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

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  • Brad R. Humphreys

    (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.

Suggested Citation

  • Brad R. Humphreys, 2020. "Legalized Sports Betting, VLT Gambling, and State Gambling Revenues: Evidence From West Virginia," Working Papers 20-06, Department of Economics, West Virginia University.
    • Handle: RePEc:wvu:wpaper:20-06
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    File URL: https://researchrepository.wvu.edu/cgi/viewcontent.cgi?article=1044&context=econ_working-papers
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    References listed on IDEAS

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    1. Mark W. Nichols & Mehmet Serkan Tosun & Jingjing Yang, 2015. "The Fiscal Impact of Legalized Casino Gambling," Public Finance Review, , vol. 43(6), pages 739-761, November.
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    5. Suh, Eunju & Tsai, Henry, 2013. "Examining the relationship between poker and the gaming volumes of Las Vegas hotel casinos," Journal of Business Research, Elsevier, vol. 66(9), pages 1651-1658.
    6. D. Forrest & L. Perez, 2011. "Football pools and lotteries: substitute roads to riches?," Applied Economics Letters, Taylor & Francis Journals, vol. 18(13), pages 1253-1257.
    7. Douglas M. Walker & John D. Jackson, 2011. "The Effect Of Legalized Gambling On State Government Revenue," Contemporary Economic Policy, Western Economic Association International, vol. 29(1), pages 101-114, January.
    8. Douglas M. Walker & John D. Jackson, 2008. "Do U.S. Gambling Industries Cannibalize Each Other?," Public Finance Review, , vol. 36(3), pages 308-333, May.
    9. Lisa Farrell & David Forrest, 2008. "Measuring displacement effects across gaming products: a study of Australian gambling markets," Applied Economics, Taylor & Francis Journals, vol. 40(1), pages 53-62.
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    Cited by:

    1. Ege Can & Mark W. Nichols, 2022. "The Income Elasticity of Gross Sports Betting Revenues in Nevada: Short-Run and Long-Run Estimates," Journal of Sports Economics, , vol. 23(2), pages 175-199, 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.
    3. Victor Matheson, 2021. "An Overview of the Economics of Sports Gambling and an Introduction to the Symposium," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 47(1), pages 1-8, January.

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    More about this item

    Keywords

    gambling revenues; sports betting; displacement effect;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • 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

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