The boom in sports gambling and prediction markets is creating “emerging credit risks,” per Bank of America

If you’re worried that a society that indulges in speculative activities is indicative of cultural decline, Bank of America has nothing for you.

But if you’re concerned that the proliferation of sports betting and prediction markets is creating new economic risks, you’re singing from their hymnal.

“Easy access and gamified interfaces encourage frequent and impulsive wagers, which can lead to overextension of credit and rising loan defaults,” wrote a team of analysts led by Mihir Bhatia. “For investors this convergence of entertainment and speculative finance signals heightened behavioral risk that could pressure credit quality, increase delinquencies, and impact earnings for issuers and subprime lenders.”

Prediction markets are booming, with much of the growth in activity consisting of what are, in the plainest terms, wagers on sports.

The analysts flag that both academic research and recent surveys suggest these activities tend to result in an increased incidence of financial hardship, with young men and lower-income consumers particularly vulnerable. Bread Financial, Upstart Holdings, and One Main Financial are lenders that face “emerging credit risks,” per BofA, as these outfits are more exposed to those segments of the market.

“Beyond individual behavior the nature of these trends could pressure credit quality across portfolios, challenging underwriting models and risk pricing,” they wrote. “Net-net, online betting markets introduce a new risk for lenders, one that they have not had to deal with historically and underwriting models may need to be adapted.”