Research by the New York Fed shows that sports betting increases credit card default rates, with this group being hit the hardest.

Ask AI · Why has the default rate among the younger generation significantly increased after the legalization of sports betting?

Since the legalization of sports betting, Americans have wagered over $520 billion in total. Image source: Scott Winters/Icon Sportswire—Getty Images

In states where sports betting has been legalized in the U.S., the default rate has shown an upward trend, with Generation Z and Millennials being the most affected.

A recent working paper from the Federal Reserve Bank of New York shows that since the legalization of sports betting in the U.S., the overall national default rate has increased by 0.3%. Although this figure seems small, the New York Fed found that, after analyzing only the population participating in sports betting, the increase in default rate reached 10%.

The study analyzed consumer credit data and defined default as any credit payment overdue by more than 90 days, including auto loans and mortgages.

The authors wrote: “Our findings suggest that sports betting may have a significant impact on household financial stability.”

In 2018, the U.S. Supreme Court ruled to overturn the Professional and Amateur Sports Protection Act, ending the previous nationwide restrictions on sports betting and paving the way for 40 states to legalize sports betting in some form. Since then, participation in sports betting, especially online sports betting, has exploded. According to data from the American Gaming Association, commercial gaming revenue hit a record high of $78.7 billion in 2025, a 9.2% increase year-over-year. The research also shows that since legalization, Americans have wagered over $520 billion in total; in the first quarter of 2025, deposits reached $1,250 per person, up from only $500 five years earlier.

Millennials and Generation Z are more vulnerable to negative financial impacts from participating in sports betting. A 2025 survey by Siena College Research Institute found that 22% of Americans have at least one online betting account, and among men aged 18 to 49, this proportion is nearly half. Based on “rough estimates,” the New York Fed found that people under 40 make up the largest share of those in default, rising to 26% after the legalization of sports betting.

The broad financial impacts triggered by sports betting

The New York Fed’s report further confirms a series of studies showing that sports betting is negatively affecting personal financial situations. A 2024 working paper from the National Bureau of Economic Research indicates that in states where online sports betting is legal, household annual gambling expenditures increase by $1,100, while net investments such as stock investments decline by 14%.

A 2025 study analyzing the University of California Consumer Credit Panel found that in states where online sports betting has been legalized, the average credit score drops by about 2.7 points, and personal bankruptcy risk increases by 10%.

Postdoctoral researcher Porter Larson of the Harvard Business School’s Digital Data Design Institute, who co-authored the study, told Forbes: “The trends in default rates and credit scores suggest that sports betting appears to be causing some degree of harm to consumers.”

Larson believes that the rapid spread of sports betting is significant. He pointed out that young people are the main target of online sports betting marketing, but compared to older groups, they have less accumulated wealth, which may make them more vulnerable.

This financial impact even extends to states where sports betting is not yet legalized. The New York Fed’s research found clear spatial spillover effects: even in states where sports betting is not yet legal, if they border states where it is, default rates also increase. Because people cross state lines to use legal online sports betting platforms, the spillover increase in default rates in neighboring states is about 0.2 percentage points (compared to the baseline of 0.3 percentage points).

Future prospects for legal sports betting

In addition to spillover effects, even states that have not yet legalized sports betting may experience similar rising financial risks. The rise of prediction markets like Kalshi has effectively created a nationwide sports betting market. Prediction markets are legal in the U.S. and are regulated by the Commodity Futures Trading Commission (CFTC) as “designated contract markets.”

A report released this month by Citizens JMP shows that, during the first three months of user engagement with prediction market platforms, their losses as a proportion of wagers were even higher than the losses on platforms like DraftKings or FanDuel.

However, prediction markets are still in their early stages in the U.S. A survey by Ipsos this month of over 2,300 adults shows that only 3% of Americans have used such platforms in the past six months; among men aged 18 to 24, this figure is 8%. Larson pointed out that the impact of these emerging platforms on financial health will largely depend on their future popularity.

Larson said: “When enough people participate in sports betting, the financial harm will gradually become apparent. As for prediction markets… if their scale remains small, they may also cause some financial damage, but it might be hard to detect.” (Fortune Chinese Edition)

Translator: Liu Jinlong

Proofreader: Wang Hao

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