We Legalized Sports Gambling. Now We're Paying for It — ft. Jonathan D. Cohen

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2:17Welcome to the 396th episode of the Prof G Pod. What's happening? In today's episode, we speak with Jonathan D. Cohen, who leads gambling policy at the American Institute for Boys and Men. He's also the founder of Losing Big, America's Reckless Bet on Sports Gambling. This is something I think about a lot. So I gamble. I don't do it as much, but I buy or I actually write options contracts. And I've convinced myself that it's a means of hedging and a way to make money. The reality is whatever that DOPA releases you get from gambling, that's why I do it. I know that over the long term, there's probably someone smarter on the other side of the trade.

2:57It's very risky, but I continue to do it anyways. This is something that is really, the term is preying on the young male brain. They're bored, they're at home, they have their smartphone, they basically have Vegas in their pocket. But if I'd had the ability in class to bet on the speed of the next pitch, I don't know if I would have been able to resist that. It is just absolutely everywhere. and six out of seven gambling addicts are men. And the thing that always struck me or the fact about gambling that always stuck with me, my mom, when my mom was retiring, we looked at Arizona, Palm Springs and Las Vegas.

3:37And we chose Las Vegas because in addition to it being beautiful, 10 months of the year, July and August, a little bit rough, a little bit rough, but the desert is beautiful. Desert's the most underrated topography in the world, in my view. But also during the week, because no one's there in Vegas, seniors could go downtown to the Strip and see Mamma Mia and grab a meal for, you know,$14. And my mom was a docent. She was a volunteer at the Bellagio. And the stat that blew my mind that she came home with in her docent training was that suicide, of all the addictions, has the highest suicide rate.

4:12Now, why is that? If you develop a meth addiction or an addiction to cocaine or you're an alcoholic, people around you notice. and hopefully some of those people really care about you and are willing to intervene and try and get you help or they fire you or they say, I'm gonna leave you, but someone will move in. Whereas with gambling, people don't know that you're in way too deep. You can lose your kid's college fund, mortgage the house, spend everything, and your family may have no idea. And you feel as if you're in too deep and you decide that there's only one way out. So this is a serious issue.

4:51States that legalized gambling have seen a rapid increase in bankruptcy. And this is something that appears to be especially important to the well-being of young men. Anyways, with that, we hope you enjoy our conversation with Jonathan D. Cohen.

5:13Jonathan, where does this podcast find you? New Haven, Connecticut, it, home to really good pizza and a decent university. I knew about the university. I didn't know about the really good pizza, but let's bust right into it. Jonathan, take us back to 2018 when the Supreme Court struck down the federal prohibition on sports betting. Since then, 39 states have legalized it. The total amount of bets placed hit roughly$148 billion in 2024, about a 30x increase from pre-legalization levels. Today, 94 % of bets are placed online or via mobile apps, and roughly half of men aged 18 to 49 have a sports betting account.

5:47Can you walk us through the incentives here? What did this policy change really mean? Yeah, so I'll just riff for six hours and then we can call it a day. Is that how does that? There we go. Yeah. See you tomorrow. Yeah, right. So so there are a lot of things happening. So this all started, you know, so what the Supreme Court did, first of all, was allow states to decide the issue of sports gambling for themselves. So it removed a congressional roadblock that had been blocking states from legalizing. So states got into it for the same reason states always get into legalized gambling, which is the promise of tax-free government revenue.

6:20They got into it more specifically because of all the lobbyists from all the gambling companies that showed up sort of at their door, telling them how much tax-free government revenue they stood to make if they did legalize sports gambling. And they did so, these companies did, in cooperation with sports leagues who had been told for decades and finally sort of were willing to take the plunge that gambling would drive more interest in their product, would most importantly drive up TV ratings because people who gamble on sports watch more sports. And as a result, would make more money for the league.

6:52So that we sort of have all these sort of different fingers in the pie or all these hands sticking into the cookie jar and all the cookies just come from gamblers' wallets. How do you reconcile? So there's a general notion, okay, we have betting, but it's been ring-fence. It was mostly kind of in Vegas or certain Native American reservations. Now it's everywhere. How do you reconcile the tension between infantilizing young men and providing them access to something that's legal anyways? And what do you see as, over the last decade, obviously this has exploded, what are the primary externalities you're focused on in terms of gambling permeating kind of everyday life?

7:41totally and it's it's one thing to have gambling legal right or even have you know something like fast food or tobacco or alcohol legal it's another thing to have a frictionless gambling app on your phone where you can lose multiple mortgage payments on malaysian women's doubles bad men right it's sort of it's to me you can't have it i'm i think all americans probably have whether they like to admit it or not some sort of libertarian streak in them where they say okay people should be able to do whatever they want if you run into trouble with gambling with fast food with whatever else. It's your fault.

8:11You didn't exhibit enough self-control. Fine. But it can't be like, it's every 21-year-old out for themselves against a billion-dollar corporation using every sort of trick in their book and every marketing device that they can think of and every sort of user design, user interface design trick they can think of to get part that 22-year-old from their money. So that to me is, we can talk about sort of the negative externality specifically and sort of why it's preying on young men. But that's why I'm not, I would love to be sympathetic to sort of the libertarian framing. But I just think it doesn't apply in this case, or it's not suitable fully in this case.

