Should We Ban Gambling on Smartphones?

A conversation between two parts of my brain

There’s been an explosion of gambling in recent years. Around 40 states have legalized sports betting since 2018, and it’s hard to watch sports on television without seeing DraftKings, FanDuel, or some other sports betting app heavily promoted.

I’ve been struggling to figure out exactly how I feel about it. Research shows that this wave of legalization may be having significant negative effects. But at the same time, I’m fairly libertarian on social issues like this. I’ve been a semi-pro poker player and sports bettor in the past. I feel pulled in two directions - towards a laissez-faire treatment of gambling, and also towards more regulations. It’s hard to reconcile.

These pieces normally get more attention and more social media ‘pop’ if you take a strong stance and defend it to the death. But rather than do that here, I want to present a conversation between each side of the argument. I may not fully know exactly how I feel about this yet, but this is a window into how I’m thinking about it.

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Ender Betts: The first thing I want to note is that I’m not a Puritan. I don’t believe that gambling is inherently immoral, and I don’t believe that all gambling should be illegal.

But the recent explosion of sports betting has had an enormous negative impact on society. Studies find that when sports betting is legalized, you get all kinds of bad things happening. Credit card debt rises. People stop saving and investing money and instead put that money into losing sports bets. Credit scores decline, bankruptcies go up, loan delinquency increases, and domestic violence increases. And there’s some evidence these impacts are concentrated among people who can least afford it - lower income households and parents with small children.

We need to roll some of this back. Gambling has gone too far, it’s too easy to gamble now, and a good place to start would be banning gambling on smartphones. It’s simply too easy and too frictionless an experience, and has too many negative consequences.

Jack Potts: I’ll start by saying that just like you’re not an anti-gambling fanatic, I’m not a pro-gambling fanatic who will deny that gambling can have negative impacts. I’m sure that in some cases it does have negative impacts, and those cases are concerning.

I think a balanced look at the research will show that there are some benefits and some drawbacks to legalizing gambling. I won’t play denialist against all the studies you linked above, but I will note that we’re just now beginning to research this topic and it takes time for a proper scientific consensus to form. We both know that effect sizes in research tend to decrease over time, so the negative effects here could easily be overstated. And your analysis ignores the positive impacts. Legal sports betting pulls people out of an illegal market with shady foreign shell companies and local bookies and into a legal market that provides the state with hundreds of millions in new tax revenue. It has a real economic impact on the order of billions of dollars and tens of thousands of jobs. And let’s not forget - it’s fun! People enjoy betting, it makes watching games more exciting, and that enjoyment is a real benefit we shouldn’t discount.

Ender: First of all, that study that says sports betting adds billions of dollars in economic impact to the US economy was funded by the American Gaming Association. I’m not going to treat that seriously. People may bet billions but that’s just diverted money they would have spent on other things - seeing movies, buying stocks, etc. It’s not a real impact.

Jack: You know what, that’s fair. But even if the economic growth angle is suspect, I think the tax benefits are real! Isn’t a classic economic policy to legalize some behavior that’s traditionally been banned and then tax it to provide revenue for the government? Economists love sin taxes! They’re one of the purest forms of win-win policy. You increase personal freedom and choice, eliminate black markets, and you can use the tax revenue to fund useful things like a Child Tax Credit.

Ender: I feel like this ducks the real conversation. Maybe the tax revenue could be put to good use (although why couldn’t we just tax the other things that money would be spent on in lieu of gambling?), maybe it wouldn’t be. But I’m not arguing to make sports betting fully illegal. I’m saying that there should be some limits. And the proposed limit that makes sense to me is to keep gambling off smartphones.

An analogy - many US states have legalized weed and implemented sin taxes on marijuana sales. That’s probably good and better than having a neo-prohibitionist War on Drugs attitude towards weed. But we also don’t have a total free market on marijuana sales. There are rules and regulations about how you can sell weed. And we don’t allow a free-for-all smartphone app to get weed delivered to your door.

Jack: We totally do have weed delivery apps.

Ender: …Seriously?

Jack: The conveniences of modern life, baby! Don’t be a square. More seriously, you haven’t really defended why specifically smartphones are the problem. None of the research you linked above specifically calls out smartphones or mobile gambling as the problem. It seems to me to just be vibes. Isn’t blaming smartphones just a form of moral panic based around techphobia?

Ender: Here’s my logic: There are certain things that should be legal, but also kind of a pain in the ass to actually do. In the US, it’s legal to smoke cigarettes. And it’s good that cigarettes are legal - it would be a pretty terrible decision to try to change that and make cigarettes illegal. But at the same time, it’s also good that most cities have dozens of laws that make smoking a pain in the ass. They tax cigarettes heavily, they put giant warning labels on the packs, and they ban advertising where kids might see it. It’s usually illegal to smoke in restaurants or public buildings. It’s sometimes even illegal to smoke in parks or near building entrances. And this is good! Cigarettes kill people and it’s valid for the power of the state to discourage that. Because of increasing restrictions like this cigarette smoking has declined dramatically and more people will lead full, healthy lives.

