Online Sports Betting: Harmless Fun or Exploiting Fans?

You’ve almost certainly seen the ads somewhere. Make money from being a sports fan! Bet just a little and win a lot! Your first bets are risk-free! It’s a fun new way to be a fan! Since online sports betting was legalized, Americans have bet over half a trillion dollars on sports. But while the industry portrays itself as a fun, harmless way to be a sports fan, the reality is much darker. The entire system is designed to suck bank accounts dry, keep losers coming back, and quietly cut off winners. From misleading advertising enticing new customers to VIP perks that get people who’ve lost millions to keep betting, the true problems in this industry are hiding below the surface.

If you have a problem with gambling, feel like you’re not in control anymore, or feel like you can’t not bet, there is help. Call 1-800-GAMBLER or talk to a therapist, a family member, or a friend.

See Sports Betting with Danny Funt for a complete transcript of the Easy Prey podcast episode.

Danny Funt is an investigative reporter and author of the new book Everybody Loses: The Tumultuous Rise of American Sports Gambling. He has reported on politics, news, sports media, and the business of sports betting for The Washington Post, The New Yorker, The Wall Street Journal, The New Republic, and more. His work trying to understand why sports betting is suddenly everywhere and the risks associated with it has led him to appear on CNN, NBC, NPR, and other major news outlets, and also led to him writing his book.

Misled by Online Sports Betting

Danny was living in New York when the state legalized online sports betting in 2022. The ads were suddenly everywhere trying to convince people to sign up. In New York, this was still during covid, and there wasn’t much else to do. Danny decided to see what all the fuss was about.

One of the advertisements was for a $1,000 risk-free bet. “Risk-free” was a huge phrase in sports betting advertisements. To Danny and a lot of people he spoke to, “risk-free” sounded pretty straightforward. You could bet $1,000 and not worry about losing it. Unfortunately, Danny and millions of Americans didn’t read the fine print. If you win that $1,000 risk-free bet, you get the money. If you lose, it’s more complicated.

Danny expected a refund. But instead, he got “bonus bets,” which don’t function like cash. So he bet on overwhelming favorites. In normal betting, when you win, you get your original amount back plus winnings. How much the winnings are depends on the odds – if the Rams are the overwhelming favorite and you bet $100, you may only get an extra $5 back because there’s not much risk. Danny didn’t care about profits, he just wanted his $1,000. But he discovered that with bonus bets, you only get the winnings. So if you bet a $100 bonus bet on the Rams, you wouldn’t get $105 if they win – you’d only get $5.

In the end, Danny got less than 10% of his $1,000 back, and he felt almost like he’d been scammed. That was the beginning of his investigation into sports gambling. His first piece on the industry was about misleading promotions. And from there, he continued trying to expose the scams, deceptions, and cons that are pervasive in online sports betting.

The Rise of Online Sports Betting

For decades, Nevada was the only state where sports betting was legal. And the primary draw was getting people into casinos. They often didn’t care if the sportsbook broke even – they just wanted to get people in the door where they could be tempted by slots, blackjack, and more profitable games.

In 2018, a Supreme Court decision allowed other states to legalize it, and they scrambled to do it. Currently, 39 states and DC have some form of legal sports betting. The whole sportsbook industry generates about $150 billion in bets every year, and around $20 billion in revenue. Since 2018, Americans have legally wagered over $600 billion on sports. Danny had the opportunity to interview Theodore Olson, who argued before the Supreme Court to legalize sports gambling, and he said that never in his wildest dreams would he have imagined Americans would bet that much.

Part of the draw now is that you don’t have to go to a casino to do it. The majority of sports betting these days is online, and you can deposit money and place bets with just a few taps. Danny has spoken with a lot of legislators involved in legalization decisions, and some have said that they didn’t consider how different betting online would be from having to go to a casino or find a bookie. They didn’t realize that ease of access would make a difference, and a lot of them regret it. Ohio Governor Mike DeWine has said that legalizing online sports betting is his biggest regret in office. Ohio is now considering a bill that will dramatically roll back legal betting, including entirely banning betting online.

Something like 95% of the [sports betting] business is now conducted online.

Danny Funt

The Gamification of Gambling

Technological innovation has created new and exciting styles of betting. You can now make “microbets” on tiny things within the game, like if the next pitch in a baseball game will be a hit, ball, or strike. That’s a road to people getting carried away or addicted, which makes a lot of money for sportsbooks. You have a casino in your pocket that’s accessible at all times, and it’ll be even more on your mind when you’re thinking about sports.

You have, as they used to say, a casino in your pocket. And it’s tugging at you at all moments, especially when you’re thinking about sports.

Danny Funt

One of the fears about stock investment apps is gamification, but sports betting is gamified from the beginning. The apps are designed that way. And the companies use the words “gaming” or “betting” instead of “gambling” intentionally. “Gambling” makes you think of casinos, places where the house always wins, and gambling addictions that ruin lives. “Gaming” sounds like harmless fun and is associated with video games.

