Higher risks taken in betting states
A new study by the UK’s University of Bristol claims risk managers take bigger risks on stocks in US states that have legalized sports betting.
significant unintended effects on the financial sector.”
The 2025 study, named Sports Betting Legalisation and Mutual Fund Managers Risk-Taking, states it provides “empirical evidence that government legitimation of gambling can have significant unintended effects on the financial sector.”
The Irish Times cites the study’s conclusion that since PASPA was overturned in 2018, investment managers in betting-legal states are taking bigger risks on stocks “leading to worse performance.”
The report comes as betting records across the US were shattered by Super Bowl LIX on Sunday.
Same money, more risks
With GeoComply on Tuesday reporting that US sportsbooks registered a 14% yearly increase in active player accounts over last year’s Super Bowl weekend, there’s no doubt the death of PASPA has dramatically changed bettor behavior.
The Bristol University paper adds fund managers to those changed by the sports betting boom, suggesting the culture change brought on by the vertical gives them more confidence to take bigger risks in their professional capacity.
not investors fueling the risks
The study highlights a key fact that it’s not investors in the 39 states with legal sports betting who are fueling the risks by pumping more money into risk-taking funds. The study found while there was no evidence of increased investor risk, fund managers were “elevating their risk-taking behaviour” and rolling the dice on stocks.
Bristol’s study also, however, cited a 2023 paper titled Trading as Gambling During Covid-19 Lockdown that found retail investors in sports betting-legal states “substituted sports betting with trading of stocks, particularly lottery stocks.”
Warning note
The study concludes that its results reveal “sports betting legalization is detrimental to fund investors.”
The university states legalization “leads to an increase in exposure to unrewarded idiosyncratic risk and an overall decrease in risk adjusted performance.”