Gambling isn’t harmful
At the very least, the studies cited in support do not show that at all
In the past few months, two studies have come out connecting the legalization of gambling to increased bankruptcies. This is hardly surprising — gambling is risky. (Citation needed). What is incorrect is that people interpret bankruptcy as harm. You have no way of knowing that from the data presented.
Bankruptcy is running out of money, or even more formally, when you consume more than you have in income. It can happen for two reasons — your income falls, or your demand rises. In the former case, bankruptcy is unambiguously due to something bad. You might have lost your job, or had a medical emergency. Your possible options are constricted; you necessarily shift to a lower level of utility.
Now let us suppose that someone invents a product which you really like. In fact, you like it so much that you stop saving, and spend all of your money on buying the product. Are you harmed? You clearly prefer having the good to not having the good — otherwise you would not have bought it. You cannot infer harm from having less money. Otherwise you would have to say that one is harmed by going to a sports game, because at the end of it you have less money.
You cannot note the increase in bankruptcy, and end the case against gambling there. You must allege some sort of market failure. I have written the strongest case I can for paternalism — perhaps you might be able to supply additional arguments. Either way, the case against gambling has not even begun.
Oh, c'mon! Hahaha. True enough about the studies... But 1) the discount rate of System 1 and System 2 are likely very different. And 2) the advice we give others we love and our revealed preferences differ. It's not obvious revealed preference should dominate.
3) We know that gambling follows something of a power law of users and quantities. Supposing that you can't gamble more than you have liquid assets, we shouldn't worry about individual quantities, since wealthy people gambling isn't the issue of concern from a social welfare perspective. But number of bets / period is probably a better indicator of self described bad behavior.
4) Some gambling is totally opaque: slot machines, scratchers. There should be some required disclosures (maybe there are!).
Bankruptchy is not just spending more, it's spending so much more you're out of proportion with your income _and cannot deal with that without a bailout_.