Charles Fain Lehman
Appearances
Today, Explained
The case against legal sports betting
This is a pretty universally popular law. It passes overwhelmingly. All the sports leagues speak out in favor of it. It's the law of the land between 1992 and 2018.
Today, Explained
The case against legal sports betting
Toronto Raptors forward Jonte Porter has been banned from the NBA for life.
Today, Explained
The case against legal sports betting
I mean look, we say that and my response to that is 1992 is not a million years ago, right? It's not a different universe. Joe Biden was an important political figure in 1992 and he's an important political figure today. I will make the argument for the virtues of prohibition and the argument for it is in essence that prohibition is big and dumb and it works.
Today, Explained
The case against legal sports betting
When you try to set up a regulatory system, you run into the risk of what's called regulatory capture, or in less fancy terms, the entities that are being regulated will have a lot of incentive to spend as much money as possible influencing the regulators. Prohibition seemed to work pretty well, and it avoided precisely the problems that regulatory capture can bring up.
Today, Explained
The case against legal sports betting
That said, I think we could certainly do a heck of a lot better than we're doing right now. You could basically ban advertising. You could severely restrict the usage of or altogether ban app-based betting. You could try to limit the ability of sportsbooks to discriminate against that 5% of players who are taking money out because that ends up being obviously unfair.
Today, Explained
The case against legal sports betting
When you do the sort of cost-benefit math... gambling looks like any other addictive substance, which is that most of the people who participate in it get some small sort of utilitarian hedonic benefit. They get some fun out of it. And then a smaller subset of those people will become seriously addicted and do serious harm to themselves, to others, and potentially ruin their lives.
Today, Explained
The case against legal sports betting
You could put caps on how much they're allowed to solicit deposits or other targeting methods for sort of bringing in those addicted users. The thing is that I think all of those would make a difference. And also because I think they'd make a difference, I suspect that the sports gambling corporations will fight them tooth and nail. Right.
Today, Explained
The case against legal sports betting
And the current political track record is that they will win. You know, there's the sort of strong argument for the prohibitionist position is trying to reach a half measure may actually be harder than just going all the way. If you can convince people that sports gambling isn't worth it. Whether or not you convince people, I don't know. But I'm trying.
Today, Explained
The case against legal sports betting
Gambling addictions associated with all sorts of terrible outcomes, including loss of your home, loss of family, loss of life through personal action. And so we've created this enormous concentrated social harm And in return, we've gotten some kind of anemic tax revenue and a bunch of ads everywhere. It just doesn't seem like a worthwhile trade-off to me.
Today, Explained
The case against legal sports betting
I don't. And I don't like it for the reasons that I'm skeptical of a lot of vice goods. And I think we tend to systematically underrate their harms. But the problems are the same in every case, which is that They concentrate in a small number of users who will do the overwhelming majority of the using and will experience the overwhelming majority of the harm.
Today, Explained
The case against legal sports betting
And everybody else is sort of benefiting off of their backs, which is an alarming arrangement to me.
Today, Explained
The case against legal sports betting
Yeah, absolutely. You know, and, and I think at this point, many Americans know somebody who's been affected by this. Many Americans know people are in the hole. I was at a wedding recently and a friend of mine from college told me about a friend of his back home in Erie, Pennsylvania.
Today, Explained
The case against legal sports betting
He works at the post office, not, you know, a well-off guy who's $28,000 in the hole on sports betting, just a tremendous problem. Um, The interesting thing about gambling legalization, we have information on this mostly from the UK's experience. The UK's experience is pretty grim. There's one estimate that says 8% of all completed suicides in the UK are attributable to sports gambling addiction.
Today, Explained
The case against legal sports betting
Yikes. That's not great. But the thing about the US context is, to sort of try to simplify it, because gambling was legalized in different states at different times... economists can use fairly specific set of methods to isolate the causal effect of sports gambling, not just sort of the correlates of sports gambling, really what sports gambling causes on a number of different outcomes.
Today, Explained
The case against legal sports betting
The American Gaming Association estimates that last year Americans bet over $100 billion on sports. Something like one in three Americans now bets on sports. It's everywhere. It's on your phone. It's on TV. ESPN, which is to say Disney, now runs its own sports book.
Today, Explained
The case against legal sports betting
One of the studies that I point to from economists at Northwestern University estimates that for every dollar spent on sports gambling, households put $2 less into investment accounts. There are big increases in the risk of overdrafting a bank account or maxing out a credit card.
