The American Gaming Association (AGA) released a new study Friday that reveals the financial literacy and numeracy skills of individuals in the US who participate in some form of gambling or prediction market trading. While the study lumps prediction market trades into the same “gambling” category as iGaming, sports betting, poker, and land-based casino house games, it does provide meaningful sample sizes for all groups.
READ: Playing The Numbers: Financial Literacy and Numeracy in Gamblers and Non-Gamblers
A total of 3,149 individuals were surveyed as part of the study, which was prepared by Colin López, Ph.D. (IN Research & Analytics LLC) and Jackson Sears, Ph.D. (Matrix Consulting Group). Out of that total sample, 574 persons were labeled as prediction market traders (or gamblers, depending on one’s interpretation of ongoing legal arguments) while nearly 1,000 of the respondents didn’t engage in any gambling activity.
One of the main takeaways from the study is that prediction market traders, when compared to sports bettors, tend to overestimate their own mathematical skills. “Sports bettors scored significantly higher than all other segments on objective numeracy and outperformed non-gamblers, iGamers, and casino gamblers on subjective numeracy. Their self-assessment of numerical ability was grounded in demonstrated mathematical skill,” according to the study.
“Prediction market users present a noticeably different profile. They scored roughly at the same level as non-gamblers on objective numeracy, squarely in the middle of the distribution, yet reported subjective numeracy scores comparable to sports bettors. They feel as confident about numbers as the highest-performing group, without demonstrating equivalent mathematical ability.”
The results go on to show that prediction market traders (or gamblers, as categorized by the study) may be more susceptible to “take on more risk than their mathematical capabilities justify.”
It is worth noting that the “sports bettors” category only contained wagerers who were at least 21 years of age. This is in line with the vast majority of state-licensed sportsbooks, which mandate that all account holders must be at least 21 years old. By contrast, the “prediction market” classification included 18-to-20-year-olds, which is also in line with the minimum age requirement of most CFTC-regulated prediction exchanges, Novig being the exception.
AGA Vice President of Research, Dave Forman, provided additional commentary to The Closing Line Substack author Dustin Gouker.
“This study shows that, contrary to popular belief, gamblers are financially savvy entertainment consumers – especially sports bettors who demonstrate a particularly high level of financial literacy and mathematical capability,” stated Forman.
“‘Prediction market’ users tend to overestimate their mathematical skillset, often thinking they are better at mathematical reasoning than they actually are, unlike traditional sports bettors who have a more accurate self-assessment. The research highlights the risks of ‘prediction markets’ marketing sports betting as investing against ‘peers’ and the dangers of misleading consumers into thinking they just have to be smart to win.”
