Gamblemerica: How Sports Betting Apps Rewired a Generation's Relationship to Risk

This transcript has been edited and reorganized for clarity. Buy Jon’s book here! I had the incredible opportunity to moderate the opening panel at the Reagan National Economic Forum with Jason Furman and Doug Holtz-Eakin last Friday. I shared some quick thoughts here, but will be back next week with a more detailed piece1.

The United States of Gamblemerica

Jon Cohen begins his new book Losing Big with a story about Kyle. Kyle really liked sports betting, and it seemed like he was pretty good at it! He made thousands of dollars betting in January 2023 and felt invincible. Working from home, he kept one screen for gambling, one for everything else. A dual monitor life, if you will. The confidence from his wins rewired his entire sense of reality. When his boss disagreed with him about a project, Kyle's gambling success made him overconfident enough to push back in ways he never would have before. He got fired, spent his unemployment checks on more bets, lost thousands and thousands of dollars over six months, and moved back in with his parents. "Gambling tore me apart," he told Jon.

My Little Brother

Kyle's story is extreme, but it's not unusual. It’s what happens when you’re young, wired for risk, and the system is wired to reward it, until it doesn’t. My little brother Ryan is big on sports betting, like many 20-something year olds (he wrote a newsletter about it)2. When I asked him his thoughts on betting a few months ago, he said via voicenote:

Ryan:   Sports betting is definitely a form of entertainment for a lot of people, and I think it's pretty comparative to what we might associate Robinhood trading with. I think sports betting provides opportunity if used correctly. But I don't think it is used correctly. The marketing of it is super predatory. The whole idea is that once they get you in, you're not going to want to leave. 

He understands that "99% of people won't" approach sports betting systematically, that most people just "want to hit the big parlay... want to hit the jackpot." And he knows that the marketing is designed to hook you.

But he also sees potential value in (1) entertainment, or (2) sports betting as an easier market to beat than traditional financial ones if you really dedicate yourself. And gambling is fun, there’s a reason it’s one of mankind’s oldest activities! His voicenote ended:

Ryan: I really have slowed my betting just because it only has gotten progressively harder and I don't love losing money. And I really like the stock market too.

There is a very thin line between entertainment and destruction. Both Ryan and Kyle are smart, analytically minded young men. Both understood the risks of sports betting. The difference seems to be that Kyle crossed some invisible dopamine threshold where early wins rewired his decision-making entirely, while Ryan managed to pull back when things stopped working.

Young people have come of age during what feels like the gamification of everything and human psychological limitations becoming a source of value. Day trading has become TikTok content! Crypto has become a presidential talking point! Any sort of hobby that you have can become a monetizable side hustle - and you better be monetizing, buddy!

Sports betting is part of this transformation in how we make money off attention, confidence, and cognitive bias. The line between investment and speculation and entertainment has been deliberately blurred.3

Ryan:  I think people will just look at [sports betting] as form of lottery tickets. They might bet this big parlay and view it in the same sense of going of trying to win the Powerball or going and getting a scratch off.

Luckily, my dear friend Jon Cohen has his new book, Losing Big, detailing America's experiment with legalized sports betting (and is also the author of the excellent book For a Dollar and a Dream, about the American State lottery). I had the chance to talk to him about how blurry everything has become. Included throughout this piece are snippets of our interview.

In Dialogue with Jon Cohen

Kyla: Hey John, thanks so much for joining me today to talk about sports betting 

Jon: A really small topic with no direct relevance to everything happening in the world right now.

We were talking about sports betting, sure - but that's not really what we were talking about. We were talking about how a society decides what kinds of human weaknesses are acceptable to monetize, and how quickly something can go from scandal to infrastructure when there's money to be made. Throughout Jon’s book and our conversation, there are two big ideas:

1. Behavioral Design: The platforms are engineered to exploit overconfidence, dopamine, and a lack of friction - especially among young men.

2. Institutional Complicity: States, media, and markets helped normalize betting not by accident, but as a way to collect revenue.

Our interview began as most do, with me asking an impossible question:

Kyla: After writing this book and doing all this research, what is your big opinion on what sports betting has done? So just summarize your book in one sentence.

Jon:  Stories like your brother. I'm like, either okay, that's totally chill and awesome and that's fine. Or I'm like, okay, this is the first step to destruction. There is nothing in-between.

