Online Betting Linked to Increased Debt and Reduced Credit Access in Brazil

A new study reveals that people who begin online betting in Brazil experience a significant increase in financial delinquency and a reduction in their access to credit. Researchers found that the proportion of people in default became on average 20 percent higher in the 12 months following their first bet compared to those who did not gamble. Additionally, the fraction of credit card bills in arrears grew by an average of 38.7 percent during the first year of betting activity.

The research was conducted by Sérgio Firpo, a professor at Insper, and researchers from the company Stone. The study, titled "Online Betting and Financial Distress: Evidence from Brazil," utilized data from Stone and the Central Bank to track millions of clients. By analyzing Pix payment patterns, the economists identified transfers to both legal and illegal betting sites. Firpo explained that delinquency rises because money sent to betting sites is no longer available to pay bills, noting that one in ten bettors spends more than 20 percent of their monthly expenditures on gambling.

The study also found that new bettors saw their credit limits drop by approximately 16 percent. Rômullo Carvalho, an economist at Stone and co author of the paper, stated that this reduction is similar in magnitude to the effects of job loss. He referenced a 2023 PUC Rio master's dissertation by Natália Corado, which showed that being laid off during mass dismissals causes a credit limit drop of about 20 percent. The researchers suggest that banks may be limiting credit to bettors to mitigate the risk of future defaults.