Publisher’s note: The Adams Analysis is a quarterly, premium-subscriber only analysis of gaming news and trends by Ken Adams. Due to this quarter’s important subject manner, we have decided to open it up to be read by all. If you like what you read, sign up for a free trial.
Gambling is ubiquitous in human society. Probably because it can be very exciting.
The excitement is generated by the chance of a reward and the tension created by waiting for the wager to be resolved. The tension is as important as the outcome in generating excitement.
For example, for a San Francisco 49ers fan, watching the team over a two- or three-hour contest is exciting, even gut-wrenching. In its playoff game this year against the Dallas Cowboys, 41 million people watched. If the fan has a wager on the game, the excitement is enhanced, as every play creates moments of tension and release. And this year, football enthusiasts in more than 30 states could make a bet and feel that tension.
The same process occurs when a player waits for a lottery drawing, a horse-race finish, and a bingo game to be called. But those events unfold slowly and create fewer moments of waiting and less attendant tension and excitement. Betting on the turn of a card or a roll of the dice is faster and generates more frequent moments of anticipation and outcomes. However, slot machines give the fastest results, sometimes hundreds in a minute.
Therefore, a player pushing buttons on a slot machine has the most moments of excited tension. That process of wagering, tension, and reward can become addictive.
In the 1990s, numerous studies indicated that approximately 80 percent of the population would play a slot machine if it was available. The percentage of the population willing to make a bet on other standard gambling games dropped significantly; poker, lotteries, and bingo wound up at the bottom of the scale at less than 10 percent. (Sports betting was not measured in those studies, as it was legal only in Nevada.)
Along with those studies was research into gambling addiction. Researchers wanted to establish the at-risk population. The research usually claimed 5-8 percent of the population was at risk for gambling addiction. At the time, the percentage was considered to be relatively high, but also relatively benign, because gambling was not readily available to the general population. Alcohol, tobacco, and drugs ranked much higher, given that they were more readily available than gaming and therefore more dangerous to society. It took considerable time and effort for most people to place a wager, the at-risk population was small. That has changed over time.
Before 1990, casino gambling was available only in Nevada and New Jersey, but then it began to spread to other states. The spread can be seen in the revenue numbers. In the early 1990s, the total annual gross gaming revenue in the U.S. was probably about $5 billion; casino gambling was only available in a few states, lotteries a few more and horse racing a few more than that. Gross gaming revenue has grown more than 35 times in the intervening 30 years. It grew not because individuals spent more, but because more people had easy access to one or more gambling options. Currently, there are over 1,000 casinos in the country, either Native American or state-licensed commercial operations. Most of the population lives within an hour of a casino. Forty-five states have a lottery, in 41 states betting on horseracing is legally available, there are tens of thousands of slot machines outside of casinos located in bars, restaurants and social clubs, 30 states now have legalized sports betting, and six states now offer legal online casino gambling.
As a consequence of the expansion of gambling options since 1990, commercial gambling in the United States has become big business. In January 2022, 14 major gaming companies, including casino, slot, and sports betting companies, had a market cap of $183.1 billion. In 2019, lotteries, racetracks, Indian casinos, VLTs, sports betting, igaming, and commercial casinos generated an estimated $172.5 billion in gross gaming revenues. It is certain that 2021 will exceed 2019 by a wide margin.
The numbers indicate that far more people in the United States are at risk for a gambling addiction than anyone could have imagined in 1992. In 2018, it appeared that the national expansion of gaming, primarily casino gaming, had peaked. Only a few states were left without casinos, mostly in the conservative south and the ultraconservative Utah and Hawaii. But something happened that year that changed the landscape more dramatically than at any other time in the history of commercial gambling in this country.
On May 14, 2018, the Supreme Court ruled that the Professional and Amateur Sports Protection Act (PAPSPA) was partially unconstitutional. The ruling turned the legalization of sports betting into a matter of states’ rights, just as casinos, racetracks, and lotteries are. That decision opened the flood gates. New Jersey and Pennsylvania were quick to allow bookmaking to begin and others followed as quickly as legislation could be drafted and passed. As 2021 closed, 28 states offered legal sports wagering. The handle for the first 10 months of 2021 was $31.5 billion and the win $3.23 billion The total win for the year will probably be $4 billion and the handle close to $45 billion.
But as big as those numbers are, 2022 will be bigger.
A couple of forces are driving the growth in sports betting. First, no state wants to be left behind. As a lawmaker in Minnesota said, “Over 30 states have legalized sports betting and we do not want to be left out or left behind.” And there are more potential sports bettors than any other type of gambler. It is estimated that 47 million people attended a college sporting event in 2019 and 145 million watched a contest on television. The numbers for professional sports are only slightly less than college sports; the combined total was estimated at 80 million in-person fans and 250 million watching remotely.