A study on NFL bettors from the 2023 - 2024 season [found that] 87% of bettor accounted for a total of 1% of sportsbook revenue, which means that the vast majority of bettors are able to play safely. Then there's that other percent of players, like 3% of players that account for like 80%+ of revenue. Some of them are really rich and good for them - they can spend their money however they want. Some of them are not really rich and their dopamine pathways are rewired and they're addicted. 

So Ryan - along with most people who bet on sports - is in that 87% who contribute almost nothing to the industry's bottom line. He's an entertainment user, someone who might bet on his favorite team or analyze conference matchups he genuinely understands.

But Kyle was in the 3%, fueling the entire billion-dollar infrastructure, like the celebrity endorsements, the stadium naming rights, and the integration into live TV.

But let’s back up to the beginning - how did we get here?

The History of Sports Betting

Kyla: Could you just talk about the history and how we've ended up in this situation where so many people are being impacted and everyone's just like… *shrugs shoulders*.

Jon: Really cool. Just ask a historian to summarize the history of a couple hundred year topic in three minutes.

Kyla: Should be easy.

Sports betting wasn’t always this mainstream. It wasn’t even legal in most states until about seven years ago! For most of the 20th century, sports gambling carried a moral stigma with legal penalties. Betting scandals, like the Black Sox throwing the 1919 World Series reinforced the perception that gambling corrupted the integrity of sports. This perception hardened into law in the 1990s.

Jon: In 1989, the state of Oregon tried to legalize - not even sports gambling, it was just like a weird parlay card game through their lottery - Congress and the sports leagues basically freaked out and passed the Professional Amateur Sports Protection Act of 1992, which didn't ban sports gambling but it banned states from legalizing sports gambling.

For decades, betting lived offshore, underground, or in Vegas. Then a 2018 Supreme Court decision overturned PASPA on states' rights grounds.

Jon: And because of this court legal quirk, the Supreme Court, uncorked the champagne bottle in 2018 and it has run rampant over society ever since.

It indeed has run rampant over society! We went from Pete Rose being a cautionary tale to announcers discussing point spreads during live games. Sports coverage now assumes you're financially invested. The language of sports journalism has absorbed the vocabulary of gambling - spreads, overs, unders, value plays.

Advertising had a lot to do with it. FanDuel and DraftKings, a duopoly who control 80-90% of the market, spent billions on a specific kind of cultural programming on redefining what it meant to be a sports fan.

 Kyla: FanDuel and DraftKings were dead in the water a while ago and now they've had this massive revival. So could you talk about the role that advertising has played in bringing this to the forefront?

Jon: FanDuel and DraftKings got every celebrity you've ever heard of - mostly like black male celebrities like Jamie Fox and Kevin Hart. I talked to someone who worked at in the DraftKings marketing department before sports betting was legal. So this is 2017 or so, and his theory is that they want to get people who aren't crazy, weird sports fans into sports betting. And the way you do that is you get people who are like Kevin Hart and JB Smoove and Jamie Fox, who didn't play college sports.

You want to make the make sports betting feel accessible, especially for these companies that are also offering online casino games, which are like insane and even more problematic and scary than sports betting.

But to this theory of normalizing, you want to just get people acclimated to betting with the help of Jamie Fox. And with advertising at the tip of the spear, turn our sports ecosystem into a sports gambling ecosystem.

Anyone can do this, especially you, just open up the app and put your money in. Your casual sports knowledge is valuable, young man! It’s normal. Sports are about gambling now. The result was complete cultural transformation in less than a decade - and it was for everyone.

Jon: Sports betting is really complicated and I still sometimes get confused about various line movements. Kevin Hart is there to make it an everyman's game. I do emphasize everyman. I think that's part of the process again, the acclimation, the normalization and letting people get used to it as part of their sports viewing experience.

It’s all about building out the Sports Experience of gambling while watching, and doing it at the click of a button.

Jon: The 30,000 foot level goal is the normalization of sports gambling - or even the normalization of just a second screen experience where you're watching TV over there and you have your phone open with your sportsbook open on the same side. All advertising is meant to build familiarity and enthusiasm for the brand, but it’s also as much about just normalizing this activity.

