01:05 PM EST, 11/21/2025 (MT Newswires) -- The growing popularity of online sports betting and prediction markets is creating new risks for credit card issuers and subprime lenders that could impact their financials, BofA Securities said Friday.

The ease of placing wagers combined with highly gamified interface applications can lead borrowers to spend frequently and impulsively, take on more debt and miss payments in some cases, the brokerage said. These increasing behavioral trends could weigh on the credit quality of issuers and lenders, heighten delinquencies and impact their earnings, according to BofA.

"We see increased risk for both credit card issuers and personal lenders from increasing sports gambling," BofA analyst Mihir Bhatia said in a note to clients. "Increased participation in gambling/prediction markets, particularly from vulnerable populations, could lead to lower cash flows and higher credit stress for consumers."

The rising availability of online betting markets increases the potential for revolving debt spikes for borrowers, as well as accelerated defaults and higher charge-off rates, especially among subprime borrowers, according to the brokerage. The nature of these trends can also impact credit quality of portfolios, while lenders may have to revise their underwriting models to tackle a new risk that they haven't dealt with historically.

"Aggressive promotional incentives and social media-driven engagement amplify participation and translate into rising credit balances and increased loss severity for lenders," Bhatia wrote. The financial headwinds from sports betting are "more pronounced" for young men, particularly in low-income areas, according to the note.

BofA sees Bread Financial ( BFH ) , Upstart (UPST) and OneMain ( OMF ) as the companies under its coverage as the most exposed to lower income or credit-stressed consumers, as behavioral risks overlap with liquidity stress. Student-loan issuers like Sallie Mae (SLM) and Navient ( NAVI ) could also face pressure because college students and recent graduates are particularly at risk of financial stress driven by gambling, according to the note.

While some US states and issuer policies may try to prevent the use of credit cards for gambling, workarounds are generally easily available, the analyst said.

"For both card issuers and personal lenders, underwriting models are typically based on historical data, but the widespread availability of mobile gambling is new, and historical data may not reflect this risk," Bhatia said. "This could lead to mispricing of risk and higher-than-expected credit losses."

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