In a country marked by high-inflation and a perception of dwindling economic prospects, tens of thousands of young adults have turned their focus from traditional ladders to success (i.e. education, entrepreneurship, real estate investment, etc.) towards various schemes that have been enabled through digital technology. Online wagering on sporting events is one such game plan for some, with a large number of others watching closely from the sidelines and wondering: “Is sports betting a good investment”?
The answer is no, it’s not. But one must provide unbiased evidence so as to not fuel the fire from camps that support gambling as a side hustle, if not a career.
The problem, is that this topic has been covered by online publications who have skin in the wealth management game. Consequently there are morsels in their arguments that sharp sports bettors on Reddit can pick through like vultures. For instance, in the recent piece “Sports Betting Versus Investing: 4 Key Differences” on Charles Schwab, author Patrick Means wrote:
“Investing uses money to make more money. As your investments grow in value, that growth can compound, which could lead to positive gains over time. Here’s an example: Let’s say you bet $150 a month. What if you took that same amount and invested it in the stock market? Assuming a 6% return with compounding, in 25 years that amount could grow to $101,936. Time is an essential ingredient in investing, and it can often help smooth out market volatility.”
It was a well intended piece, and we’re on the same side of the conversation, but ultimately a sharp sports bettor can work around this. In referencing Means’ example, a savvy gambler may state that they could take a windfall (which does occur from time to time when betting on sports) and hedge future sports betting activity by concurrently investing in the stock market, earning an X% return with compounding interest over X-years to grow to $X at the end of the term. In fact, Means argument could support sports betting as a means to attaining market wealth because of his verbatim statement of “Investing uses money to make more money“. This harkens to Roman playwright Titus Maccius Plautus who first coined the expression around 200 BC, drawing a line between the economic potential of Patricians and Plebeians of the epoch. Nearly two millennium later Benjamin Franklin reiterated the mantra in his 1748 essay titled; “Advice to a Young Tradesman: Money Makes Money”.
Both Plautus and Franklin stated something that America’s underprivileged have pointed to as a reason for not being able to get ahead, whereas legacy WASPs and other contemporary beneficiaries of aristocracy have been able to grow wealth amidst economic uncertainty (and often because of it). When using Means’ rationale, those who support sports betting as a good investment may conclude that it’s the only way for the lower-to-middle class to get the funds required to get in and play the market. Need $10K to invest in stocks or real estate, but only have $100? Leveraging +9900 futures odds on who will win the next Super Bowl or a multi-selection parlay can get that for you.
The conversation is deeply nuanced, so we must supplement surface level arguments with other considerations to respond to the question posed at the top of this article. Please keep reading.
Why it’s Dangerous to Think of Online Sports Betting as a Viable Financial Investment
I. There is No Longterm Profitability Strategy
Means was correct in stating that time is an essential ingredient in investing. It’s a friend to traditional investors, but not to sports bettors.
S&P 500 Exhibits Longterm Profitability
The Standard and Poor’s 500, or plainly the S&P 500, is a stock market index weighted by market capitalization that is made up of 500 of the largest public companies in the United States. The index captures approximately 80% of the total U.S. equity market value. Because it’s an index, one cannot invest directly in the S&P 500 but they can and do invest in one of the many exchange-traded funds (ETFs) or mutual funds. Simply put, it is used as a benchmark and reference point for investor and overall economic performance.
Analysis shows that on average, investing in the S&P 500 for a period of 10 years results in positive returns 100% of the time. In fact, data suggests that longevity is a friend of calculated investment in the stock market:
Source: Capital Group
“Over the past 91 years, the S&P 500 has gone up and down each year […] And the longer the time frame — through highs and lows — the greater the chances of a positive outcome. Indeed, over the past 82 years, through December 31, 2024, 100% of 10-year periods have been positive ones. Investors who have stayed in the market through occasional (and inevitable) periods of declining stock prices historically have been rewarded for their long-term outlook.”
The same research uncovers that over the last 91 years, which includes the back-half of The Great Depression (which ended around 1940) the S&P 500 has boasted positive periods 63% of the time.