A lot of what the online sports betting industry does is help people celebrate their wins and forget about their losses. DraftKings is the second-largest sportsbook in the US right now. For a while, they sent a monthly report to customers about how they are doing on their bets. When you hear “report,” you think it’s going to be about net performance. But it’s not. The report highlights their wins – single biggest win, biggest long shot, biggest parlay (a popular style of bet that combines a bunch of smaller bets, and if any one of the smaller bets fails it’s a loss), etc. It doesn’t mention your losses at all.

Why Sportsbooks Care if You Win

Some people think that sportsbooks are just taking a little fee out of every bet, so they shouldn’t really care who wins or loses. But in reality, that’s not how they work. That’s the difference between prediction markets and sportsbooks. The details are much more complicated, but in the simple version, prediction markets legally aren’t gambling apps. They’re classified as derivatives exchanges. Essentially, they’re peer-to-peer exchanges. People are trading with and betting against each other, and the platform takes a fee when you withdraw the money. It’s like poker where the house doesn’t play, they just take a cut from every hand.

In sports betting, you’re not betting against other gamblers, but against the bookmaker. There are some cases where bookmakers lose big. When the New York Knicks won the championship recently, New York sportsbooks list around $45 million. The house has an intrinsic advantage in the odds, but they can still lose. So they want to be careful who they take bets from. They want to incentivize the “whales” – people who lose a fortune and still aren’t great a betting. And they want to stop sharp betters from doing much because they will actually win long-term.

A Legal but Predatory Industry

The premise of legalizing sports gambling was similar to that of legalizing recreational marijuana. People want to do it, and they’ll figure out how to do it whether or not it’s legal. If they’re going to do it no matter what, let’s legalize it so it can be taxed and companies can be required to treat customers honestly, pay out what they owe, not lie about odds, and other shady things that happen with black market sports gambling. But in practice, that often doesn’t happen.

Danny isn’t here to argue whether or not sports betting is a good thing or legalizing it was the right move. He’s seen good cases for both sides. What he is saying is that the industry as it is right now is predatory. They’re tricking people, misleading them about the nature of specific bets and sports gambling itself, and cheating them out of money that they ought to be paying out. A lot of it feels very much like the way black market bookies did business – which undermines the entire argument for legalization.

A lot of what the [sports betting] industry is doing is downright predatory.

Danny Funt

Danny doesn’t spend a lot of time in his book talking about the right way to be a fan or whether or not there’s a place for gambling in enjoying sports. He’s a reporter, not a lawyer or philosopher here to make a legal or ethical case about it. But as a reporter, he can see that the current industry is destructive. People are getting screwed over right now. Whatever you think about gambling in general, he wants to make people aware of how the industry is currently working.

Shady and Misleading Advertising

The lottery highlights people who win life-changing amounts of money, and online sports betting platforms make it sound like anybody could be the 1% of people who actually wins money. One ad, for example, said the average customer on FanDuel wins $1,200 a year. But only eleven people won 13% of all fantasy baseball winnings. A few people win big, and most lose.

Advertising misrepresents the nature of online sports betting. It says that you can win – not in a dream-come-true way like winning the lottery, but that if you follow and understand sports that you can turn a profit. There used to be a FanDuel billboard near Danny’s apartment that said, “Turns out watching football can really pay off,” with “pay off” underlined. Danny doesn’t know how you could look at that at not think you can make money from being a football fan. He’s heard from people who saw this kind of messaging and thought it would be irresponsible of them to spend so much time and effort following sports and not try to make some money off of it.

The advertising isn’t just excessive; it really misrepresents the nature of sports betting.

Danny Funt

Only something like 1% of people actually make money long-term off of sports betting. But if you do show signs of being good at it, sportsbooks will throttle you. Danny has talked to people who can’t bet more than a few cents on NFL games. It’s borderline impossible to beat the house long-term on NFL games. But sportsbooks still don’t want savvy gamblers betting. Getting cut off because you might win is exactly the opposite of the advertising. The founding CEO of FanDuel plainly said that the advertising is untruthful – they’re selling that you can win, but you can’t.

Buttering Up the VIP Losers

In casinos, the “whales” who lose a lot of money gambling are treated extremely well. Danny spoke to a DraftKings executive who snickered at the casinos’ treatment of high rollers, because online sportsbooks blow that out of the water. Most of the casino perks are confined to the casino – dinner, flights to the casino, suites while you’re there, etc. But because you can do online sports betting from anywhere, the sky is the limit.

