Professor Jason Kotter (BYU Marriott School of Business) breaks down what sports betting looks like in the real world—why it feels “winnable,” how commonly misunderstood odds and wager structures (like parlays) can quietly stack the deck, and the financial tradeoffs heavy bettors often make (including pulling funds from long-term savings). You’ll also hear the data-driven reasons many bettors end up losing over time—and what education and smart policy changes could do to reduce harm.
Jeffrey Snyder, Broadcast Retirement Network
Joining me now is Professor Jason Kotter of the BYU Marriott Business School.
Professor Kotter, it’s great to see you, sir. Thanks for joining us this morning.
Professor Jason Kotter, BYU Marriott School of Business
Thanks for having me here.
Jeffrey Snyder, Broadcast Retirement Network
So we’re gonna talk about this great study that you and the team at BYU did, but I wanna maybe take a step back and maybe start off with just an assessment. We’re talking about legalized gambling and sports gambling and its impact on savings, but in your interactions with your students, which I would imagine would be anywhere from 18 to 22 or even graduate level, what are their perceptions about sports gambling? Are they heavily invested in gambling?
Professor Jason Kotter, BYU Marriott School of Business
Our students are definitely interested in sports betting. You know, I interact mostly with business school students and finance students in particular, and they are very interested in betting. In the state of Utah, online sports betting is actually illegal, but as you probably are aware, prediction markets are legal everywhere and you can place sports prediction contracts that look an awful lot like a sports bet, and our students are doing that.
They are interested in it and they’re on their apps placing those contracts all the time.
Jeffrey Snyder, Broadcast Retirement Network
Yeah, does it strike you as kind of counterintuitive? We’ll talk about the study in a second, I promise. Does it seem like counterintuitive that you have very smart business school students that wanna build a business and they’re learning the principles of being a successful business person, managing a balance sheet, putting money towards your savings and your capital.
So does it strike you as kind of a paradox that they would be interested in sports betting?
Professor Jason Kotter, BYU Marriott School of Business
Yeah, it is a little bit discouraging to be honest, but when I talk to my students, a couple of things stand out. One is that there’s a set of my students who just feels like they’re the experts at sports. They’ve tracked their favorite teams, their favorite players, they know all the stats and they feel like they have an edge.
And sometimes they feel like they have more of an edge in sports than maybe they would have in the stock market. And so they think, well, this is actually my place to make a profit because I know what I’m doing. The aggregate statistics just don’t bear that out.
The vast, vast majority of sports bettors end up losing money. So I think they’re just mostly wrong about having that edge. But then you also talk to a different set of students who just feel so discouraged.
They look at the current economy, they look at house prices and they say, look, there is no way I’m ever gonna be able to buy a house or get ahead in life. And really the only chance I have is to basically play the lottery. And sports betting is just one way of playing the lottery.
It’s not the only way. I mean, they might take levered bets in the stock market or short dated options or whatever else, but they really have this sense of like, I’ve gotta win big to have any chance of making it in life. And I can understand some of that frustration.
The current economy is pretty difficult, especially for those just starting out.
Jeffrey Snyder, Broadcast Retirement Network
So let’s talk about the study. What led you and Professor Johnson to do this study? What was kind of key and top of mind as you and the team kind of laid out the questions and going on and going through the data?
Professor Jason Kotter, BYU Marriott School of Business
Yeah, well, the first thing is, any of you who watch sports know, sports betting has just exploded over the last several years. You can’t turn on a game without ads from DraftKings, PanDuel, and now PolyMarket and Kalshi. And it’s just in your face all the time.
And so that was kind of top of mind. Our students were talking about sports betting, which made it top of mind as well. And so we started to wonder, where’s all of this money coming from to make all of these bets?
Is this just another entertainment expense? Is this taking your Starbucks money and putting it on the game instead? If so, then maybe that’s no big deal.
But if it’s coming from somewhere more important, it might have longer term financial consequences. So that was our motivation and led us to dive into the data really with this question in mind of how are people funding all of this money that’s going towards sports?
Jeffrey Snyder, Broadcast Retirement Network
So who’s funding it? Is it mom and dad? Is it a grandparent?
Is it a job that they’re taking up or are they taking it from their savings? Yeah, so- Or all of the above?
Professor Jason Kotter, BYU Marriott School of Business
You know, there’s probably a little bit of all of the above, to be honest. But I think the most striking thing from our study is that people are cutting their long-term savings to fund their sports betting habits. So the heaviest bettors you see actually cut their deposits to their long-term savings accounts by about 50%.