A lot of people were not gambling before 2018. It was too scandalous. It was too hard to access. You had to buy Bitcoin and transfer the Bitcoin to cash and then gamble with that. But now you can just use your phone, use your debit card, use your PayPal account and they are trying to normalize that.

Previous eras had gambling, sure. People have always bet on sports, bought lottery tickets, speculated on markets. But never before have we simultaneously decided that every opinion should be monetizable (prediction markets), every social connection should generate revenue (dating apps), every creative impulse should become a side hustle (creator economy), every moment of boredom should be captured for advertising dollars (infinite scroll), and every sports opinion should become a financial position (sports betting). I do this! We all do!

We looked at the full spectrum of human psychological experience and asked: how can each of these become a profit center?

The State, The Platform, and the Hen House

Cultural normalization via two screens is only half the equation. For sports betting to become infrastructure, it needed political legitimacy. When Jon started researching how states legalized sports betting, he expected to find a story about regulatory capture like “Local Lawmaker Gets Hoodwinked By Sophisticated Lobbying Campaigns and Caught Flat-footed by Industry Promises They Didn't Understand”. He found something worse.

Jon: The case study I have in my book is about Colorado. There was a lawmaker in Colorado who's genuinely really into sports betting and was happy to go along with basically whatever the companies wanted. So this was not, as I was expecting, like state capture and lobbying. It was basically the hens enthusiastically opening the doors to the hen house.

Sports betting became policy because it promised money during COVID. Lawmakers needed revenue without raising taxes. Betting looked like an easy win. It wasn’t.

Jon: A lot of states passed sports betting during COVID when they had more acute financial needs and they were basically being offered a free source of revenue that didn't require any taxes. Why wouldn't they say yes?

What elected official wants to be the one who said no to free money during a budget crisis? What lawmaker wants to explain to constituents that they opposed something that could fund schools or infrastructure without requiring tax increases? But the revenue math never worked.

Kansas expected ~$100 million annually but collected $12 million in 2023 - less than half of one percent of the $2.8 billion wagered according to the Washington Post. Arizona projected $100 million but got $26 million. Colorado expected a 10% effective tax rate but promotional deductions cut it to under 5%.

Jon: You'll be shocked to hear that's not exactly what FanDuel and DraftKings promised when these states were considering legalizing in the first place

States themselves have become gamblers too, in a way!

Jon: Red and blue lawmakers alike have shown that they're just total suckers when it comes to gambling revenue. They'll just say yes to anything because it seems too good to pass up.

As Jon argues in his lottery book, the real problem isn't individual, it's institutional:

Jon: The thesis of my lottery book is that it's easy to look down on lottery players for being irrational and stupid for wasting all their money on these hopeful impossible dreams of a lottery ticket. But the only reason we have lotteries in the first place is because lawmakers and taxpayers wasted their impossible dreams of a tax free bonanza for the state on a lottery ticket.

So first of all, that's why I don't call a lottery a stupid tax because we're all stupid and we just condemn it when it's poor and non-white people who are buying lottery tickets. So I think if you want to distribute the blame it lies a little bit with these companies for these false promises.

States become stakeholders in an industry built on extracting money from their own citizens. The worse people like Kyle get at gambling, the more money the state makes.

The Dopamine Business Model

We tend to think gambling danger lives in losing streaks and desperation, but Kyle's story shows how success becomes the actual problem. The confidence that comes from early wins creates the sense that you've discovered some edge that separates you from all the other suckers.

Jon: You win your first bet, and you get really high off of the dopamine from it. That's how they get you. That 'I won my first bet on Marquette, so I must be awesome at sports betting'— [bettors] don’t realize that's actually the dangerous part in how they get you.

Kyle made $4,000 in January and felt "invincible." That confidence might have made him bold in betting, but it torched his work, his relationships, and his entire sense of reality. When his boss disagreed with him about a project, Kyle's recent gambling wins made him overconfident enough to push back in ways he never would have before. He got fired.

Jon: The FanDuel ad right now is Never Waste a Hunch - [making you think] that you know more about sports and you can leverage that to make money. Seems like a really easy trap door to fall into, like it might lead to problematic play down the road. 

Platform economies have collapsed the distance between self-expression and market participation. A hunch becomes a commodity and a casual thought like “I think the Knicks are going to win tonight” becomes something to be priced. Something that shouldn’t be wasted!

