In the late 1990s, SMR Research Corporation was commissioned by the banking industry to investigate the trend toward financial insolvency in America. SMR's report found that legalized gambling is not only the fastest growing cause, but also the third leading cause of individual bankruptcies in the United States.
Testimony before the National Gambling Impact Study Commission indicated that in 1997, the bankruptcy costs due to legalized gambling translated into a cost of $40 per U.S. household. By the year 2000, these costs were expected to be $220 per U.S. household.
Extrapolating from bankruptcy reports and the Harvard Addictions Meta-analysis, 1.5 million people (0.5 percent of the U.S. population) became new pathological gamblers in the years 1994 to 1997, creating social costs of $40 billion per year. The bankruptcy costs of 1.5 million new pathological gamblers in those three years alone were $9 billion resulting from 315,000 new bankruptcy filings. On an annual basis, these bankruptcy costs due to legalized gambling are at least $3 billion with 105,000 new bankruptcy filling. These numbers are projected to increase by fifty percent as more of the new pathological gamblers finally financially "bottom out."
"[S]tudies have suggested, fairly consistently, that more than 20% of compulsive [i.e., pathological and problem] gamblers have filed for bankruptcy as a result of their gambling losses." Worse, pathological and problem gamblers used multiple credit cards to finance their gambling. .
Other states such as Kansas, Michigan, Minnesota, Missouri, and South Dakota also had increases in both unsecured credit card debt, high debt-to-income ratios among consumers, and increase bankruptcies subsequent to the introduction of legalized gambling.
Finally, the close link between gambling and bankruptcy was illustrated in a pithy observation from a well-known report on the subject, which noted that in Nevada, "the closer you come to Las Vegas and Reno, the higher the Bankruptcy rate."
It has been demonstrated that the introduction of legalized gambling in a certain geographic area leads to an increase in the bankruptcy rate, and a general increase in social costs to the community affected.
Furthermore, research suggests that the spread of gambling may be accompanied by an increase in families' financial failure: SMR Research Corporation has found that bankruptcy rates are significantly higher than the national average in counties with gambling facilities.
However, Professor Grinols reported that the annual benefits per person were dramatically exceeded by the socio-economic costs that accompany legalized casino gambling.
Non-discharge of their gambling debts would keep pathological gamblers (and often innocent family members) as debtors forever - a type of involuntary servitude to casino owners - which can and has resulted in even more deleterious social consequences such as crime and suicide.