And because sports betting is, you lose money, it really hurts your long-term savings and your long-term financial health in very large ways. Now I should be clear, this isn’t every bettor. There’s a big chunk of bettors who bet just fine.
They do so in a moderate way. They’re probably having fun. There’s not a problem with that.
But the heaviest bettors really find themselves in a financial pickle as they end up cutting their savings and also increasing their debt. Their credit card balances go up. They take out personal loans and this really puts them in a difficult financial position.
Jeffrey Snyder, Broadcast Retirement Network
You know, you were talking about, as you were talking and mentioned the word lottery, Professor, I was thinking it is like the lottery. I had the job experience when I was younger of working in a liquor store. I didn’t really drink liquor, so it was really odd for me to go there.
But in any event, I actually worked a lottery machine sometimes and there were people that would come in and they had their numbers and they would think they would win. So when you use the term lottery, I really put this in the same category. It’s so risky.
I mean, is there any sense for how many people actually win their bets versus, like you can win outcomes, right? Win versus loss, but people are betting on whether the Utah Jazz player is making the jump shot from half court.
Professor Jason Kotter, BYU Marriott School of Business
Yeah, and it’s even worse than that because the most common bet now is a parlay, which is really stringing together a set of bets. So, you know, will the Utah Jazz win the game? Will the Lakers lose the game?
Will, you know, and you stack these bets on top of each other and you have to win every single bet to win the whole bet. The attractive thing about that is it makes it even more lottery-like. If you do win, the payout’s very, very large, but the chances of winning that thing are probably worse than the typical lottery odds.
They’re just very difficult to win. So if you look in the short term, of course there are some bettors who win a bet here and there, but if you look at people who bet over, you know, a long period of time, you know, several months, years, the percentage who come up ahead over a long period of time is incredibly small. There’s just a teeny fraction of bettors who make money over the long haul.
Jeffrey Snyder, Broadcast Retirement Network
Yeah, I got to think that since these companies are in business to make a profit, they’re not in a business to lose money. They’re in a business to win. Obviously they see the opportunity.
So, you know, you would think people would kind of, it’s like playing the virtual slot machines. Analogous to that, the virtual slot machines are virtual. They were programmed.
Someone programs them. Obviously they’re going to program them in the business’s or the house’s favor. Let me ask you about your students.
And I, you know, I hate generalizations, but let’s talk about financial literacy. Is, are people moving in this direction, students moving in this direction, not just in, at BYU, but possibly around the country, maybe around the globe, because they lack the financial literacy or the education about, you know, putting in the hard work and the long-term investment.
Professor Jason Kotter, BYU Marriott School of Business
Yeah, I think financial literacy is a huge issue. You know, my business school students are generally pretty financially literate. We’ve, you know, trained them in these concepts, but if you look a little bit broader at the college student population, or even broader than that at the U.S. population, the levels of financial literacy are pretty low. People have a hard time understanding the costs of bad financial behavior. And they also have a hard time understanding the benefits of long-term consistent saving and the benefits of compound interest. And we probably need to do a better job at teaching the entire population these skills.
But a different area that’s not exactly financial literacy, but it also is information, is that people just don’t understand the odds when they come to things like sports betting. And so they look at a bet and they tend to think that there’s a higher probability they’re going to make money than there actually is. They have a hard time understanding that the house takes a cut of every bet.
And so you have to even do better than 50-50 to have a chance of winning. And because of that, they really just have the wrong picture in their mind. And I think we need to do a lot better job at helping people understand the actual financial picture that they’re looking at when they think about placing sports bets.
Jeffrey Snyder, Broadcast Retirement Network
So it sounds like one of the theses of our network, I can’t get it out, is education. When I think about, you mentioned Utah does not yet allow sports betting, but it does allow prediction markets because it’s technically not sports betting, although it sounds like it is. That’s a whole different story.
Who should be responsible for the education? Should it be the sports betting companies? Should it be the government?
Or should it be like a not-for-profit or a third party? Or should it be the individual? The saying before I even do this, I need to really be educated.
Professor Jason Kotter, BYU Marriott School of Business
Well, I mean, ultimately it is individual’s responsibility to be informed about the financial choices one makes. But I think ideally I would like to see a group effort here. So it’s actually, I think, in the interest of the sports betting companies to help their customers understand.
Customers that end up in very bad financial position, they can’t keep betting, you lose those customers. Of course, it’s in the interest of government to help people do this because people that end up in bad financial position, we end up using public assistance to help them and their families. And so preventing that is good for the government.