And what if the platforms aren't neutral markets rewarding good analysis? What if they’re designed to exploit your belief in your analysis?

When Jon talks about how dangerous early wins are, he’s really describing the gamified version of self-confirmation. You feel like you’re right, and that your rightness should scale. It’s a statement of sorts: I know something. I see something. And that makes me valuable.

Jon: It's at your highest winningest moments that are the most dangerous. This is the design of the No Sweat, First Bet promo because they want you to win your first bet. This is literally the plot of the Gambler by Dostoyevsky from 50 years ago - when you win your first bet is how you build out the sense of overconfidence that will be really hard to shake

The marketing of sports betting is very precise: young men like Kyle (and Ryan) who are statistically prone to overconfidence, hit during the exact developmental window when their prefrontal cortex is still forming and their financial lives are most fragile. 39% of men aged 18-49 now have online betting accounts. And they bet. 

Jon: The impacts are being born disproportionately by younger men - the rates of problematic or hazardous gambling or even just having a bad week and losing a couple thousand dollars more than you intended to, which is probably the most common sort of harm and negative side effect.

Polling indicates that pluralities of young men between the ages of 18 to 35 say this has happened to them at least once: that they've been unable to pay one of their bills because of gambling losses. If it's happening to that many people, there's clearly some phenomenon going on, something that is rooted in both gender and society. And it's not just a coincidence anymore.

Pluralities of an entire demographic unable to pay bills because of gambling losses. For college students, the environment creates what Jon calls "trip wires everywhere." Sports culture, peer competition, underdeveloped impulse control, and apps designed to prey on overconfidence.

Jon: It seems like drinking, right? Just to take the college student analogy, which is you can drink safely, you can even drink a lot and it might give you a hangover, but it's not going to have any long-term consequences. You can also drink and even just one night of unsafe drinking can ruin your life in the same way that gambling can for a young person, right?

[In gambling] you either you lose literally all your money and you can't pay your bills or it can start a process of addiction that lasts a long time. College students are in an environment where sports are central, they're surrounded by culture, let's say at a fraternity house, by other young men who also love sports. And they're encouraged to prove that they're smarter than their friends about sports by betting on sports because they can make money off of it. And you can just see all of these things alone might be okay, but they're all compounded together.

How do you exercise personal responsibility against a system designed by teams of behavioral psychologists and data scientists specifically to defeat your capacity for rational decision-making? I genuinely don't know.

The Language of Individual Responsibility

One thing that clearly frustrates Jon is how the industry weaponizes the language of personal responsibility:

Jon:  I'd love to actually talk about the phrase, please play responsibly. I think each of those three words is so interesting. It's like the warning labels on cigarettes, which is just ingeniously worded and so insidiously worded. It's like “Okay, please Kyle, I'm asking you to play responsibly. Putting the onus on you as a result to be the one in charge of your own play.” They can't even say the word gamble! It's not even please gamble responsibly! It's like play. It's fun, it's light, it's easy. This is not gambling, it's just playing. And then responsibly, same thing. I think the true function of responsible gambling campaigns and ads is to put the onus of responsibility onto the individual rather than the billion dollar corporation that is offering them the chance to bet on Malaysian women's doubles badminton at 3am.

I don't want to say people don't stand a chance, but again, there's just all these like landmines or trip wires or however you want to put it in front of people that both make it easy for them to get addicted, and then when they do, it's basically implying that it's their fault and that they should have been more responsible.

Kyla: How would you phrase it to capture the corporation's responsibility?

Jon: That's a good question. I don't know. There are people who do this who think about responsible gambling and how to improve responsible gambling all the time. And no one listens to them, but they do have actual ideas about campaigns. I don't know if I'm smart enough to have an off the cuff amazing advertising copy.

Kyla: Yeah. Maybe it's like It's Our Fault.

Jon: Don't gamble, asshole.

When Kyle lost his job, his savings, his ability to function, the message was that he should have played more responsibly. That this was his fault. It’s complicated. Traditional gambling required physical presence, social interaction, choice. The current system eliminates all friction, all social context, all natural stopping points.

