US Online Gambling Expansion Fuels Problem Gambling Concerns

It’s time to admit America has a gambling problem.

This month marks 10 years since New Jersey launched regulated online casinos. Online sports betting has spread faster than online slots and table games. Nevertheless, the NJ casino launch — on Nov. 21, 2013 — is a significant date in the story of the United States’ gambling problem.

It marks the beginning of an experiment featuring both policy failures and funding successes along the way.

States address problem gambling when adding more gambling

It’s easier than ever to find regulated gambling products. So, more Americans than ever are being exposed to a potentially dangerous pastime.

However, states that have expanded online gambling are far ahead in combating problem gambling than states without it.

Consider:

Average per capita responsible gambling spending in 2021 was $0.32.
Average per capita responsible gambling spending among online casino states in 2021 was $0.69.

It’s counter-intuitive, but part of the answer to addressing US gambling habits is more gambling — more regulated games, sustainable tax revenue and significant resources for responsible gambling programs.

States don’t have to embrace online gambling to combat this problem, either. Increasing responsible gambling aid without legalizing new forms of gambling would be an improvement. It’s a necessary step even for states opposed to gambling expansion.

State borders haven’t kept gambling problems out of non-gambling states. Many Americans still play offshore at sportsbooks and casinos without adequate responsible gambling protections, especially when their state does not have legal options.

Plus, too many states have legal online gambling options to ignore problem gambling any longer.

Lessons learned, ignored from 10 years of NJ online gambling

A closer look at the Garden State offers a glimpse of the perils other states will face. Over 10 years, New Jersey has made just over $1 billion in tax revenue¹ from online casinos. Since New Jersey launched online casinos, five other states have gone live. Another, Rhode Island, will launch next year.

However, tax revenue isn’t the only thing increasing in online gambling states. When comparing studies from before and after online casino legalization, problem gambling rates increase, too.

A National Council on Problem Gambling (NCPG) report² estimated that 2.8% of New Jersey adults “are believed to manifest a gambling problem.” That report used data from 2013, months before online casinos launched in New Jersey.

Rutgers 2023 prevalence study³ estimated that 5.6% of New Jersey adults exhibited high-risk problem gambling behaviors. That’s double the NCPG estimate a decade earlier and triple the current national average. As advocates warned, easier access to gambling increased the number of people with gambling problems.

Consequently, the state’s responsible gambling spending also increased during that time. Per capita, New Jersey spent $0.10 on problem gambling in 2012. In the 2023 budget, it’s up to $0.34.

That money funds:

Public awareness campaigns
Problem gambling helpline
Counselor cross-training
Problem gambling treatment
Workforce Development

New Jersey has the nation’s second-largest online sports betting market, the largest online casino market and was among the first to legalize both online casinos and sportsbooks.

New Jersey’s online gambling regulations are the foundation of other states’ regulations, and its example is the most prescient look at the future of American online gambling markets.

What is problem gambling compared to gambling disorder?

Problem gambling⁴ is gambling that has negative consequences on someone’s life. However, that definition is broad. It treats someone who drains their family’s retirement accounts and someone whose partner dislikes their gambling habit as having the same issue.

An estimated 3-4% of adults⁵ could fit this problem gambling description.

When most people think of problem gambling, they probably think of gambling disorder. Gambling disorder⁶ is a behavioral addiction in the DSM-V, characterized by gambling that cannot be controlled. People with a gambling disorder experience severe consequences from gambling. These patients deplete life savings and incur debts that are impossible to repay.

About 1-2% of the population could meet this standard for a gambling disorder.

The Harvard Medical School conducted the 1997 meta-study on problem gambling rates. It suggested that up to 5.45% of adult gamblers could exhibit a moderate or severe gambling problem.

That’s a lot of people quietly funding unsustainable gambling habits and even more families with loved ones who don’t know how fragile their finances are. When gambling is as easy as downloading an app, states will confront more cases like these.

Reasonable estimates suggest that 1-2% of a state’s population could have a severe gambling problem. Another 3-4% will have moderate gambling problems, which still require treatment and attention. States won’t be able to reap the benefits of tax revenue without containing the spread of these harms.

Read more: Tips for gambling responsibly

Online gambling states outpace others in responsible gambling spending

Online gambling companies’ taxes usually fund responsible gambling initiatives. New Jersey has minimum responsible gambling funding requirements⁷ primarily generated by gambling license fees.

Oregon directs 1% of its state lottery funds⁸ to combat problem gambling. Arizona directs tribal contributions⁹ to a state fund, and 2% of that money goes to fund problem gambling services.

According to the National Association of Administrators for Disordered Gambling Services, the average per capita expenditure¹⁰ on problem gambling was $0.38 in 2022. The median per capita expenditure was about $0.22, showing how much most states underspend on problem gambling.

Only 19 states spent more than average per capita on problem gambling in 2022. All seven legal online casino states were among them.

What sets the high spenders apart is their funding of prevention, treatment, and, in some cases, research. For example, New Jersey funds public awareness campaigns and counselor cross-training. That covers prevention and treatment. New Jersey is also a national leader in problem gambling research through the Rutgers Center for Gambling Studies.

