The Long Odds of Sports Betting: Part 1
To avoid losing money as a sports bettor you need a win rate of 52.4%.
Why?
The sportsbook needs operating margin in order to be business, so you need to be a bit better than a coin flip.
For those of us who are not sports bettors, 52.4% doesn’t seem like all that much. It’s so close to that coin flip with just a couple extra percentage points.
But it’s massive.
Massive enough that only 3% of sports bettors will be profitable in the long run. 3%!
The rest of us are breakeven or — more likely — funding the few winners and feeding the sports books from our losses.
This Reddit thread on what percentage of sports bettors are in the black is pretty spot on.
Sports betting is an almost guaranteed way to lose money.
But the near certain chance of failure has not stopped sports betting from exploding in popularity in the 6 years since it first became legal in the US.
You can see how interest in “sports betting” in the United States has grown based on Google Search interest since 2018.
And there’s a lot of money at stake.
The Financials of Sports Betting
The growing interest resulted in Americans wagering $119.84 billion on sports in 2023. That’s more than 3 times as much as Americans spend annually on our favorite food (pizza).
Those bets, fueled largely by the 97% of people who are not profitable, translated into $10.92 billion in revenue for the sportsbooks.
The revenue jump was aided by five more states legalizing sports betting last year.
With Kentucky, Maine, Massachusetts, Ohio and Nebraska going legal, you can now bet on sports on 38 states plus Washington D.C.
This year is poised for even more growth with more than $23 billion wagered on the Super Bowl alone.
America Loves Sports Betting
An already out of date study in 2022 from the Pew Research Center found that 19% of Americans placed a bet on sports in the preceding 12 months.
Many of these “gamblers” were betting with friends and family and not through the sportsbooks. Only 6% said that they had bet online “with a betting app, sportsbook, or casino.”
Just a year later the popularity has exploded.
According to a newer poll from St. Bonaventure and the Siena College Research Institute, a whopping 39% of Americans have bet on sports.
But with only 3% of us actually making money from sports betting, why do we do it?
Why We Bet On Sports
Here are the reasons sports bettors gave about why they bet in this Siena College Research Institute poll.
- It’s fun and exciting (93%)
- It makes the games more interesting (85%)
- We think we can make money (80%)
The vast majority of us, of course, will find our hopes of making money to be mistaken.
Are we wrong about the fun and excitement as well?
America Hates Sports Betting?
But it’s not all fun and games.
A full 40% of respondents to that same Siena poll say they have felt ashamed after losing or betting more than they should. And 18% say they have personally lost money that they needed to cover other financial obligations.
We also keep very poor records or we’re simply not willing to be honest about our performance. Because here is what bettors say about their profit and loss.
“36 percent say they win more than lose, 33 percent say they break even while 30 percent say they lose more than win.” [Source, Legislative Gazette]
But even if 69% of us don’t know, or just won’t admit to losing, roughly that same percentage (65%) believe online sports betting will “create compulsive gamblers that will cause pain to them and their families.”
We see the obvious problems this presents for people. We just don’t think it’s a problem for each one of us.
What is Problem Gambling?
The National Council on Problem Gambling (NCPG) has a definition for problem gambling.
This group describes itself as the “only national nonprofit organization that seeks to minimize the economic and social costs associated with gambling addiction.”
Here’s how the NCPG describes some of the warning signs of a gambling problem:
- Thinking about gambling all the time.
- Feeling the need to bet more money and more often.
- Going back to try to win your money back (“chasing losses”).
- Feeling restless or irritable when trying to stop or cut down.
- Feeling like you can’t control yourself.
- Gambling despite negative consequences.
- In extreme cases, problem gambling can cause bankruptcy, legal problems, losing your job or your family, and thinking about suicide.
That sounds a lot like the self-reported behavior of American sports bettors, 40% who report feeling ashamed of betting or losing more than they should, 59% of whom bet at least once per week, and 24% of whom bet three or more times a week.
Those numbers sound a lot more widespread than what the NCPG says.
According to their data, only 1% of U.S. adults have a severe gambling problem and only 2–3% more have a moderate or mild issue.
2.5 million U.S. adults (1%) are estimated to meet the criteria for a severe gambling problem in a given year. Another 5–8 million (2–3%) would be considered to have mild or moderate gambling problems; in other words, they do not meet the full diagnostic criteria for gambling disorder but meet one or more of the criteria and are experiencing problems due to their gambling behavior. Research also indicates that most adults who choose to gamble are able to do it responsibly. [Source, NCPG, What is Problem Gambling]
That seems like a difficult contradiction to rectify. But they must know best, right? After all, the NCPG is the “only national nonprofit organization that seeks to minimize the economic and social costs associated with gambling addiction.”
They must have incentives that are aligned with honestly presenting the data to help Americans make informed choices about their gambling.
Right?
Maybe. Maybe not.
Check out Part 2 for more of the story. It will be published Tuesday, 7/23/24.
