New York Fed Report Links Legal Sports Betting to Financial Harm

A Federal Reserve Bank of New York study published March 25 found that only about 3 percent of adults in newly legalized states actually took up sports betting, yet that small cohort drove a measurable deterioration in credit health across entire counties, with the financial damage spreading well beyond state lines.

The report, authored by Jacob Goss, a former research analyst at the bank, and Daniel Mangrum, a research economist, drew on the New York Fed Consumer Credit Panel, a nationally representative 5 percent sample of anonymized Equifax credit reports. It found that overall credit delinquency rose 0.3 percentage points from a base of 10.7 percent in counties where betting became legal. Among the people who newly began wagering after legalization, the share falling behind on at least one bill or debt jumped 10 percentage points.

The burden fell hardest on younger Americans. Among adults under 40, the primary marketing demographic for platforms like DraftKings and FanDuel, the share at least 90 days late on a credit card payment rose 7.9 percent following legalization. Auto loan delinquencies for that age group climbed 5.6 percent, according to the paper. People under 40 made up the largest share of individuals with credit delinquency, which rose to 26 percent after legalization, the study found. "Our findings suggest that sports betting can have dramatic implications for household financial stability," Goss and Mangrum wrote.

The financial damage did not stop at state borders. The researchers found that counties in non-legal states within 15 miles of a legal state experienced spillover spending equal to roughly 14 percent of the direct effect, with those spillovers declining to near zero by 60 miles. The New York Fed warned of a "noticeable deterioration in repayment performance" in certain parts of the country, as well as "spillover effects" to nearby areas where betting remains illegal.

The study adds to the mounting evidence of financial fallout from the 2018 Supreme Court decision that allowed states to legalize sports betting. Thirty-eight states have since legalized mobile wagering, and Americans have collectively placed more than $520 billion in sports bets. Americans wagered nearly $167 billion on sports in 2025 alone, a new record. Quarterly sportsbook deposits per adult rose to $1,250 in 2025, up from $500 five years earlier.

A separate 2026 analysis from researchers at UCLA Anderson School of Management, Harvard University, and the University of Southern California's Marshall School of Business found that the odds of bankruptcy filing in states with legal betting increased by as much as 25 to 30 percent. A 2025 study analyzing a separate consumer credit panel found that average credit scores in states with legal online sports betting fell by about 2.7 points and increased the likelihood of bankruptcy by 10 percent.

The problem has gained a new dimension from prediction market platforms like Kalshi and Polymarket, which now offer event contracts on professional and college games in states that have not legalized traditional gambling, extending access to millions of additional Americans outside any state regulatory framework. Median credit scores, the study noted, already declined by roughly one point across counties with legalized betting, a modest figure that masks the far steeper losses concentrated among the young borrowers who represent sports wagering's core customer base.