Today, Explained
The case against legal sports betting
There's another paper from economists at UCLA and USC looking specifically at online sports gambling, and they find that legalization increases the risk of bankruptcy by 25% to 30%, which is a big relative risk increase against a small baseline, but still. And the other thing that really sticks out in those studies is that
Today, Explained
The case against legal sports betting
the harms tend to concentrate among the most economically precarious, right? The people with a history of overdraft end up overdrafting more. There is sort of ecological evidence that the harms tend to concentrate in the areas with highest levels of poverty, that they also tend to concentrate among young men who are already at risk for all sorts of, frankly, not great financial decision making.
Today, Explained
The case against legal sports betting
And so it seems like It's not just that, you know, gambling harm befalls some people. It's that gambling harm befalls often the people who can least afford to have it come down on them. Like the guy I was talking about earlier who's, you know, nearly 30 grand in the hole working at the post office.
Today, Explained
The case against legal sports betting
Yeah, actually. So there's another study from folks at Southern Methodist University where they have a panel of 700,000 sports bettors. And they show a couple of really interesting things. So only about 5% of people in the panel withdrew more from the apps than they deposited. So 95% of people are losing money. Wow. That's actually nuts. not the interesting thing.
Today, Explained
The case against legal sports betting
The really interesting thing is that about 3% in their estimate, about 3% of bettors drive 50% of sports gambling profits. And this, just to go back to the conversation earlier, is what you see in all markets in addictive goods. They follow what's sometimes called a Pareto distribution or power law distribution.
Today, Explained
The case against legal sports betting
5% to 10% of the people who are doing the consuming will do 80% to 90% of the consuming. And that's pretty clearly true here as well.
Today, Explained
The case against legal sports betting
It's a big part of the story in more ways than one. You know, One component of it is just it's much more readily available, which is to say if I have to go to a casino to gamble, I may not want to take the time out of my day. I may not make the effort at the margin. I may not get drawn in.
Today, Explained
The case against legal sports betting
And so over the long run, you generate fewer people who are addicted because they never get exposed in the first place. This is the virtue of keeping gambling in Las Vegas is you have to go to Vegas to do it.
Today, Explained
The case against legal sports betting
In Vegas. But then I think to my mind, the much more alarming thing is that app-based gaming facilitates algorithmic discrimination on the part of the sportsbook provider. They can tell, it's actually trivial to tell with modern methods, who the people are who are going to spend the most. They know when you check your bets in the middle of the night. They know when you are watching the game.
Today, Explained
The case against legal sports betting
They know what you are doing and how much you are betting. And then what they can do is algorithmically reinforce that. They can make you offers. They can assign you a personal concierge who encourages you to bet more. This is actually what they do at casinos in Vegas. If you are a whale, a big spender, you'll get all sorts of good stuff comped.
Today, Explained
The case against legal sports betting
But instead of that happening in sort of a dingy hotel or even a glamorous hotel, that's happening on your phone. all day, every day, until they get all of your money.
Today, Explained
The case against legal sports betting
Yeah. And, you know, I think that there were a few arguments here. One is tax revenue, and that's a big selling point. Yeah. And the reality is that the tax revenue has been pretty anemic. If you look at the census figures from QTAC, say, look at the 38 legal states in their most recent count. Together, gambling is generating about...
Today, Explained
The case against legal sports betting
half a billion dollars a quarter, which is not nothing, but is a drop in the bucket compared to not just most state revenue needs, but also substantially less than you get from alcohol, tobacco or marijuana, which is legal in fewer states. So it's not even a particularly revenue generating syntax. Another argument is that you would reduce the reach of the offshore gambling sites.
Today, Explained
The case against legal sports betting
That doesn't really appear to be happening. There's a survey, I think, out of Massachusetts where they found that bettors were just as likely to use unauthorized betting sites after legalization. But it makes sense. If you're an active sports bettor, you're betting on multiple sports books. You're trying to get as much action as possible. And so the offshore sites are just complements.
Today, Explained
The case against legal sports betting
They aren't substitutes. And then the third argument is one that I think we should take seriously, which is like the hedonic benefits and the sort of individual liberty benefits. But as I talked about earlier, you know, A, we didn't like live in a terrible dictatorship in 2017. If you and I made a bet together, neither of us was at any risk of going to jail. Right.
Today, Explained
The case against legal sports betting
That was it was not illegal for us to make up an interpersonal bet. The thing that was illegal was for Big B. businesses and states to get involved in the action. And, you know, I'm just not that upset about restricting the liberty of, like, the state of Georgia or Fluttershy to get involved in your and my bets. So, you know, that argument doesn't hold a lot of water with me either.