KU Business faculty experts discuss: Online sports betting

Online sports betting has evolved from a pastime for intense fans into a mainstream, accessible financial activity. Newfound interest in this activity across the U.S. has reshaped how individuals interact with risk, reward and even personal finance. 

With states, including Kansas, legalizing online sports betting in recent years, millions of Americans find themselves navigating a landscape in which their favorite form of entertainment intersects with their personal finances in unprecedented ways.  

What are the implications that come with it? Justin Balthrop, assistant professor of finance  and avid sports better, has been investigating this topic.

With a unique background in investment management and a doctorate from Rice University, Balthrop brings a unique angle to the topic. His early research focused on financial markets, but two years ago, a colleague encouraged him to explore these topics through the lens of sports betting, an angle he has continued to pursue as a sports better himself. Recently, Balthrop has published papers such as “Gambling Away Stability: Sports Betting’s Impact on Vulnerable Households,” combining research with real-world experiences to explore the true financial impacts of sports betting.  

What inspired you to start investigating the financial implications of online sports betting?  

I’ve been interested in the topic since before the legalization of online sports betting in Kansas. As early as 2011, I was participating in fantasy sports leagues and trying to predict the outcomes of different games with friends. So, when I learned about the legalization of online sports betting, I figured I should get involved. Upon diving deeper into the process, I learned that some of what I had been doing as a fun pastime was similar to the processes of sports betting, making it a natural progression into the world of online betting.  

Beyond that, I am personally interested in doing work that can have actual policy and real-world impacts. I think understanding how sports betting affects people (financially, psychologically and otherwise) is extremely important. 

Are there misconceptions about sports betting that your work may help clarify or debunk?  

Many betting participants believe that wagering money on their favorite team or sport is financially safer than traditional investments like the stock market. In reality, I have found that online sports betting may be riskier form of investment for participants, while traditional forms continue to help individuals avoid overspending or overdrawing past their typical limits. We have learned that no matter how well you know a sports team, the outcomes of events can be so unpredictable that they pose a much higher risk than reward compared to other investments.  

Another misconception around the topic is that the negative implications of sports betting will only affect the individual who engages in the act, which is something I too believed upon beginning this process. Through research, I have found that the implications of losing bets and large amounts of money can have long-term effects on groups of people, not just the gamblers themselves. I now see that the increased financial instability of sports betters may start to affect those around them, whether it’s their family, their community or even the government, as individuals begin to need more financial and emotional support from those around them.    

What should the general public consider before they start participating in online sports betting, especially as large sports seasons like college football and the NFL begin again?  

If individuals are planning to bet, especially during this busy season, many online sites will have promotional offers that users should take advantage of to increase their likelihood of winning and decrease the need to spend their personal savings. When you do take advantage of these offers, though, make sure you set forth personal spending limits and avoid drawing from any savings accounts or important investments to place bets. Overall, a good rule of thumb is that if you feel emotionally attached or truly upset about losing the money you’ve bet, you may have gone too far.  

How can gamblers be smart about their betting habits when we’ve seen increased financial uncertainty?  

I think that the easiest way to be smart about your gambling habits is to treat your budget the same way you would with any other entertainment spending. For example, if you set aside $50 for the movies, you wouldn’t expect to get that money back. Individuals should have that same mindset about the money they put into sports betting to avoid overspending and the negative financial implications that may come along with it. If you think about betting as a form of entertainment, not income, you can achieve increased emotional and financial stability when it comes to online gambling. On top of the budgeting limitations you can set for yourself, it is wise to use the limitations provided by betting apps to keep yourself on track.  

As a sports better yourself, how has your research framed your mindset around the activity? 

When I began this research, I had a hands-off approach, believing that the financial habits of others were not my business. Now, I realize that financial implications of sports betting may pose problems for communities and organizations around the U.S., in addition to individuals and their households.  

With this newfound information, I hope that fellow research partners and I can be involved in policy change conversations throughout the country, equipping voters to make informed decisions based on the broader implications of sports betting.

Where do you hope to take this research next?  

I am currently working on research into the future of sports betting, specifically using individual behaviors and their betting profiles to learn more about how sports betting affects decision-making. My forthcoming projects will leverage our access to a large number of anonymized online sports bets to analyze risk-taking behavior and connect it with other aspects of household finance. This will build on current research, while also bringing data-informed insights to help shape smarter regulations, more responsible gambling practices and a deeper public understanding of the financial risks involved.