The basic idea is that bad things can be legal, but with significant frictions that make it a pain to actually do them. Those frictions preserve personal choice and freedom, but dissuade people from impulsive decisions. Smartphones are the logical choice here (perhaps in addition to banning advertising). If you had to actually trek down to a physical casino or sports betting shop or make a phone call in order to place bets, far fewer people would do it. Just like we shouldn’t allow cigarette smoking anywhere and everywhere, we shouldn’t want sports betting to be something you can do in 15 seconds with zero friction. It’s simply too easy, too addictive and too seamless right now to open an app and put down a 7 team parlay on your phone. That’s like digital crack. We all know how addictive smartphones can be, but gambling addiction has far worse consequences than just scrolling too much on social media.

Jack: There are a number of things that bother me about this. I get the basic idea behind make-it-legal-but-annoying tactics. But this is often just a velvet glove over an iron fist. It’s a softer, gentler form of authoritarian control. Maybe you think it’s dramatic to call it authoritarian, but you are pretty explicitly saying that the state knows better than the average citizen how they should spend their money and live their lives. Call me a crazy libertarian but in the same way I don’t like the state telling me they’ll throw me in jail for betting, I also don’t like the state getting in my business about when and how I can bet. It’s still coercive.

And even if I grant you that some legal-but-annoying rules can be good, that doesn’t mean that every one of those rules is necessarily good. The reason cigarette policies are so widespread is that they directly impact other people. I don’t smoke cigarettes, and it makes my life directly worse if I’m in a movie theater or restaurant and have to smell the stale cigs from the guy smoking 10 feet from me. It ruins my experience and second-hand smoke could also put me at higher risk for cancer. That doesn’t hold for sports betting on my phone. I’m not harming anyone else by making some bets in the privacy of my own home. There’s no second-hand smoke from betting the over/under.

This also strikes me as ignorant in a coastal-elite-Acela-Corridor kind of way. You live in Manhattan, Ender. If the new rule was that you had to visit a physical location to bet, of course YOU would still find it convenient. You’d probably have five or six within easy walking distance of your apartment. But for people out in the suburbs, it would be a much bigger burden. In rural areas that would amount to a de facto ban on gambling overall. That would be enormously unfair and discriminatory to people who aren’t in big city walkable neighborhoods. And you know what the real end result would be? They’d end up recreating the illegal bookies and overseas apps anyways.

Ender: Even when things that don’t have clear negative spillover effects, it’s still valid for the state to regulate or ban them if they’re bad enough. Fentanyl and crack should still be banned even without the bothersome secondhand-smoke factor. They’re really awful drugs and it would be really bad if people started using them more in private - never mind using them on public transit. You can take a hardcore libertarian line of ‘nobody should regulate anything ever’, but that seems like it ducks the real and harmful impacts this is going to have.

I think there are two things you aren’t taking seriously enough: how addictive and different smartphone gambling is now compared to the past, and how bad the impact might be if we go full free-market here.

Sports gambling has traditionally been one of the slowest forms of gambling. You bet on the game, and then you get to watch the game for 2-3 hours and enjoy having some money riding on it. That’s really slow compared to stuff like scratch-off lottery tickets, blackjack, craps, slots, etc. There’s a lot of gambling that gives you a dopamine rush immediately and where bets turn over very quickly. And typically the faster it goes, the more addictive it can be.

But while sports betting used to be slower and more drawn out, it’s becoming less so. Now you don’t just bet on a team to win, you can bet the outcome of each half, each quarter, each inning of play. You can make live bets halfway through the game. You can bet on the outcome of the next play! These more exotic bets are increasing as a share of plays, they’re much more profitable for the sportsbook, and they’re much faster. Smartphone betting supercharges this. You can be at home alone, watching a single game on TV, and placing dozens or even hundreds of bets in real time on your phone with zero friction. Your potential to lose big and your potential to get addicted is increased.

These companies also have much better data collection now. They know who the rare winners are and they know who the big losers are. They use behavioral science to expertly manipulate the most vulnerable players into losing even more through notifications, offers, special bonuses, etc. And they’re not just focused on sports betting - they want much more. In every state they’re able to do so, the sports betting companies also operate online/mobile casino apps that allow you to play blackjack, slots and more. They pay massive influencers to promote their casinos (often to young audiences). And those apps really suck the players dry. If we allow that, we’re going to end up with a whole cohort of gambling-addicted youth who send their paycheck to the online casinos each month.