And so I think really it’s in everyone’s interest to do a better job at education and helping create the circumstances where we can have fun and moderate activity in the betting markets and avoid the worst harms. Of course, getting there takes a lot of effort and probably takes coordination among legislatures and constituents as we reach out together and ask for better practices when it comes to this area.
Jeffrey Snyder, Broadcast Retirement Network
You know, I like when I was reading the study or that, I guess, I didn’t read the whole study, full disclosure, I kind of read the executive summary, but I like how you referenced, you and your colleague, Professor Johnson, referenced the S&P 500 or the S&P index. When I go back and I look at like the 100-year track record historically and you average it all together, it’s like 8% annual return. I would take 8% every year, bar none.
I don’t like volatility. You know, I’m a long-term investor. That, to me, really spoke volumes.
Maybe that’s what we need to show because 8% every year, and of course there were ups and downs, Great Depression, you know, all these volatile events, but 8% on average is pretty darn good.
Professor Jason Kotter, BYU Marriott School of Business
That’s right. And what really is hard to appreciate is how much 8% per year compounds over time, right? You know, 8% sounds teeny when you think, oh, this sports bet could give me 100% or 200% or even more return.
And so we really need to do a better job at helping people understand, well, 8% compounded year upon year upon year actually builds tremendous levels of wealth. And the truth is there is no shortcut to wealth. Everyone wishes they could just get rich instantly.
That’s part, I think, of what drives behavior like lotteries, behavior like sports betting, but the data doesn’t lie. People just don’t generally make money that way. The slow and steady approach really is the one to win when it comes to building wealth.
Jeffrey Snyder, Broadcast Retirement Network
Gotta love that tortoise. Tortoise and a hare story, I don’t know. I was gonna ask you, you know, is it just a symptom of today’s world environment?
We all have social media, people are just scrolling. We were kind of, I was kind of joking about that before the interview. You know, they don’t like what you have to say.
They just do this and they just move on. Is that really symptomatic of a bigger issue? Is that there’s lack of patience?
People may or may not think they’re gonna get there and how can they get there sooner?
Professor Jason Kotter, BYU Marriott School of Business
I think that certainly contributes to this thing. You know, a downside of social media is it’s so easy to compare yourself to the rest of the world. And unfortunately, you’re comparing yourself mostly to a fiction.
And so it’s very easy to see this perfect world and think that’s what I had to have and I have to have it now. And I think that does make it hard for people to take the slow saving patient behavior that really is the necessary road to build wealth.
Jeffrey Snyder, Broadcast Retirement Network
So if I may ask Professor, what are the next steps? What do you and Professor Johnson plan to do next? What do you take this, do with this information?
Is it, do you embed it in a course? Do you embed it in maybe a university, BYU financial literacy course? What’s next?
Professor Jason Kotter, BYU Marriott School of Business
Yeah, that’s a great question. So one thing we are doing now is we are talking about this with our students in our courses. So, you know, we’re bringing up sports betting, we’re helping them understand sort of not only what we’re finding in our study, but just the broader statistics about how difficult it is to make money over any long period of time when it comes to sports betting.
So that education I think is one part. I think there’s also room for sort of some government action here. So, you know, we’ve been meeting with, because we’re in Utah, we’re starting with Utah, we’ve been meeting with our state, you know, senators, congressmen, governor, we’re trying to get the message out to politicians as well so that they can understand, you know, from a state level, the legalization of online sports betting is very attractive because you raise tax revenue from taxing these companies. And of course, a source of new revenue is an attractive thing to politicians.
We’re trying to help them understand, hey, there’s consequences here too to the people in your state. And so maybe you wanna proceed with a bit of caution or at least think of ways that you might limit some of the harm. So, you know, maybe that’s making it just a little bit more difficult so you can’t bet 24 seven from your couch, or maybe that’s reducing advertising so it’s not in front of people’s faces all the time, or there’s a number of other things that one could take, but we’re trying to get the conversation going.
We’re not saying that we have all the answers here. There’s a lot more work to be done. Part of our research is trying to figure out how do we alleviate the harms of this going forward?
But I think getting that conversation started is necessary.
Jeffrey Snyder, Broadcast Retirement Network
Yeah, I tend to agree. And we thank you so much for coming on the program. Great work.
Congratulations to you and Professor Johnson. And look, we look forward to having you back again very soon, sir.
Professor Jason Kotter, BYU Marriott School of Business
It’s great to talk with you. Thanks for having us on.