Online casino gaming is very close to sports betting in both handle and win, but not in the number of jurisdictions where it is legal. The growth of online gambling has been slower. Fewer states have been tempted to legalize igaming. It is not as sexy as sports betting and attracts far less media attention. However, the growth of igaming revenue is being noted by lawmakers and gaming operators. In Michigan, New Jersey, and Pennsylvania, the GGR and taxes being generated are significant, equivalent to retail-gaming taxes; igaming can be expected to continue to expand.
While legalization of igaming is pedestrian, sports betting is progressing like a runaway train. It does more than attract the attention of lawmakers and operations. Sports aficionados and would-be bettors are very interested.
Sports have always been popular. Now, however, sports are appealing to a base other than the traditional all-male enthusiasts, broadening to a national audience embracing all ages and gender groups. We used to say baseball was the national sport, but now I think one could say that sports are our national form of entertainment. That is becoming more and more obvious as legalized sports betting spreads across the land. Gambling on athletic contests has gone from being morally and legally questionable to a pastime that is fully embraced by the major sports leagues, mainstream media outlets, and legions of fans. That means that the betting side of sports is a regular part of coverage of sports. It has also led to the formation of new companies that combine gambling and media. Networks and other media outlets are hiring on-air personalities to create original gambling content.
Coupled with gambling content is the ever-present gambling advertising. The airwaves are flooded with ads for sports books offering bonuses, special picks, and even free bets. The gambling itself has not yet engendered much pushback, but the advertising has. From Wall Street analysts to social critics, people are calling for some restraint. If advertisers are not willing to restrain themselves, the critics are calling for lawmakers to impose restrictions on the advertising. Financial analysts are more practical; they do not think the level of advertising is sustainable and believe it will result in many companies going bankrupt.
This problem is not unique to the United States. Way ahead of us on the issue are Australia and Europe, where many countries have limited gambling advertising to times when children normally are not watching television. Some countries are seeking a ban on all gambling advertising during sporting events.
A recent editorial in the Christian Science Monitor, citing three former Paddy Power executives, says the time has arrived for the gaming industry to actively lobby for restrictive legislation. For example, the Monitor suggests curbing gambling advertising, placing spending limits on people under 25 in advertisements, reducing the aggressive policies targeted at the people who bet the most, and finding ways to further restrict unlimited access to gambling, including loss limits.
The former executives have formed an organization called Stop Gambling Harm. It has taken the position that society will soon turn on the industry. The organization opines that as the severity of the social impact becomes more apparent, the industry will be overwhelmed by class-action lawsuits, similar to what the tobacco industry has experienced. The executives and the editorial board of the Monitor suggest it is time for the industry to take an active role in reform in the United Kingdom.
An article in the UK Guardian cited a survey of university students in England. The survey reported 35 percent of the students borrowed money to gamble and 40 percent said gambling adversely affected their studying. The study said, “With online gambling increasingly prevalent during the pandemic, the research shows the importance of raising awareness of a free online self-exclusion service which is accessible to all.” The majority of the gambling cited was done online. The article recommends an online tool to help gamblers control their behavior. A study from Australia conducted by CQ University’s Experimental Gambling Research Laboratory goes deeper into the use of online tools and recommends specific language.
England and Australia are several steps ahead on the sports gambling road than the United States. But the road is the same and soon we will be treading the same ground. The wave of enthusiasm has not peaked, nor have the collaterally damaged victims been identified or counted. The damage is hidden within the mystic of sports. Sport by itself is benign, except of course injury on the field of play. Playing and attending organized games is deeply imbedded in our culture; it is just good healthy fun. Children begin playing as early as five or six years old and often continue through high school; their parents are also involved at each stage. A very strong component of sports is the participation by parents. A child’s sporting career becomes a form of family bonding. That bonding is very often extended into watching and supporting college and professional teams together.
The strength of that bond is one of the reasons that sports betting has become so phenomenally successful. It slides easily into the network of behaviors associated with sports. The family may not bet together, but you can bet they discuss the odds together. As those studies in the 1990s suggest, that is where the danger of addiction lies. We are all at risk, at risk to go from a nation of sports fans to a nation of sports gamblers. An awareness of the change will not happen overnight. The societal problems that will ensue will take even longer to become evident.
People are reluctant to face unpleasant facts. But even an ostrich eventually must take its head out of the sand. If we begin to talk about it now, when the time to face the problem and find socially and economically viable solutions arrives, we will be ready.
