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The Effects of Sports Betting on Cross-Border Substitution in Casino Gambling

Author

Listed:
  • Ege Can
  • Mark W. Nichols

Abstract

This paper tests for potential cross-border substitution in casino gambling between Illinois and Missouri due to the launch of sports betting in Illinois. Using casino-level gambling revenue and admissions data, difference-in-differences, event study analysis, and regression discontinuity design, our findings suggest that the launch of sports betting increased casino revenues and admissions in the Illinois casinos and decreased revenue and admissions in Missouri casinos close to the border of Illinois and Missouri. Thus, Missouri not only lost potential sports betting tax revenue but also tax revenue from casino gambling revenue and admissions resulting from cross-border substitution between Missouri and Illinois after the launch of sports betting. The size of the lost casino and foregone sports betting tax revenues suggests Missouri and other states in similar circumstances are likely to experience continued fiscal pressure to legalize sports betting despite possible moral objections or an intent to minimize social costs through prohibition.

Suggested Citation

  • Ege Can & Mark W. Nichols, 2024. "The Effects of Sports Betting on Cross-Border Substitution in Casino Gambling," Public Finance Review, , vol. 52(5), pages 563-609, September.
    • Handle: RePEc:sae:pubfin:v:52:y:2024:i:5:p:563-609
    DOI: 10.1177/10911421241248506
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    References listed on IDEAS

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    1. Lucas W. Davis, 2008. "The Effect of Driving Restrictions on Air Quality in Mexico City," Journal of Political Economy, University of Chicago Press, vol. 116(1), pages 38-81, February.
    2. Gary A. Wagner & Douglas M. Walker, 2021. "Did video gaming expansion boost municipal revenues in Illinois?," Southern Economic Journal, John Wiley & Sons, vol. 88(2), pages 649-679, October.
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    More about this item

    Keywords

    sports betting; casino gambling; cross-border substitution; event-study design; regression discontinuity design;
    All these keywords.

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • L38 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Policy
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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