Sports betting VIPs get to do things like throw the first pitch in an MLB game and let their kids have batting practice on the field beforehand. They get to play pickup basketball on an NBA court and give the “Drivers, start your engines!” command at NASCAR races. When the US Open was played on Long Island, average people had to drive and deal with the endless traffic, but sportsbook VIPs got flown in on a helicopter that landed right on the golf course. The list goes on – anything money can buy is fair game, and even things money can’t buy.

That includes things that have nothing to do with sports. An example that sticks out to Danny was from FanDuel. The people who take care of these VIPs are called “hosts.” A FanDuel host discovered a customer’s dog passed away, so he sent a condolence gift bag that included a blanket printed with the dog’s face. The host explained that anyone can swipe a credit card and give you free stuff, but they’re thoughtful enough to send condolences when your dog dies. And that also reminds you that if you think about betting less, you’re not just going to lose perks, you’ll lose the friend who was so thoughtful when your dog died.

The Ethical Challenges in VIP Perks

Treating these VIPs like this is one of the most ethically complex sides of the online sports betting business. They’re encouraging people to lose incredible amounts of money. The hosts are making the gambler think of them as a friend whom they can text at all hours, will go to games with them, and who they can go drinking or golfing with. But it’s their job to feel like a friend to get them to keep betting.

These hosts are also the first line of defense if someone has a gambling problem. That puts them in a very awkward position. They’re under a ton of pressure from the sportsbook to get as much money out of the customer as possible. But they’re also responsible for intervening if they have a problem. Danny has heard lots of stories of how that goes wrong. Essentially, unless the customer plainly says, “I have a problem and I need help,” the sportsbook pressures the hosts to not intervene.

Sportsbooks also don’t like to define where the line of needing help is, because if they define it, they’ll be responsible for acting if someone goes past it. Other countries have “red flag” laws, and some states have tried to adopt something similar to make companies responsible for intervening if someone shows signs of problem gambling. Warning signs they could easily look for is dramatic increases in the amount of money you’re wagering, betting on more sports than you were initially (especially if you’re betting in the middle of the night), depositing money wildly, or betting again immediately after a loss. These are all hallmarks of a gambling problem. Online sportsbooks could easily identify these, but right now they’re under no obligation to do anything.

Getting Cut Off at the Bar and at the Sportsbook

A lot of the rules and norms around alcohol are considered common sense and not seen as patronizing. Generally, we don’t like the government telling people what they can or can’t do with their own money. But bars have a legal requirement to stop serving you alcohol if you’ve had too much, and that isn’t controversial. You’d think the same thing would apply to gambling, but it doesn’t.

Not over-serving a visibly drunk person at a bar feels responsible and not that controversial. And you’d think the same would apply to betting, but it doesn’t.

Danny Funt

If you’re spending more than you can afford on gambling and you’re getting in debt or having financial problems because of it, that’s an issue. About a third of sports bettors said they’ve had financial trouble because of their online sports betting – it’s not just the ones with full gambling addictions who are suffering. Sportsbooks could do more, but they don’t.

Sportsbooks say that they’re confident most people are only betting money they can afford to lose. But they’re not checking bank accounts or anything that would actually give them that information. And just because someone can afford to lose money doesn’t mean it’s good for them. Some definitions of responsible gambling say things like you shouldn’t be betting more than a few times a month on more than a couple different types of gambling products with more than 1% of your household income. But sportsbooks don’t want to promote that because they’d lose a lot of money.

If you have a problem with gambling, feel like you’re not in control anymore, or feel like you can’t not bet, call 1-800-GAMBLER or talk to a therapist, a family member, or a friend. There is help.

Legislative Solutions for Online Sports Betting

At first, states hoped the sportsbook companies would self-police. But Danny anticipated we would need more regulation eventually. Europe has had online sports betting longer than the US, and that’s what happened there. They realized unrestricted sportsbooks wasn’t working and regulated after the fact.

We’re seeing early signs of that in the US. Ohio’s aggressive bill would roll back a lot of online sports betting. Colorado has something similar. Certain states are trying to increase the tax rates – the industry had a lot of lobbying power and got initial tax rates extremely low, so the industry isn’t even making states a lot of money right now.

One of the things that stuck with Danny in talking to people in the industry was that they said the status quo was the lowest common denominator of consumer protections. They’re always weighing the balance between protecting consumers and maximizing profits, and protecting consumers too much puts them at a disadvantage. So unless there’s some sort of requirement that all sportsbooks have to put these protections in place, none of them are going to do it. Many of the sportsbook employees don’t feel good about what they’re doing. But in the words of one employee Danny spoke to, their job is to maximize revenue, not be good moral citizens. Their business is about making money, and protecting people often gets in the way of that.

Contact Danny Funt through email at [email protected], on social media @dannyfunt, or at dannyfunt.com. Also check out his book, Everybody Loses. He encourages you to reach out, whether that’s to share your thoughts on the book, tell your sports betting story, or anything you think a journalist might take an interest in.