Even Rhode Island, whose online casinos aren’t live yet, has treatment and prevention ready. In 2021, it spent 90% of its responsible gambling budget on treatment options. The state also has a self-exclusion program available. Even without funding research, Rhode Island seems ready to expand online gambling.

Responsible gambling trends are encouraging

At first, online gambling products launched in a regulatory Wild West. Today, state regulators are catching up to their online gambling industries.

For example, Ohio prohibited misleading language in bonus ads that required customers to risk their money. Massachusetts adopted the same regulation when it launched a few months later.

States are also revisiting their sportsbook tax policies and responsible gambling plans.

Colorado changed its responsible gambling budget from $130,000 yearly to a $2.5 million grant program. Colorado also eliminated promotional write-offs, which had previously cut Colorado’s potential sports betting tax revenue in half.

States have learned the hard way that responsible gambling can’t be an afterthought. States will likely keep improving their gambling policies, whether expanding or continuing to oppose it.

Sports betting spread quickly; online casinos are next

While legal sports betting is live in 37 states, online casinos have barely made it out of New Jersey.

While sports betting is now tied to being a sports fan, online casinos are a type of traditional, long-stigmatized gambling.

Online casinos are more profitable than online sportsbooks, though. In New Jersey’s third quarter:

Online casinos made $469.6 million in revenue.
Online sportsbooks made $268.2 million in revenue.

Rhode Island will join Connecticut, Delaware, Michigan, New Jersey, Pennsylvania and West Virginia with its live online casino launch in early 2024.

Ten other states have proposed online casino bills and failed to pass them. Online casino bills have been discussed in states like Indiana, Maryland and New York, but none are likely to pass in 2024.

“No state is entering 2024 with momentum to legalize online casinos,” said Matthew Kredell, senior lead writer for legislative affairs at PlayUSA. “And it’s more difficult to pass gambling legislation in an election year. While it’s possible a state comes out of nowhere similar to Rhode Island this year, it’s looking more like a set-up year to advance legalization discussions for 2025.”

Still, the $17.8 billion (through October) of lifetime online casino tax revenue¹¹ in the six live states will be tough for state legislators to ignore. The next time funding needs become state issues, online casinos could gain fresh momentum.

State regulators focusing on advertising messaging

One of the flashpoints of US online gambling policy is advertising. Many regulators are concerned about how widespread advertising contributes to problem gambling in regulated and unregulated markets.

While they may not intentionally target children, online gambling ads are everywhere.

Social media feeds include sportsbook bonus ads. Sports betting commercials give the impression that sports betting is a key part of being a sports fan. Whether that leads young people to sign up for an offshore sportsbook is a question that demands a well-researched answer.

State regulators have tried many approaches and haven’t settled on an answer.

Ohio prohibited misleading language on promo bets from being advertised unless those bets were truly without liability. However, FanDuel had already phased that language out of its ads before Ohio enforced that prohibition.

Massachusetts has proposed new advertising restrictions¹² on ads that could reach young audiences. Ontario is stricter than any US market because it prohibits certain celebrities and athletes¹³ from appearing in sports betting ads.

However, stringency isn’t everything. If lawmakers and regulators adopt superficial policies, they’ll fail to address the root causes of problem gambling. Whether they keep that balance in view will decide how abruptly online gambling expansion ends.

Two potential futures of US online gambling

The United States faces two futures.

One is a future where states underinvest in responsible gambling programs.

Problem gamblers will lack the counselors to help them recover. Parents won’t learn their teenagers have gambling problems until their money is gone or they attempt suicide. States will retaliate against online gambling companies, turning public opinion against the most common source of responsible gambling funds.

The other is a future where states realize that online gambling imposes costs, whether it’s legal or not.

States like Texas would fund problem gambling. Patients with gambling disorders have counselors, Gamblers Anonymous chapters and other resources available, no matter where they live. Online gambling companies remain taxable and reliable sources of responsible gambling funds.

Deciding which future we live in is a decision lawmakers and regulators make daily. Hopefully, they will choose the responsible gambling future.

About this story

In evaluating how to cover the 10th anniversary of regulated online gambling in New Jersey, the editorial team at PlayUSA decided a deep dive into the spread of online gambling and its consequences over the past decade was warranted.

As we started gathering statistics from various sources, we realized the definition of problem gambling is complicated. So, we set out to understand the definition. Then, using available public data, we strived to answer the question, “Does the US have a gambling problem?”

Chris Gerlacher was the lead writer on this project. He studied research that had been conducted on problem gambling and its prevalence rates in major markets. Then he identified state policies that addressed the concerns raised among industry analysts and problem gambling researchers.

The story was fact-checked and edited for accuracy by Matt Schoch and Kim Yuhl. Maria Healey and Jake Garza provided additional guidance.

The final edit was performed by Ron Fritz, who published the article. Graphics were designed by Jenn Montgomery. Media relations are managed by Danielle Burrows.

Sources used in this story

Fair Use: For media inquiries, please contact [email protected]. When using this data, research and graphics, please attribute by linking to this article and citing PlayUSA.