8:44I remember reading, you're not against legalization of sports betting. You're against a reckless legalization of it. What regulation would you like to see imposed? It really boils down to this concept of friction. More specifically for gambling apps, friction looks like something to slow down the pace of betting, to make it so that someone who is gambling casually, gambling$5 here,$10 there on the Knicks or whatever the case may be, doesn't sort of fall down this rabbit hole where all of a sudden they are gambling on minor league British darts or check table tennis because they're chasing their losses.

9:17So something to slow down how quickly you can get money into the app to make it easier, ironically, to get money out of the app, to maybe limit how much money you can spend in a day, how much time you can spend on the app, things like that, that would just organically slow down the pace of play and make it so that someone doesn't sort of fall down the hill and accumulate velocity, but accumulate speed with their gambling without realizing what's happening to them. So I've seen, I've read statistics that when states legalize gambling, bankruptcy is surged by a third. What are some of the other kind of, I mean, if you were to sound the alarm here, what's your evidence for why frictionless gambling has, is a real issue?

9:57Right. So I would say, I would say two categories. One is you already referred to. There's these three so far, three aggregate level studies that, you know, basically the, within a few, the arrival of online sports betting within a few financial quarters, we see a 30 % increase in bankruptcies, rising credit card, auto loan delinquencies, debt use of debt consolidation loans, percentage of accounts with debt in collections, reduced savings and investment in low income households, and an increase in calls to child and protective services. So even at the aggregate sort of at the state level within a, within a year or two of the arrival of online sports betting, we see sort of the effect there.

10:31And then that's, I haven't even gotten to like sort of the addiction question and sort of the number of people who've like run into addiction. That's just like people who are just like losing a shit ton of money. My mom was a docent at the Bellagio Hotel. We moved her to Las Vegas when she retired and she used to come home with all these fun facts about the casino business or the gambling business. And one that's always struck me is that gambling has the highest suicide rate of any addiction, because you can get in so far over your head. But do you have data around, I read somewhere that one in two college age men bet on the Super Bowl.

11:04Are you starting to see some of the externalities of that bubble up in terms of men dropping out of school or higher self-harm rates? What can you point to right now that is clear that the increase and the prevalence of online gaming is hurting young men? Okay, so the best data we have right now is primarily from survey evidence. And there's, in fact, a huge lack of research on gambling in general, part of which is what my organization is starting to help fix a little bit. But you're right. Gambling is the addiction with the highest connection to suicide. It is, for the record, the only behavioral disorder that's technically, formally, diagnostically codified as an addiction.

11:49Something like sex addiction, shopping addiction, those are disorders, but they're not addictive in the way that tobacco, alcohol, drugs changes your brain chemistry and gets you hooked on the dopamine, and gambling does. So here's a stat that I was going to boil it down when it comes to addiction. because we don't have the great data yet. But here's the stat that sort of keeps me up at night. There's this thing called self-exclusion, where if you say, okay, enough's enough. You're not allowed to allow me onto your casino floor anymore. You can't allow me onto your app. You can't send marketing materials to my house.

12:19You can fill out a form with the state or with the gambling company and say, you need to exclude me. Theoretically, Scott, you could do this if you wanted. I don't know why anyone would go through the trouble of self-excluding if they didn't sort of have run into a gambling problem of some kind. Okay, so Pennsylvania created a self-exclusion program in 2006. From 2006 to 2018, they had roughly 400 people between the ages of 18 and 35 who self-excluded. So about 50 a year for 12 years. And then since 2019, when they legalized both online sports betting and online casino gaming, there have been 10 ,277 people from 18 to 35 who have self-excluded.

12:55So we've gone from about 50 a year sort of under, let's call it treatment or control conditions or normal conditions to now 1 ,500 a year, just from sort of the young, not just male, but the young age bracket as what I can offer as sort of the best proxy right now for indications that gambling harm has gone up. My sense is men are predisposed to being more risk aggressive and that that has real dividends. And they're more inclined. I see movement in the bushes. I grab a spear and I go try and hunt and I take risks. But some of that risk aggressive behavior is there for a positive reason. You know, I would argue men make better combat soldiers and warfare has changed.

13:35And you need a combination of more thoughtful, what I'll call feminine instincts or measured feminine instincts. But you also need those more aggressive, valourious, I don't know what the term is, male instincts. And it's a peanut butter and chocolate combination, I think, that has served society fairly well. The men are men. My understanding is six out of seven gambling addicts are men. Can you go back to the male brain and when it starts and why are men more predisposed to gambling addiction? You know, where does it come from? You called my boss's boss's boss, Richard Reeves, your Yoda. So I'm drawing a lot of this from his work and credit to him for having the American Institute for Boys and Men work on sports gambling, which is, you know, young men, as you've said, are already predisposed to risky behaviors of all kinds, especially given sort of the economic circumstances in the United States where they're suffering, where they're not doing as well in higher education, they're not doing as well in the labor market.

