Gambling Harm Blame Game: New Study Says Researchers May Have Wrong Culprit

Sports betting has spent the last couple of years wearing the black hat in numerous academic studies. Legalize it, the research keeps suggesting, and credit scores slip, finances wobble, mental health takes a hit.

A new paper raises a complication to this narrative. In some of the key states driving those findings, sports betting didn't show up all by its lonesome. Online casino gaming showed up as well. And the data, the authors argue, can't really tell the two apart.

The paper — “Is Access to Online Casino Gaming Responsible for Estimated Impacts of Online Sports Betting?” — is from three economists: Tim Bersak of Wofford College, Richard Gearhart of Cal State Bakersfield, and Lyudmyla Sonchak-Ardan of Susquehanna University.

The setup behind most gambling-harm research is straightforward. States legalized sports betting at different times, so researchers compare a state before and after, lean on the states that hadn't legalized yet as a control, and chalk up whatever moved to sports betting. It works if nothing else relevant changed at the same time.

But in some cases, something else relevant did change. Some states also ushered in regulated markets for online casinos. New Jersey had it before sports betting even arrived. Pennsylvania and West Virginia added it shortly after. Michigan and Connecticut launched both simultaneously.

This all affects where people actually lose their money.

Casino leads the way

Studies tend to assume the damage runs through gambling losses, which is reasonable enough. But in the early states, those losses skewed toward the casino, not the sportsbook.

Looking at the eight states that launched online sports betting before 2020, the study found a slight majority of total industry revenue came from online casino rather than sports. The authors pegged it at 53% casino, 47% sports. And that's with only two of the eight (New Jersey and Pennsylvania) running online casinos at the time.

Then COVID arrived, sports shut down, and for a period there was little to bet on but Korean baseball and table tennis. From March through July of 2020, more than 81% of gambling revenue across these states came from online casinos, according to the study.

The pattern held once the sports contests came back. From 2021 through 2024, online casinos out-earned sports betting every single year in the states that offered both. Casino gaming was roughly two-thirds of the take in New Jersey and about three-quarters in Pennsylvania.

It gets harder to untangle than even those numbers suggest.

Untangle, they try

In New Jersey and Pennsylvania, before FanDuel had a standalone casino app the casino games lived inside the FanDuel sportsbook app. One app, two very different ways to gamble. So research that follows deposits to "FanDuel" as a proxy for sports betting is, in those states, also following deposits to online slots. The transactions look the same. A bettor and a blackjack player are, in the data, the same person.

To show the problem wasn't just in theory, the authors re-ran an existing analysis that had tied sports betting to worse mental health among young men.

With every legal state in the mix, the original finding held up. Then they dropped New Jersey and Pennsylvania and ran the analysis again, using only the states that had legalized sports betting and nothing else. The effect mostly dissolved. The estimates shrank, and in several cases they stopped being statistically meaningful.

Then they flipped it, keeping only New Jersey and Pennsylvania. The effect snapped right back.

The mental health story, in other words, lived almost entirely in the two states where people were also putting money into online casinos. Take those states out, and there wasn't much left to find.

The paper is careful about its own findings. It does not declare sports betting harmless. What it says is narrower, and something that should probably be obvious, but isn’t: Much of the current research does not cleanly separate the effects of sports betting from the effects of online casino gaming.