Here is a fun finance question. What is the difference between buying an index fund and betting on a football game? The conventional answer is that one is investing and the other is gambling, but the more precise answer is that one is a claim on an asset that, in expectation, grows with the economy, while the other is a contract where the counterparty has priced itself a margin and will, in expectation, take your money. Both involve putting money down and waiting to see what happens. Only one of them is designed, structurally, to pay you back more than you put in.
This distinction appears to be getting lost. A survey of retail investors released in August by Betterment found that 66% of Gen Z investors participate in sports betting, CNBC reports. The Bank of America Institute found in a September report that Gen Z made up almost 50% of all online betting activity in July — the height of the 2026 FIFA World Cup — outnumbering millennials for the first time. “It is more unusual for someone not to have, for example, a Kalshi account, DraftKings … than it is” to not have one, said Cynthia Grant, vice president of clinical at Birches Health, an online therapy provider for gambling addiction. “It’s part of the experience of watching sports now.”
How did we get here? Sports betting exploded after a 2018 U.S. Supreme Court decision allowed state-authorized sportsbooks, which have since spread to 30 states. Then, in early 2025, prediction markets introduced sports-related event contracts — which the platforms describe as financial trades, not wagers — opening the door to states without legal sportsbooks and to users under 21. I do not want to be cynical about the labeling here, but it is worth noting the mechanism: call a thing a derivative, and suddenly it looks like it belongs in a brokerage account rather than a casino. And once it is on the same phone as your brokerage account, the categories start to blur.
And they have blurred. The Bank of America Institute survey found Gen Z was twice as likely as respondents overall to see sports betting as a type of investment; the overall figure was 20%, and prediction markets got read as investing too, again more so among Gen Z, according to CNBC’s account of the report. In Betterment’s survey, 52% of Gen Z respondents said they had moved money originally meant for investment into sports betting, and another 26% saw wagering as part of their long-term financial strategy.
Dan Egan, Betterment’s director of behavioral finance, finds this alarming, largely because of what an investment actually is:
It’s not an asset that grows with the economy, that kind of gets better as time goes on, that has a positive expected return, and that you can kind of sit back and not have to do anything with. It’s the exact opposite.
The exact opposite. Imagine, as a thought experiment, an asset where most participants lose money, where the design of the product requires you to keep actively trading it to get any of the benefit, and where the more you trade the more the intermediary earns. That is a real product, available in app stores, that some share of young investors has filed mentally next to their retirement savings.
The household balance sheet data does its own blunt arithmetic. Bank of America found that the median deposit account balance for households that use online betting was 59% of the balances for those that didn’t. That is a correlation, not a diagnosis, but it is the direction you would expect if the activity is, on net, a way to convert savings into entertainment.
Part of the problem is marketing by anecdote, and the anecdotes are asymmetric. An August survey by BadCredit found that 44% of respondents started trading on prediction market platforms hoping for extra income — even though the majority of sportsbook and prediction market users lose money. “People tend to tell other people how much money they’ve made,” said Erica Sandberg, a consumer finance expert at BadCredit. “If you’ve got people around you who are saying, ‘I just made $300 in five minutes on this platform,’ you’re gonna hear about it. You will not hear that they lost $800 last month.” This is survivorship bias with a social component: winners publish, losers go quiet, and everyone’s mental model of the odds is built from the winners.
There is also a biological wrinkle. Young people take up sports wagers more readily in part because brain development comes with a heightened appetite for risk, said Amaura Kemmerer at UWill, a mental health provider that supports more than four million students at 500 institutions. The industry has, one could say, identified its customer. Kemmerer noted that even casual players — people “doing it occasionally” — show “predictable negative effects on academics.”
Grant of Birches Health described how the more serious cases announce themselves. “It creeps into the way that they’re functioning in the world, how they interact with their peers, how they interact with their family,” she said. “They lose time on work, they lose time in school.” Clinically this gets termed “functional impairment,” which is a particular kind of phrase: an industry that monetizes risk appetite, measured in the units of the damage it does. (Translation courtesy of being a person.)