively researching the industry, after reading horror story after horror story, after confronting all the statistics and research proving that sports betting is near equivalent to lighting your money on fire, I still placed a few hundred dollars in bets. Now I’m back at college in Vermont, where the app I was using isn’t legal. But I still feel the urge to download another one and start again. 

Of course, many people can gamble on sports, have fun, and easily move on with their lives. But some clearly cannot. Many others exist in a gray zone somewhere in between, in which the technology with which they interact will have a material impact. Regulations cannot solve gambling disorders; like any addiction, gambling disorders can only truly be solved at the source. But reforms can reduce the cultural saliency of sports betting, as well as the ease with which gambling companies transfer money out of users’ pockets into their own. 

Calls to gambling hotlines have increased 150 percent since 2019, the year after legalization. Raymond Estefania, the addiction specialist, told me he worries that online sports betting is becoming an epidemic among college students. And we’re still only at the tip of the iceberg, just six years into this. 

Meanwhile, the insertion of gambling into every facet of our life continues. You can now gamble on the weather, the odds of a recession, even what policies will be mentioned in an upcoming presidential debate. The pinnacle of gambling’s valorization might be Nate Silver’s latest book, On the Edge: The Art of Risking Everything. Silver, election forecaster and avid poker player, argues that the connective tissue binding most highly successful people together—hedge fund managers, AI accelerationists, effective altruists—is their propensity to gamble. “Blackjack and slots … are fundamentally not that different from trading stock options or crypto tokens or investing in new tech startups,” he writes. Gambling, for lack of a better word, is good: “Ever since 1776, we risk-takers have been winning,” he manages with a straight face. According to Silver, human flourishing—or, at a minimum, immense financial reward—depends on breaking life down into an infinite series of expected value equations and then betting on them. If the world is dominated by gamblers, then maybe you should gamble too. 

The world of sports betting shows why you shouldn’t. Because what Silver fundamentally misunderstands is that today’s economic winners aren’t the gamblers—they’re the house. They win by turning more of us into gamblers. And right now, they’re succeeding. It’s time to change the odds.

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