A recent Bank of America Institute survey found that one in five Americans now considers sports gambling a form of investing — just another asset class, with DraftKings sitting somewhere among stocks, bonds, and cash. Among Gen Z, the figure is 40%.
Anxious people have long confused investing with gambling. I shouldn’t be surprised the confusion runs the other way. If you stare at a slot machine long enough, you can talk yourself into calling it a portfolio. Stare at a day-trading screen or Jim Cramer long enough and you’ll call that investing, too.
One difference between investing and gambling is what happens to your money over time. In investing, time is usually on your side. Stock prices bounce around daily and even yearly, but profitable companies tend to become more valuable. Investing is a positive-sum activity. One investor’s gain is not another investor’s loss.
Gambling works the other way. Time is the enemy. Bettors mostly swap money with each other — after the house takes its cut. The longer you play, the more opportunities the house has to collect that edge. Bet the NFL long enough and, if you are lucky, your losses will match DraftKings’ 9% to 12% slice of every dollar. And that is the optimistic case.
If you want to make money in the gambling business, be the house, not the bettor.
Tennessee figured this out years ago. When it wanted a new revenue stream without raising taxes, the state did not wander down to a convenience store and buy a few Powerball tickets from somebody else’s lottery. It became the lottery. It now nets $400 million to $500 million a year—extracted, with admirable consistency, from people who are very, very bad at math.
I fear online sports gambling has the makings of another opioid-style problem. Not everyone who bets on a game is a problem gambler, any more than everyone who takes a pain pill is an addict. Volume, however, is not comforting.
Americans wagered $166 billion on legal sports last year — roughly what the last serious national estimate said the country spent in a year on cocaine, heroin, marijuana, and meth.
A 2024 national gambling survey found that 23% of American adults placed a sports bet. Among traditional sports bettors, 17% reported at least one indicator of problem gambling “many times” in the past year. For comparison, only 34% of Americans own any stocks outside a retirement account.
We have somehow made it easier to bet on Thursday night football than to buy a share of a business. That is not investing. It is a slot machine with a kickoff time.
David Moon is president of Moon Capital Management. A version of this piece originally appeared in the USA TODAY NETWORK.