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March Madness—the time when the and basketball teams challenge each other—is a made-for-television spectacle . While , one of the tournament's biggest changes happened in 2018, when the .

Since then, legal sports betting has skyrocketed. Americans in 2023, according to the American Gaming Association, which promotes gambling. In 2024, Americans will place on March Madness alone.

a professor fascinated by March Madness and sports betting. Studying sports betting has shown me how valuable it is for states short on cash. Unfortunately, it also has significant drawbacks, especially for and their families.

Why lawmakers love sports betting

As of March 2024, some form of sports gambling, and six more are debating the issue. State lawmakers are interested in sports gambling because they have a fiscal problem. State spending over time has and after .

While state spending is increasing, state revenue from so-called "sin taxes" has flatlined after adjusting for inflation. and , reducing and . Even after growing strongly for decades.

Increased spending combined with a reluctance to raise taxes has led to a push to find new sources of revenue. That option to politicians.

The statehouse always wins

on sports each year. More than 90% of the money bet goes to paying out winning gamblers. Gambling operators keep the rest, which they share with the states. The percentage kept, called the hold rate, has been , with 2023's of the money bet.

State governments now collect , or about $2 billion a year, from sports gambling. That's roughly one-fifth of that 9.1%.

If gamblers bet around $3 billion on March Madness, then states will pocket over $50 million dollars in extra revenue just from a three-week basketball tournament.

The ugly side of sports betting

Gambling is wonderful for state revenues and . However, it has : While many people enjoy gambling, millions of Americans have a gambling problem.

Studies suggest of adults fall into this category. In Massachusetts, where I teach, a 2018 survey found that about 2% of adults were already problem gamblers, and .

Meanwhile, the number of calls to the lasting more than a minute . While this doesn't mean that problem gambling has become more common—among other issues, correlation isn't causation—the increase very closely matches the across the U.S.

Two possible policy solutions

Betting on sports was illegal before 2018. to either bet with a bookie or an offshore site. Betting with a bookie before 2018 was a relatively slow process. Gamblers typically needed to pay for their bets upfront with cash and ran the risk their bookie would be arrested or shut down.

Today, in-play or live betting is legal and almost instantaneous. Bettors sitting on their couches at home can make multiple types of bets, such as which in a basketball game. In business terms, sports gambling went from extreme friction to a completely .

To reduce the harms of sports betting, I propose two ways to reinject friction into the system. The first is to prevent . While not every state and bank allows credit cards to fund a sports betting account, many do. Those credit cards that allow it often treat gambling payments as a .

The in 2020, noting that people who used credit cards to gamble were . online bets made with credit cards. A few U.S. states, , have also instituted these sorts of bans, but most have not.

The second idea, which I prefer, is to of using cash to bet. The idea is simple. Anyone with an online gambling account would need to prefund their account with cash. Winners would never have to stop gambling.

Losers, however, would be forced to temporarily stop betting when their account runs out of money. Needing to take a break to go to a bank or simply pull money out of your wallet and hand it to someone would give people a chance to think about what they're doing instead of being stuck in the .

In theory, people could deposit cash into their accounts at any of the . To implement this idea, however, the federal government would need to change a law. , it has imposed a who accepts bets for profit.

. This tax doesn't raise much revenue already, to it. It also reduces employment, as well as gambling companies' interest in allowing in-person prefunding of accounts.

If you're watching March Madness and betting on the tournament, I hope you win. But even if you don't, at least your state government will.

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