And just as a quick note on the rural thing: everything is further away and harder to do in rural areas. It would be harder to get to the physical sportsbook location, but that’s no different than how it’s harder to buy groceries or home goods. It’s just a fact of rural life.

Jack: I’m glad you brought up the online casinos. I’ll fully admit there’s a stronger case for banning mobile casinos than just about anything else. But there’s an important point to bring up whenever you talk about banning this or banning that. Where does it stop?

Maybe there’s a good case to ban casinos from being smartphone apps. And maybe you think you’ve developed a good case for also banning sports betting. But what else falls under the category of problematic gambling?

What about day trading? RobinHood is an extremely popular trading app. It’s available on your phone. And it’s got a very similar profile to the sports betting stuff you just complained about. Trading stocks used to mean that you got a tip from your cousin and you bought some Ford stock because you thought it would go up, then you waited months/years to see if you were right. It was slow. Now you can buy stocks instantly on your phone. Some of them are clearly meme stocks that are just an alternative form of gambling. And more than just buying/selling stocks, you can also buy exotic option trades. You can buy puts or calls, you can short stocks, you can trade on margin. It’s also an activity concentrated among young men, it can also have negative financial impacts. Isn’t this exactly the same thing?

What’s your solution to the problem of day trading as gambling? Are you going to ban people from buying options or from shorting stocks? I’m no legal expert but I bet you’d run into some sort of constitutional issue if you tried. Are you going to take the position that it’s fine to buy stocks on a laptop but should be illegal to buy them on a smartphone? That’s nonsensical on its face.

What about crypto? Some people invest in crypto soberly and are holding Bitcoin or Ethereum for the long run. Others run around YOLO-ing far too much money on stupid memecoins. It’s just naked gambling, and on top of that it’s also an area filled with scammers, pump-and-dump schemes and grifters. What about prediction markets? Should it be legal to bet on congressional races but not the NBA finals? Where’s the logic there? Are we going to just ban anything and everything that could be dangerous? Where’s the line?

Ender: Come on, Jack. This is a slippery slope argument. You can’t escape the bad thing by pointing out there might be a slightly worse or slightly better thing to also consider.

Jack: The slippery slope argument isn’t always a fallacy! Sometimes the slope really is slippery. You want to regulate away an activity that many people enjoy and that most people engage in responsibly. You say it’s necessary to do so because a minority of the population will end up hurting themselves if this activity is legal. And before you use the vast power of the state to ban people from an activity that harms nobody but themselves, I’m asking you to state your principles on what should be banned and what shouldn’t be. This seems like a perfectly fair question to ask.

I’m assuming you don’t actually think it should be legal to buy memecoins or short stock on a laptop, but illegal to do those things on a smartphone. So I’m asking what’s the line? What’s the line that separates problematic gambling-adjacent behavior that should be allowed on phones, vs problematic gambling-adjacent behavior that shouldn’t be allowed on phones?

Ender: The line I would draw, if I had to draw it right now, would be to ban casinos and sports betting from phones but leave those other areas you discussed alone. I’ll admit that I can’t formulate a perfectly logical reason why that’s where the line should be. I have trouble spelling out the exact principle, because I’m operating on feel. It’s fuzzy, but sometimes the real world is fuzzy. Could you point out on the gradient below where ‘blue’ starts?

There isn’t a perfect definition of how blue a color has to look before we stop calling it purple and start calling it blue. It’s subjective. Some people might put that point at slightly different spots. But it doesn’t change the fact that the top left corner is very, very clearly blue. And just because it’s hard to draw a perfect, principled line for which gambling should be legal and which shouldn’t be, that doesn’t change the fact that the worst offenders should be banned for society’s own good.

Jack: Here’s what I come back to in the end. Sports betting is an activity that most people can enjoy in a perfectly moderate and sensible way. It’s entertainment, it’s good fun and people like doing it. And I think it’s a big overreaction to see a small handful of studies (that may or may not even replicate a few years from now) and decide to ban that activity.

I appreciate that you’re being thoughtful about it. I appreciate that you’re not an anti-gambling fanatic. But I don’t think you’ve built a solid case here for the smartphone ban specifically, and I don’t think that protecting a few people from themselves is worth ruining everyone else’s enjoyment and freedom. Some people might be hurt by the increased availability of gambling, just like the end of Prohibition was bad for alcoholics. Maybe society should put more resources towards problem gambling hotlines and things like that. But a smartphone ban would be too far.

Ender: I appreciate that you are willing to admit there are people hurt by gambling. I’m just trying to make sure that people’s lives aren’t ruined by something entirely preventable. People who genuinely enjoy sports betting should be able to bet, but making it slightly more inconvenient isn’t the end of freedom and liberty as we know it. The scale of the potential harms here mean that we need to take some action. A smartphone gambling ban, potentially alongside a ban on advertising where kids can see it, is a reasonable middle ground between prohibition and a complete free market for gambling.