Financial Literacy in Gamblers and the Risks of Framing Gambling as Investing

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As the Responsible Gaming Education Month winds down, the American Gaming Association releases an important study that demonstrates most gamblers have an elevated financial literacy compared to the general public but gamblers on prediction market sits are overestimating their financial savvy.

GGB Magazine

As the industry closes out another successful Responsible Gaming Education Month, the American Gaming Association continues funding research to inform responsible gaming. The gaming industry spends more than $500 million a year on responsible gaming efforts, including research, and is the primary driver of responsible gaming research, while state gaming taxes funded more than $170 million for state-specific responsible gaming programs last year.

This month, we released study results showing that gamblers demonstrate higher levels of financial literacy than non-gamblers. This finding challenges conventional wisdom about gamblers and offers new insights into the relationship between financial literacy and responsible gaming.

Gamblers Are More Financially Literate than their Peers

This research found 41 percent of gamblers qualified as highly financially literate, compared with 27 percent of non-gamblers. Using the Big Five Index, gamblers scored an average of 3.93 out of five compared with 3.72 among non-gamblers, a statistically significant difference.

Sports bettors in particular showed strong financial literacy compared to other groups.

Prediction Market Users Overestimating Themselves

The data also reveals a significant difference between traditional sports bettors and prediction market bettors when it comes to their actual mathematical capabilities. Sports bettors specifically demonstrate significantly higher mathematical ability and confidence compared to other kinds of gamblers interestingly, “prediction market” users overestimate their ability when compared to their sports betting peers:

  • Sports Bettors More Accurately Assess Their Mathematical Skill Level: Sports bettors demonstrate a higher level of objective mathematical ability, and their perception of their own skills more closely aligns with their demonstrated ability.
  • “Prediction Market” users Misjudge Their Mathematical Skill Level: “Prediction market” users demonstrate a lower level of objective mathematical ability, yet their perception of their own skills exceeds their demonstrated ability.

This gap between perceived and demonstrated ability raises important questions about the risks of “prediction markets” marketing sports betting as investing.

When consumers are led to believe they are engaging in an investment activity rather than gambling, they may have a different perception of the risks involved. Simply, language is particularly important when it comes to shaping how consumers understand risk and make informed decisions.

Financial Literacy Linked to Positive Play

The legal sports betting industry is unequivocally clear that sports betting is a form of entertainment. This messaging is paramount in helping consumers understand how to play responsibly. Last year, the AGA released a responsible gaming platform “Play Smart from the Start” to provide resources that enable foundational skills needed for responsible gaming. Here you can find tools to understand the odds of various games, and ways to understand behavioral aspects of gaming like, setting budget and time limits

And now, this new research finds that responsible gaming and financial literacy are positively correlated. Participants with moderate or high financial literacy recorded significantly higher Positive Play scores than those with low financial literacy. The findings suggest that financial literacy education may strengthen responsible gaming resources by helping consumers better understand risk.

Diving Deeper at G2E

I will be diving into this important topic on Wednesday, September 30, at the Global Gaming Expo. The session will take place at 11:40am in Veronese 2401 and is titled Financial (Il)literacy: Risks of Framing Gambling as Investing. We will explore how language influences financial literacy within responsible gambling. Panelists will discuss the dangers of “prediction markets” utilizing of language aligned with financial products, and explore what this might mean for consumer understanding, risk perception, and more.

Panelists Include:

  • Me! Carly Johnson, AGA’s Director of Research
  • David Bergman, Association Dean, University of Connecticut
  • Brandon Mastromartino, Director & Associate Professor, Institute on Sports Wagering & Gaming, San Diego State University
  • Alex De Marco, Founder & CEO, MoneyStack, Inc. and GamFin.org

Please join us if you can!

Future of Responsible Gaming Research

Looking ahead, this study lays the groundwork for future research into financial literacy and responsible gaming.

The AGA and our members remain committed to advancing research into responsible gaming and ensuring that consumers are equipped with the tools and resources they need to play responsibly and enjoy gambling as intended: entertainment.

Dr. Carly Johnson, is Director, Research for the American Gaming Association.