Jon: So the word that's used in the subtitle of the book is Reckless—and not because gambling is reckless, but the way we rolled it out in the United States and the fashion in which it has been set up here is reckless. I'm quoting here from a 1976 gambling Congressional gambling commission - but you know that gambling is inevitable, right? As a human activity, as a human pastime.

Also I think it's fun, right? Not everything that's fun should be legal, but I think gambling does happen to be fun. The question is like “Okay, just because something's fun, should that mean that you should be able to bet in the middle of the night on like Malaysian women's doubles badminton through the state of Colorado?”

That to me is where you get past the point of oh, this is inevitable, so we might as well legalize and make money off of it. We are now inculcating gambling and creating a new generation of gamblers and soliciting gambling that wouldn't have been happening otherwise. 

Many people compare it to other vices, but Jon points out that gambling is a very specific type of cognitive capture.

Kyla: That's the loop of gambling, right? You're like, “oh, I'm in the hole. I just need to gamble some more and I'll get out of the hole.” It's such a nasty cycle.

Jon: It’s unlike drugs or alcohol in that way. There's no reason that you'd expect “oh, if I have another shot of vodka, it will cure all the negative effects of my alcohol addiction”. Theoretically, like if you hit the Milwaukee Bucks over tomorrow night, it could wipe out all of your debt. So you just keep chasing and keep chasing.

Kyla: Yeah. And you never really get there, do you?

Jon: I have yet to find a bettor who went down so far, got even and then was able to stop. This one guy profiled in the book got down a lot of money. He basically broke even. But he was like, no, I was, I used to be up $40,000. I need to get back up $40,000. And then of course, it's chasing that last $40,000 that he quote unquote lost, that he runs back in trouble and falls right back into debt and the whole cycle begins again.

The addiction is built around a logical premise, that somehow the next bet could actually solve all the problems created by previous bets.

Jon: What I'm saying is that has always happened. There have always been Kyles in American history, but never has the government and corporations made it so easy to have that exact experience and to have it from their couch.

The Human Cost

The worst-case scenario is documented in places that got there first.

Jon: Gambling addiction is the addiction most closely associated with suicide compared to every other directly, formally categorized addictive behavior in the diagnostic and statistical manuals. And this is what sparked the—we'll call it a reckoning—over gambling policy and over legalizing online gambling in the United Kingdom: a wave of suicides of young men who had developed gambling addiction."

The UK data: young men with problem gambling show 9x higher suicide attempt rates. Public Health England estimates 409 gambling-related suicides per year in England alone.

Jon: So that's the absolute worst case scenario is basically a lot of young men taking their own lives because of gambling addiction in the sense that if they were to disappear, their gambling debts and their addiction were to disappear. Once you unleash gambling [it could] lead to increased rates of people taking their own lives.

And then working down a couple layers of harm, as illustrated in these two SSRM papers that came out over the summer, increased bankruptcies, increased credit card delinquencies, reduced investment in the stock market and reduced savings among families that bet a lot of money. We are already seeing direct evidence of that. Just financial insecurity or people wagering their financial futures, quite literally. You're probably more qualified than me to know what the long-term consequences of that are of a 20 something year old losing all their money but I know it's not good I'll tell you that. 

Kyle moved back in with his parents, his career derailed, his finances destroyed. But he survived. Many don't.

What Comes After Sports Betting?

New players have emerged with even more aggressive and exciting models.

Jon: There have been all these big gray market gambling operators that have rolled out under the guise of prediction markets. You can bet on the NCAA tournament in all 50 states, even in states that haven't legalized sports betting.

Kyla: The Robinhood-Kalshi agreement.

Jon: Yes, which apparently received the blessing of the CFTC, which I have no idea how. I'm all for the shitting we've done on DraftKings and Fanduel, but I think there's a chance that within a few years we will look at them as the most benign and responsible providers of sports gambling.

Kalshi and Robinhood are the tip of the iceberg when it comes to offshore sportsbooks or this Sports Illustrated branded peer-to-peer betting program that might be being rolled out that is claiming that it can exist by being totally unregulated because it's peer-to-peer rather than with a house.

Kalshi x Robinhood represents something potentially more… interesting than traditional sportsbooks because it's wrapped in the language of financial markets rather than entertainment. They're not running a casino, right, they're building a financial exchange. They don't set odds; they facilitate trades between users.

