New opportunities and challenges in the age of online gambling

By Adam Beissel and Matthew McMurray

As Americans embrace a digital economy, suppliers are adapting to digital marketplaces. For highly regulated industries like gambling, digital transformations present new challenges where traditional methods of regulation will not be sufficient. Current regulations were designed to protect consumers, reduce opportunities for illegal activities, prevent match fixing, and address effects on mental health and social inequality. Regulators, policymakers, and other stakeholders must consider these issues when developing policies to facilitate gambling’s digital evolution.

Expansion of online gaming will affect the very structure of sports industries. Since the Supreme Court’s Murphy decision, more than 20 states have legalized sports betting, driving billions of dollars through the U.S. economy. The growth of daily fantasy sports combined with the increased accessibility of online sports books has generated new corporate partners that provide sport leagues crucially important exposure and advertising revenue. Certainly, professional sport leagues will gain new and enhanced sources of revenue. But sports leagues remain divided on how to monetize sports betting. Some leagues are pursuing direct payments in the form of royalties or “integrity fees.” Others have sought partnerships with sports books and gambling companies. Indeed, legalization of sports wagering in several states has crystallized a burgeoning sport-media-gambling industrial complex. For example, last year, Penn National Gaming acquired a 36% equity stake in Barstool Sports. Since this investment, Barstool has announced it would sponsor and broadcast a college football bowl game in Arizona and held discussions with Major League Baseball to create a new broadcast experience with in-game gambling. Such investment by gambling companies in digital sport media properties point to a future in which sporting events and programming function as a means to accumulate capital for sport media companies and sports books. This raises serious regulatory concerns about improper messaging produced during televised sporting events and ancillary programming.

These concerns are not solely present in professional sports, but also affect intercollegiate and even high school sport. As legal sport wagering has been rapidly expanding, the NCAA has been slow to propose meaningful policies and educational initiatives to protect college athletes and sport integrity. This impact is further complicated by the recent Supreme Court ruling allowing athletes to benefit financially from their name, image, and likeness. As sports bettors access legal sports wagering in larger numbers, and gambling companies grow in commercial influence, serious questions remain regarding the impact sports gambling might have on college and university campuses. The time has come for the NCAA, collegiate athletic conferences, and colleges and universities to consider the impact of legalized sports wagering and develop preventative action to ensure the privacy of athletes, the security of institutions and athletes, and the integrity of intercollegiate athletics amidst widespread legal betting markets.

Aside from sports, the social impact of online gaming will be considerable. Gamblers who previously spent time and money traveling to gambling destinations can now access sports betting, casino, and lottery games on their smartphones. Unsurprisingly, increased access has led to an influx of new gamblers and record handles for gaming operators across the country. In Pennsylvania alone, 2.7 million gamblers participated in mobile gambling last year, spending an average $6,000+ per gambler. While gaming provides a lucrative source of state revenue, money spent on new forms of gaming is displaced from other household budget items. This shift is disproportionately seen in low-income households. As the number of gambling options grows, we must examine where spending comes from to determine if such trends persist or worsen.

Increased access to online betting is also likely to affect the lives of individuals, most acutely felt by those who suffer from gambling disorder. According to the National Center for Responsible Gaming, approximately 1% of the U.S. population suffers from gambling disorder. In addition to the acute financial impact of their disease, these individuals are also at severe risk for anxiety, depression, and even suicide. Much of what we understand about gambling disorder suggests that it shares key attributes with other addictions. Ease of access to a variety of forms is an important determinant of both the development and the maintenance of the disease. With increased access and greater social inclusion of gambling (media, etc.), we will see a similar increase in gambling disorder prevalence. Not only will this make those at risk for the disease more likely to develop it, but it will also make it harder for our already taxed mental health services to treat the disease. Further, allowing individuals to gamble privately on their phone will make risky activities harder to observe, creating barriers to prevention and diagnosis. Combined with the stress of pandemic-related social isolation, job loss, societal inequity, and other factors, enhanced access to easy, legal, and private sports betting is the perfect storm.

As reviewed here, the rapid expansion of online gaming creates opportunities for stakeholders, but also challenges for regulators, the gaming and sports industries, and the public. Current strategies for regulation are under-resourced and ill-equipped to deal with the rapid escalation in online gaming. Therefore, new strategies must be developed and implemented alongside state efforts to legalize these activities. 

As we move into the middle of the 21st century, legislators and regulators need to use comprehensive data analytics to accomplish their mission. If legislators and regulators do this correctly, gaming can safely become an even bigger part of our entertainment choices, there will be an even larger audience for sport, and the tax receipts from gaming will reduce the need for tax receipts from other parts of our economy.

Adam Beissel is the assistant professor of Sports Leadership and Management and director of undergraduate studies at Miami University. Matthew McMurray is an assistant professor of psychology at Miami University. Austin Smith, an associate professor of economics in the Farmer School of Business and the director of the Master of Economics program at Miami University, also contributed to this column.