The gamblification of America

Late in life, Thomas Jefferson was so deeply in debt he believed the only way out was to offer his assets in a lottery: $10 tickets for a 1-in-145,000 chance of winning his Monticello estate, for example.

It was an undignified coda for the primary writer of the Declaration of Independence, but not an unprecedented one. Lotteries were popular in Colonial America.

In 1768, for example, George Washington signed tickets (pictured above) for the Mountain Road Lottery, which was intended to fund construction of a road into the hills of western Virginia. The lottery failed because not enough tickets were sold to fund the cash prizes — there were too many competing lotteries at the time and not enough players.

A year later, a law was passed requiring that all lotteries in Virginia be approved by the colonial legislature. Few were. Lotteries were seen as a corrupting influence, their harms only partly offset by the public projects they funded.

In 1826, Jefferson asked the legislature for permission to hold an estate lottery, making his case in a long letter both for and against lotteries.

Lotteries, he wrote, are a tax that’s “laid on the willing only.” That made them a useful and unusually equitable source of funding for public works like Washington’s road: “The greater number of these pursuits are productive of something which adds to the necessaries and comforts of life.” 

Other forms of gambling, however, “such as cards, dice, etc. are entirely unproductive.” These, he acknowledged, “endanger the well being of the individuals engaged in them or of others depending on them.” 

He agreed, therefore, that many gamblers needed the legislature to protect them from themselves: “It is the duty of society to take them under its protection even against their own acts and to restrain their natural right from the choice of these pursuits by suppressing them absolutely.”

Had it existed at the time, he almost certainly would have included sports betting among the forms of gambling governments should restrict — no one can argue that wagering on the outcome of a game is a societally productive activity.

He might, however, have made an exception for sports betting on prediction markets.

Prediction market betting can be societally productive. At its best, it creates better information on things like inflation, weather events or how effective a new vaccine might be — information we can use to make better decisions about things that matter more than the outcome of a game. 

Unfortunately, people mostly use prediction markets to bet on the outcome of games. Polymarket, for example, recorded $10.4 billion in sports bets in Q1 of 2026, its largest category.

The science category, by contrast, did $33 million — less than one-third of the $114 million that Kalshi bettors wagered on which song Bad Bunny would open with at the Super Bowl. 

But prediction markets may have given sports betting a new purpose: the volume, liquidity, and fees it draws in can subsidize less popular but more productive markets — like weather or science predictions.

If so, the Jeffersonian question becomes whether the benefits of productive prediction markets outweigh the societal costs of the unproductive ones.

It’s difficult to answer because the benefits of prediction markets are diffuse and hard to measure. 

The costs, however, are not.

If you can't make it through pluck, make it through luck

When the Supreme Court overturned a federal ban on sports betting in 2018, it created a natural experiment for economists to study the impact of sports betting.

The results have not been good.

One study found that in states where online sports betting was legalized, bankruptcy rates rose by 28%.

Another found that legalization caused crime to increase during and immediately after sporting events — with stronger effects after upsets.

It's affecting our retirement plans, too.

Sports betting is typically categorized as a form of entertainment, which makes it seem not so bad — what’s the harm in spending $20 to make a game more exciting?

One problem is that the $20 isn’t coming from our entertainment budgets. Instead, it comes almost entirely out of our investments: A 2024 study found that $1 of online sports betting reduces investments by $0.99.

In 2025, Americans bet $167 billion on sports (up from the $5 billion we bet in 2018, the year the Supreme Court overturned the federal ban).

That’s $167 billion a year — and climbing — that people are gambling instead of investing.

Worse still, the study found that for “financially constrained” households, $1 of sports betting cuts net investments by an estimated $3.07.

$3.07!

How does $1 of betting displace $3 of investing? The study explains that, as well: “sports betting increases households’ expenditures on complementary goods such as cable, restaurants, and other entertainment.”

And lottery tickets.

Jefferson would be unsurprised to hear it. Gambling, he wrote in his appeal to the Virginia legislature, is “so seducing in practice to man of a certain constitution of mind that they cannot resist the temptation altho it brings ruin ‘themselves all their families and dependencies.”

Prediction markets are a tax on the willing.

The question to ask now is what we get in return.

— Byron Gilliam

Brought to you by:

Zcash Q1 2026: the privacy-focused blockchain had a pivotal quarter.

Nearly a third of all ZEC is now held privately, the network's mining power hit an all time high, and the SEC closed its investigation without action. A leadership transition also brought a new development team and a $25M+ raise.

Get the full Q1 report from Blockworks.