The Psychology of Online Gambling and Financial Decision-Making

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Gambling has been a popular pastime for centuries; records even point back to the Paleolithic period. Despite there now being far more knowledge regarding how gambling works and a wide understanding that “the house always wins”, millions of consumers head to virtual or physical gambling locations to spend money every year. 

Various psychological factors make online gambling attractive to players, including the appeal of entertainment, the thrill of risk, anticipation of rewards and dopamine, cognitive biases, bonuses, and social and community elements. However, the same factors that make gambling fun can also make it addictive. 

Against the odds

Casino games are not full pay; RTPs always fall under 100% to account for operator profit. The same is true of any gamble; for example, sportsbooks carefully calculate the odds in their favour. This small cut of each stake is steadily accumulated over millions of wagers and time. 

This isn’t a secret. Every gambler knows, and industry experts and regulators go to long lengths to ensure consumers understand the rules, payouts and how gambling games work. Nonetheless, there’s still a widely held belief that players can make money, have an element of control over outcomes, or that luck will favour them, making the gamble worth it.

Risk, reward and dopamine

Gamblers require an aptitude for risk-taking behaviour – the ability to bet and make financial decisions when the odds are against you. It is the pull of the potential reward that encourages these risk-taking behaviours. 

When gamblers take risks, it releases adrenaline in the body, and if they win, the reward system in the brain is activated, releasing dopamine. Dopamine is the “happiness hormone” and is the same drug our brain produces during enjoyable activities, such as eating, exercising, or spending time with someone you love.

Dopamine makes us feel good, and that is addictive, leading gamblers to seek repeat experiences. However, over time, the brain becomes used to the dopamine reaction created from gambling, so riskier wagers are required to receive the same result, encouraging larger bets. This circular pattern of dopamine seeking makes gamblers more prone to addiction. It, along with other factors, has led to rules around game design in the UK, such as slot suppliers being prevented from celebrating financial wins that are of less value than the bet amount and the ban on autoplay, which can lead to cycles of gambling/significant losses without a financial decision being made at the time each bet is placed.

Responsible gambling tools, like budget limits and play time reminders, are critical in safeguarding gamblers. In most cases, these limits are affected outside of playtime, meaning the financial decisions are assessed and made when gambling is not occurring. When a set limit is reached, it usually takes time to change the limits, which breaks a cycle of harmful or dangerous gambling, like chasing losses and overspending.

Cognitive bias in gambling

Several types of cognitive bias influence financial decision-making when gambling; these include confirmation bias, the gambler’s fallacy and loss aversion.

Confirmation bias

Confirmation bias is our underlying tendency to accept information that subscribes to what we already believe and place less emphasis on or even ignore information that doesn’t agree with our preheld ideas. 

Confirmation bias in gambling plays a significant role in why we gamble (or rather, why players can ignore that adage that the house always wins). By and large, confirmation bias can lead to poor decision-making, as by only accepting information that aligns with our personal preference, decisions are not made based on the complete evidence base.

The gambler’s fallacy

The gambler’s fallacy is as old as time and has been debunked copious times by gambling experts and strategists. Still, the belief that “the probability of a random event occurring in the future is influenced by previous instances of that type of event” still exists.

For example, we know that each time a coin is flipped, there’s a 50% chance it will land on heads and a 50% chance it will land on tails. Each flip is individual and provides an equal chance. It is not affected by the preceding rounds. 

However, many gamblers base decisions on the number of past heads/tails outcomes, believing those results will affect the outcome of the current toss. This cognitive bias can lead to adding additional bets while waiting for the expected outcome, aka chasing losses and suboptimal financial decision-making.

Loss aversion

Loss aversion is a cognitive bias that describes why losing money feels worse than winning the same amount. Generally, it makes people try to avoid losses, and it’s critical in financial decision-making (research has also shown that those who suffer from gambling addiction have lower loss aversion, which can contribute to taking more considerable financial risks and chasing losses). 

Generally, bonuses and promotions are used as a strategy to overcome considerations of loss aversion. “Risk-free” bonuses and trial play periods for new players exploit the psychological effects by making consumers feel protected against losses. 

Online casinos’ promotions, bonuses and gamification also tap into the gambler’s psychology and dissuade loss aversion thinking. Similar to risk-free bonuses, other types of casino promotion appeal because psychologically, we like free things and quick wins that lead to dopamine rushes, like claiming a welcome bonus that instantly doubles casino credits or spinning a bonus wheel to win a promotional prize. Here, the financial risks are low, and the potential to gain is high. 

In the case of gamification, the whole casino experience is designed like a game with bonuses and challenges throughout, which blurs the boundaries of real money gaming. Gamification also ties into the social elements of gambling and group mentality. 

Product design

Gambling products and the experience are carefully catered to appeal to the psychological elements that make consumers want to gamble and take risks. We’ve already mentioned the Gambling Commission’s recent implementation of rules for game design, which were created as safeguarding techniques to slow down the speed of play for slots and ensure players know when they are losing and winning, making it more likely they could make sensible financial choices while playing. 

Community and fun-seeking

Social casinos and bingo sites are adept at creating online communities of players. A community increases the excitement, reinforces biases, encourages group behaviour, and makes gambling a shared experience buoyed by commandery. This social element can be extremely attractive, especially when playing social games like online bingo. Consumers often use review sites such as Best Bingo Websites to find valuable reviews covering information on the social community, loyalty schemes, games, design and promotions, ensuring they select a site with an active and engaging community, making playing more fun.


One element of the psychology of gambling is that it is addictive. Pathological or problem gambling is a medical and psychological diagnosis, and according to the Gambling Commission 0.3% of the UK population are currently problem gamblers. 

Neurological research has shown differences in the brain activity of those addicted to gambling when presented with gambling stimuli. Those with gambling addiction show a spike in brain activity that “remained elevated for extended periods”, especially in males. These patterns were not observed in recreational gamblers, suggesting those suffering from gambling addiction have altered neurological reactions to gambling stimuli, leading to greater compulsion. 

Regulation meets psychology

As psychology is at the heart of gambling, this research also informs policies on player protection and safeguarding against addiction. These include policies based around financial decision-making (budget limits, bankroll management, play time reminders, time outs), which can effectively prevent or break gambling cycles and encourage healthy behaviours and self-regulation.

Education and awareness of the signs of problem gambling are critical for successful safeguarding against addiction. This is because most strategies rely on consumers understanding, identifying and taking action regarding negative behaviours linked with problem gambling, such as increased frequency of gambling, chasing losses, secrecy, neglecting responsibilities, borrowing money, using savings, selling items to fund gambling, mood swings, withdrawal symptoms, relationship issues, health issues, and escapist behaviour.

Outside of behavioural approaches, additional regulatory industry standards, like games testing and platform testing by third-party bodies (such as eCOGRA and iTech Labs), Know Your Customer Checks, and the upcoming financial checks and slots limits introduced by the UK’s new gambling white paper increase protections for players while recognising that certain groups (like those aged 18-24) are more vulnerable to the cognitive bias and risk and reward patterns that lead to faulty financial decision-making and gambling addiction.

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The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.