14:29You sort of see why gambling would take on this sort of what Kyla Scanlon calls sort of a nihilistic logic or a financial nihilistic logic where I don't have enough money to buy a house, but I might as well gamble with whatever money I do have to try to get enough money to secure. I'm not saving, so why not? Yeah. Right. Why not gamble? And then not to mention the sort sort of slower developing prefrontal cortex, not to mention the sort of sports fandom of it all already, not to mention the sort of overconfidence or desire to like prove that, you know, ball to your buddies or to your friends and to show off a little bit.

15:00I think all those things combined just create this like toxic cocktail that makes sports gambling just so biologically, sociologically, economically dangerous, specifically for young men. We'll be right back after a quick break.

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18:32So give me what you think, if there are any. The difference is, my understanding is Flutter, the biggest sports gambling, or this biggest company has gotten the shit kicked out of it. It's equity. And I think some of that is regulatory risk, but I would argue the majority of it is there appears to be leakage of that firm's growth and upside to the prediction markets. Curious how you would establish or distinguish between the prediction markets and the gambling apps. So we had the head of Calcion, and he made what I thought was a fairly compelling point, that we're in the middle of a trade or two contracts similar to when stocks trade, as opposed to the gambling apps where they're essentially trying to engineer a way to get more money from you.

19:21Anyways, I can see by your language, you sort of buy that, you sort of don't. So let me ask the initial question. What and how would you distinguish between gambling apps and the prediction markets? So honestly, I wouldn't as a baseline. 90 % of the trading volume on CalSheet is on sports. And as far as we know, yeah, it's cool, it's sexy, it's weird. You can bet on Taylor Swift's Bridesmaids or gas prices in Miami or whatever. But functionally, these platforms, because they're 18 plus rather than gambling, which is 21 plus, and because they're available in all 50 states rather than just the 32 states that have legal online sports betting.

19:58Functionally, this is a way for a 19-year-old in Utah to gamble on sports when he wouldn't have been able to otherwise. And all the election stuff, all the will, you know, will aliens, will Jesus Christ return in 2026? All those markets are basically just like appetizers for sports gambling, which is the bread and butter business, whether they want to admit it or not, of companies like Calci and Polymarket. So fundamentally, I'm not going to beg your question, but like these are just gambling platforms and they've worked like gambling platforms and the fact that you can build a parlay or what they call a combo, like you could on a sports book, also begs to me the question of like, that this is all peer to peer.

20:33How can I have like Bangladesh invasion by the US plus Philadelphia Eagles plus Sacramento Kings? No one, there's no trader with the exact opposite combination. There's clearly a house working, it might not work exactly like a sports betting house, but there is clearly some institutional investor on the side of the prediction market providing the initial liquidity for these markets and provide allowing me to build these sort of extremely bespoke custom investment tools, if you want to be generous and call them that, such that this, yes, nominally, these are peer-to-peer platforms, but I would love to sort of open the books and see if that's actually the case or to what degree that's actually the case.

21:10How do you build in the best type of, so when I think of the stock market,$3 trillion a year in transactions,$300 billion is for the initial objective of the market and that are secondaries or IPOs. You could argue that 90 % of the transactions taking place in the market are speculation. It's me betting against Jonathan. If I sell my Apple stock and you buy it, these would be, you know, through a third party intermediary, I'm betting it's going to go down. You're betting it's going to go up. But there is some friction there, right? You have to be, if you're investing in a private company, you have to be a quote unquote accredited investor.

21:46You have to, there's certain margin requirements. Have you seen any country other than, and maybe it's just an outright ban, but what are the best methods of introducing friction to the system? I don't think you're ever going to screen out all the problems. And, you know, if you want to just sit at home and smoke cigarettes and eat ice cream and kill yourself, I kind of think that's your right to a certain extent. But at the same time, we put warning labels on it. You know, we do have certain intervention. What have you seen as the most effective means of introducing friction into the system? So you referred to Flutter earlier, which is FanDuel's parent company.

22:23But this is a case of actually effective and important self-regulation by Flutter, which is FanDuel's parent company, which imposes limits on gamblers in the United Kingdom and Ireland who are under the age of 25. It's like you just like there's a there's a maximum amount that you can lose if you're under the age of 25 and then you get cut off i think it's on a monthly basis and that's the kind of friction that should be that you what we have right now is friction that you can opt into you can opt into a time limit you can opt into a deposit limit and spoiler alert no one ever does and what they're creating is an opt-out system yes you can't opt out but it's sort of a default uh friction system um and this is well i'll stop there yeah i think that as a as a starting point.

23:06And that's not even regulatory, right? That's sort of industry imposed, self-imposed. That's the kind of thing I would like to use as a baseline. The thing that also strikes me as a potential solution, and I wonder if you've thought about this, is I've always thought that we have, the word crisis is overused, a problem with kids borrowing money for degrees that are just unlikely to provide them with the market power to be able to pay back their student loans. And I thought an easy solution or a friction, if you will, would be putting the host institution or the issuing institution of the debt.