Legalized Sports Betting, VLT Gambling, and State Gambling Revenues: Evidence From West Virginia

Brad Humphreys

No 20-06, Working Papers from Department of Economics, West Virginia University

Abstract: A Supreme Court decision legalizing sports betting in the US led states to legalize sports betting in order to generate new tax revenues from wagering on sports events. Most states already permit other forms of gambling and receive tax revenues from these sources. The literature analyzing consumer substitution in gambling spending contains some evidence on the impact of expansions in many types of gambling, but no evidence on the impact of expanded sports betting. This paper exploits the legalization of sports betting and timing of sports book openings in West Virginia to analyze the impact of expanded sports betting on other casino gambling. Evidence using Instrumental Variables and difference-in-differences shows that increased consumer spending on sports betting caused a significant decline in spending on video lottery terminals (VLTs) in casinos, both of which generate tax revenues. Fiscal impacts include $2.6 million in new tax revenue from sports betting and a $45.4 million decrease in VLT tax revenues caused by expanded sports betting.

Keywords: gambling revenues; sports betting; displacement effect (search for similar items in EconPapers)
JEL-codes: D12 D22 H25 H71 L38 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2020-05
New Economics Papers: this item is included in nep-spo
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Journal Article: Legalized Sports Betting, VLT Gambling, and State Gambling Revenues: Evidence from West Virginia (2021)
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