It's Uber logic: we're just the platform!

If you can eventually bet on everything from the weather to election outcomes to celebrity behavior through the same interface you use to buy stocks (which is an interesting and engaging thing to do) - where do we even go from there?

Jon: DraftKings and FanDuel have built the noose that'll be used to hang them. They normalized betting as a practice as something that's a part of American society over the last seven years. Why should we be surprised that there are going to be innovators and other companies that are trying to disrupt the framework that they're building and that [these companies] are going to be more aggressive, are going to try to be less regulated and be more aggressive in their pursuit of customers and in their offerings?

What makes the newer platforms particularly concerning is their lack of even the minimal safeguards traditional sportsbooks maintain.

Jon: As totally ineffective as I think the responsible gambling campaigns are from the big companies, at least they have them. At least they're trying. At least they have people at their companies who are well-meaning and will show up when a regulator says, 'Oh, we need to talk to you about your practices.' Whereas some of these other companies aren't even gonna have that.

So I'm a little sympathetic to these companies because again, I think there's a chance that they might look like the most responsible providers, but they're also responsible for the situation in the first place because of how fast they wanted to move at the beginning, and how recklessly again they tried to proceed.

If uncertainty of Kyles everywhere can be monetized, why limit it to sports? Why not monetize every form of human uncertainty - political, cultural, personal, financial? Why not turn every moment of doubt into a transaction opportunity?

How Do We Fix This?

Kyla: We're going to have to totally revamp the curriculum for kids. It's going to have to be gambling literacy and porn literacy and AI literacy and deep fake literacy. There's just going to be a whole new world. I do think the 25 to 35-year-old range is a guinea pig for all of this stuff. My point of hope is that we'll take the lessons learned from the consequences that have been bestowed upon this generation and hopefully the kiddos coming along won't be so fried.

Jon: A journalist I talked to once called it a nation of beta testers. It’s a generation of beta testers.

Kyle and Ryan are both guinea pigs4 for what happens when every dopamine pathway becomes monetized. Kyle and Ryan are both full of analytical confidence, competitive drive, technological fluency and it serves them really well in other contexts. Kyle got caught in the machinery. Ryan managed to recognize when to pull back - and that’s good. Tests help you adapt and learn and develop immunity. There is hope!

Jon: I don't want to be another liberal who's like everything's bad and nothing is good. I do think that the cultural work would be really important and would be really impactful.

I do think there are some concrete ideas that would actually make things safer that would remove some of these trip wires and these landmines. I don't think you should be able to bet on minor league British Darts. I don't think you should be able to bet as much as you want without ever having to provide proof of income and provide proof of how much money you have.

I do think that a destigmatization effort or a counter narrative to the advertising would play a big role. I think it could and should be part of high school curricula to talk to kids about gambling... we try to give them some counter narrative so it's not, 'Oh, Jamie Foxx is gambling on a piano, it's really cool, I should try it.'

We need gambling literacy alongside digital literacy, financial literacy, media literacy5. We have to understand how these systems work!

Jon: Even just telling people how that process works—that when you win your first bet, that's actually the dangerous part, that's how they get you—I don't think people realize that. The house always wins, which is true in this case because if you do start winning, they'll just limit you and limit your gambling. So you don't actually have any prospects of making money in sports gambling, and that should be your mentality going into it.

Jon’s book is incredible, and it opened my eyes to the very complex problem we have before us. I don’t know much, but what I do know is that sports betting isn't really about sports betting. It's about what happens when we reduce all friction and turn uncertainty into a profit center.

Each platform promises control, skill, edge and all are designed to extract maximum value from your inability to stop. Exploitation is in the language of freedom!

We are all living in the experimental phase of an economy built on extracting value from human psychological vulnerability6. We've built a democracy that literally depends on citizen irrationality for some parts of revenue, then wonder why our political discourse feels increasingly unmoored from reality. Everyone is responding to incentives, all of the time. But the incentives are increasingly misaligned.

The house always wins, you know? But what happens when the house is everywhere?
In your pocket, your feed, your brain. And what kind of society are we building if it’s powered by our worst instincts?

Jon Cohen's book "Losing Big: America's Reckless Experiment with Sports Betting" documents America’s experiment with sports betting and is available wherever books are sold.