U.S. gambling crisis feared as online betting rises

• More than 38 states have legalised since 2018 court case
• Calls to addiction hotlines double
• Sports betting nets $500 million quarterly for states

LOS ANGELES - When Asher first attended a Gamblers Anonymous meeting in 2022, only a dozen or so people were there, but now as many as 60 turn up with most newcomers dealing with addictions to online sports betting.

Asher, who asked that Context use a pseudonym to protect the privacy of his recovery group, was drawn into gambling by online poker.

"It is just so easy to open these gambling accounts online," he told Context/the Thomson Reuters Foundation. "At one point I lost over $500,000 to this addiction and almost lost my family."

Dr Timothy Fong, co-director of the Gambling Studies Program at UCLA, said clinics used to be inundated with older people who had lost their savings at casinos, or were addicted to slot machines.

But these days it is young men, hooked on online gambling, risky crypto and stock trading, and increasingly online sports betting. 

"Everything has changed," he said. "We are in the second inning of a gambling crisis. We don't know ... if it could be an opioid-crisis level."

The U.S. Supreme Court transformed online gambling in 2018, striking down a national prohibition on sports betting.

Since then, 38 states and the District of Columbia have legalised sports betting, according to the American Gaming Association, an industry group, bringing in more than $11 billion in revenue to the sector last year.

The ability to tax such new revenue streams is enticing for state and city officials dealing with post-pandemic economic upheaval, said Richard C. Auxier, principle policy associate with the Urban-Brookings Tax Policy Center, a think tank.

"You'll hear people say things like, 'this will pay for schools'," he said. "Politicians are purposefully saying, 'we won't need to raise property taxes!"

But, Auxier warned, governments tax companies on their revenue, so the state makes money only when gamblers lose.

"It's not free money, it's money from residents. And as this moves to phones, it's coming from possibly addicted residents," he said.

Joe Maloney, a senior vice president with the American Gaming Association, cited state-level studies showing that "problem gambling" rates remained low even in some places that have recently legalised online gaming.

"Responsible play is at the foundation of sustainable growth," he said. 

Maloney said a well-regulated and legal industry was best prepared to help tackle gambling addiction. "The industry does not have a vested interest in creating problem gamblers."

'Significant' revenue

Sports betting revenue for state governments was more than $505 million during the third quarter of last year, up 20% from the same period the previous year, the Census Bureau reported in February.

Sports-betting tax rates differ significantly, up to 51% in New York and Rhode Island.

In recent years, gambling revenue has made up about 1% of state and local budgets, Auxier said, an amount he called significant.

Yet like other "sin taxes" such as on alcohol or cigarettes, gambling revenue offers a "twisted incentive" for local officials, said Kamolika Das, local policy director with the Institute on Taxation and Economic Policy, a think tank.

Such taxes are usually in part to "deter consumption, but then that reduces the revenue," she said, noting that long-term growth from sin taxes tends to be fairly weak.

"So a lot of localities are doing this as an immediate way to plug budget holes, but it's not really a long-term solution," Das said.

Meanwhile, the legalisation of online sports betting often leads to a corresponding jump in gambling addiction, some experts said. Last year, Florida saw calls to its gambling addiction helpline double after an online sports betting app was launched in the state.

"Many people who call the helpline have gambling debt that's more than twice their annual income," said Keith Whyte, executive director of the National Council on Problem Gambling.

The group operates a national helpline that saw calls and texts nearly double between 2020 and 2023. 

Maloney, the gaming industry executive, stressed calls to helplines were not a direct measurement of gambling addiction rates and could be a result of more awareness of the helpline number.

Safeguards and treatment

In Massachusetts, a decades-old nonprofit working on gambling problems has seen its work transformed by apps.

"You don't have to get into your car, nobody is setting eyes on you, you can constantly access gaming – these are huge concerns," said Marlene D. Warner, chief executive with the Massachusetts Council on Gaming and Health, which receives support from the state.

The group has long operated on-site experts who can help with gambling problems at casinos, and now is offering similar services via online chat, though Warner said more needed to be done to ensure minors were kept off of betting apps.

While Massachusetts has received accolades for its robust funding for such support services, gaps remain elsewhere.

States set aside nearly $100 million for addressing problem gambling last year, nearly all of which came from taxes paid by the industry itself, according to the American Gaming Association.

Yet there are eight states that provide no publicly funded services for gambling addicts, said the National Council on Problem Gambling's Whyte. "In a lot of states you might just get six sessions of treatment - it's just not enough," he said.

The council advocates for 2% of gambling revenue to be set aside for treatment programmes. It estimates the societal cost of gambling in the United States is up to $10 billion a year, including health and incarceration costs.

The council also urges states to institute 39 safety standards for online gambling - including deposit limits, tools for users to block certain apps and direct links to addiction help.

The industry has rolled out its own standards for "responsible advertising" for online sports betting, which include a directive to target ads to users over 21, and guidelines to make it clear that betting involves risks.

Many of the major players have implemented tools that allow users to set betting limits or exclude themselves from the app, as well as offering information about how to seek help for addiction.

Still, policymakers increasingly recognise risks. In July, state legislators met in Pittsburgh to put together legislation on Internet gaming, expected to be released this month.

Meanwhile, some say the rise of online gambling could bring new opportunities for safeguards.

"There are a lot of elements online that change the game in terms of responsible gambling," said Warner of the Massachusetts Council on Gaming and Health, such as allowing people to set limits on wins, losses or amount of time spent.

AI tools could also assess a person's risk before it becomes problematic, she said.

"That's changing our world dramatically. If we can send a message to someone starting down a problematic path, whether by AI or people, that's terrific."

(Reporting by Avi Asher-Schapiro and Carey Biron; Editing by Jon Hemming.)