There is gambling fever going around. With the floodgates of ever increasing gambling types and methods working its way around the United States, Americans are spending more of their hard earned dollars on gambling. Mostly losing money that could otherwise be spent more assuredly saving up for their dreams. Add together, the magnitude of money being wasted is astonishing. And often depressing.
When coronavirus started saturating the globe in early 2020, we saw outright casino and sporting event shutdowns. And yet people found new ways to speculate tens of billions of dollars [some eventually leveraging government-fueled stimulus checks]. Including on areas they never had expertise [e.g., on weather, on coronavirus statistics, on internet matters]. Leaving this 2020 discourse aside, there are still many ways to legally gamble in the United States. The most popular games, similar to those globally, are casinos [at times racinos], electronic casinos, lotteries, and sports betting. We'll explore this aggregate movement below.
And with so much money flowing through this attractive system, there is increased overlap as well in the target audience. And of course we have similar large amount of money slushing around in parallel right now, in market forms speculation. Think metaverse projects [a hundred billion annually], non-profitable technology companies and SPACs [absorbing tens of billions annually], cryptocurrencies [absorbing a billion annually], NFTs, and the overall gamification of trading apps. Of course this frothy, recherché boom has helped the continued economic expansion and inflation. But with increasingly exceptional economic risk, which at some point will be fully and brutally realized.
where's the gambling?
There has been an expansion of casinos and sports gaming across the past half-decade, an explosion from mostly Indian Tribes and Las Vegas, to now coming in some way to nearly 40 states. As it does, there is continued high growth in gambling.
Let’s start by visualizing -through an animation- the great multiplication of gambling as a function of individual income. And a monster data-tracking effort to stay ahead of it! For this article we will explore the main gambling revenues above, accrued to the state governments [covering approximately 90% of all gambling revenue]. In our next article we'll cover more of the business and probability aspects of these speculative games.
There will be a lot to unpack on the actuarial and probability differences and payouts [including operator margins] of different forms of speculation. From casinos, sports, and even the financial markets [shorter or longer term]. Ongoing growth comes from innovations in news ways to gamble, real-time, but at a cost of far more complicated machine learning and hedging by sports bookmaking operators, with odds nearly impossible for most humans -let alone skilled probabilsts- to calculate live.
This isn't the spending levels per income [which is a multiple of this]. But it is the gambled revenue amount. If 1%-2% of typical income doesn't seem like a lot, then consider the impact of your state simply raising their tax rate by this amount [jointly a now extremely reliant, revenue source for the local government]. Or consider inflation running 1%-2% higher [or your income running 1%-2% lower] than it currently is. It's simply a lot, the percentage is accelerating, and these burdens is hardly shared fairly broadly across society. Ironically in many states upwards of just 5 basis points of this revenue goes to help "problem gamblers", from the very societal disease they fostered and mushroomed.
Now look at this collective gambling as it has grown into states, with individuals generating more gambling now versus before. As an example, as sports betting has come to a large state such as Pennsylvania in 2019, lottery revenues in Pennsylvania didn't shift away. This perception wedge concept from our book: suppressed movements eventually mean-revert, but in unpreditable ways. They still continued to rise. And the subsequent 2020 coronavirus shutdowns didn't matter as much since new revenue from electronic lotteries in this state more than made up for the retail slowdown.
Nevada -a traditional casino suck for the country- is so not very revealing other than its lack of lottery. Should be noted that much of the gambling in Las Vegas is from some people still driving there - typically from a neighboring state. And New Mexico is not as dominant in casinos as you might imagine given their many tribal operations.
But notice a cluster of less gambling [of all forms] in the southeast. Particularly near North Carolina, a state that relishes sports. Is there a segment of apprehension against gambling in those communities? Or maybe that will change as sports betting is experiencing exponential growth during this low-audience pandemic end, and marketing jointly with the local jurisdictions. And doing all of it at a loss.
Also notice that California where large career exposures are already spent on the other speculative areas [e.g., technology firms and cryptocurrencies] has a slightly above-average amount of additional speculation on the casino/lottery/sports gambling forms we describe here. This includes the statistic above, concerning Nevada.
shifting between games?
Now let's look at the movement of speculation around the time of the 5 most recent lottery jackpots that exceeded $500 million. Two of those five happed to be in January 2021. Also during the lower, but faster growing casino expansion year of 2021, and hence they were averaged to make a little better sense of the pattern.
Last, one of these jackpots occurred simply days ago, so it'll take a little time to verify how the lottery revenue has since collapsed and a slight pick-up in casino revenues in these subsequent few months from now.
We are seeing for the most part 3 of the 4 most recent jackpot periods there was divergence when the lottery broke above $500 million jackpot and casinos [outside of the early spring seasonal pick-up] revenues were slightly lower. And then in 3 of those same 4 jackpot periods there was generally continued progression higher in casino revenues [adjusted for the rising seasonal/promotional pattern] after that jackpot was then won [for example now that the $1.3 billion Mega Millions was won as predicted at the end of July 2022].
We showed above sometimes we see modest market shifts between gambling types [e.g., between casinos and lottery games]. At times brief, but the underlying growth in casinos and sports betting has very much been on the uptrend and [outside exceptional jackpot periods] now coincidentally positive alongside lottery at this time.
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