Sports Betting Exhibits Longterm Loss
Proponents of sports betting as a financial investment strategy reference bankroll management as being the key to sustainable success. These sharp sports bettors (and aspiring sharps) are quick to differentiate themselves from the average Joe and Jane sports bettor. Unfortunately for those who buy into the concept, bankroll management in sports betting is a myth. It requires absolute discipline, does not account for impassioned betting behavior, and neglects to recognize the emotional dysregulation exhibited by millions of habitual gamblers. More importantly, statistics show that sports betting over the longterm results in financial loss. Only 13.5% of longterm bettors make it out with a profit, and that’s only if they quit. The number declines for those who play longer. The latter has been proven by the Gambler’s Ruin Formula, which when tested uses the exact same wager (as per bankroll management strategy) over an extended period to show what occurs overtime:
Source: Gambler’s Ruin | Fairly Nerdy
Those who are only looking at the financial bottomline when determining if sports betting is a good investment can only conclude that it is not. But as alluded in the introduction, there are other implications that must also be addressed.
II. Online Sports Betting Designed to Be More Captivating
Online sports betting is innately designed to be more engaging and captivating, but can also be very habit forming. While traditional investment in individual stocks, EFTs, mutual funds, and real estate (et cetera) does not come without complications from a behavioral health perspective, it does not compare to how online sports betting has a rapid-fire impact on multiple neurotransmitter systems in the brain, primarily the dopamine, serotonin, and norepinephrine systems. There are two areas of particular concern that we reference below.
Mindful Funding vs Microtransactions
Investing in traditional individual stocks, EFTs, mutual funds, and real estate (etc.) generally involves carefully preparing one’s finances, choosing investments, and monitoring one’s portfolio over time to align with financial goals and risk tolerance. Further, most investors seek some sort of help in making decisions. Recent surveys have found that approximately 53% of U.S. respondents receive assistance in managing their investment portfolio, with the number of those working with financial advisors being even higher at 81% north of the border. Simply put, investing is relatively a more mindful activity.
Online sports betting on the other hand, is riddled with a feature that enables players to spend small amounts (which add-up) with little thought and in great frequency. This feature is referred to as a microtransaction and has become ubiquitous in nearly all digitally powered consumer environments. Research confirms that microtransactions are addictive because they leverage psychological principles such as variable rewards, loss aversion, and even social/peer pressure. The feature helps create a cycle of impulsive spending that is driven by the release of dopamine, a release that becomes diluted over time and requires greater frequency and/or volume to sustain the same “high”. View more about the mental health dangers of microtransactions.
Influential (sometimes manipulative) UX
While platforms that encourage investment in traditional individual stocks, EFTs, mutual funds, and real estate (etc.) certainly market financial products to current and prospective investors, it’s pretty clear that sports betting platforms are more aggressive in how they promote to the masses. Examples of highly influential and sometimes manipulative integrations in online sports betting include the following:
- Quick and friction-free signup process.
- Offers of first time deposit bonuses and frequent account reload bonuses.
- Account deposit and betting ticket fields are generally defaulted to higher amounts than required.
- Confusing or hidden (in small print) rollover requirements that can make it challenging for a causal user to withdraw winnings.
- Frequent prompts to make other wagers beyond what was initially intended (i.e. parlays)
- Prompts to participate in live betting during games, which also suppresses friction when deliberating whether or not a wager is a good idea.
- Challenging for causal users to find unsubscribe and close-account functions.
While evident in varying degrees among online sports betting platforms, the unregulated market is the most aggressive when it comes to manipulative UX. Considering that recent data confirms that most of the sports betting population (as high as 89% for the Super Bowl) uses unregulated operators, the difference between UX in sports betting versus UX in investing needs to be considered.
III. Comorbidity with Other Harmful Behaviors
Long-term investing (versus day trading) can certainly be stressful and anxiety-inducing during times of uncertainty. However, it generally poses a lower risk of severe mental health compromise and has fewer comorbidities with mental health disorders when compared to online sports betting. The latter is associated with a higher prevalence rates of mental health concerns, including a range of mood and anxiety disorders, compared to traditional long-term investing. These include the following:
| ADHD | Anger (chronic) |
| Anxiety | Bipolar Disorder |
| Depression | OCD |
| PTSD | Schizophrenia |
This phenomenon needs to be called out when addressing how sports betting is not a good investment strategy, or an investment strategy at all.
Holistically, investing describes an approach where financial decisions are made as part of a comprehensive strategy that considers an individual’s entire life situation, including their wellness, values, goals, and other financial components, rather than focusing solely on maximizing portfolio returns in isolation. Online sports betting does not fit into his picture.
Do you often rationalize gambling as a smart financial practice, and find that you’re not able to take a break long enough to reevaluate your decisions? It may be time to speak with a counselor. Tap the banner below or call our helpline to invest in your mental health.
