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Sports Betting Across Borders: Spatial Spillovers, Credit Distress, and Fiscal Externalities

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Abstract

We use the staggered legalization of mobile sports betting across U.S. states to study the consequences of legalizing a taxed vice when consumers can cross state lines to consume it. Since betting apps verify a bettor’s location rather than residence, non-residents can wager in a legal state, causing an asymmetry where tax revenue accrues where the bet is placed while any financial harm follows the bettor home. Using transaction and credit records tied to place of residence, we estimate the effects of legalization both within legal states and into nearby states where betting is not legal. Betting rises in legal states and across the border, fading within an hour’s drive. Credit delinquency rises, concentrated among consumers under 40 and for credit cards and auto loans. Distress crosses the border in greater proportion than betting, consistent with distress-prone bettors selecting into cross-border betting. Ignoring spillovers contaminates control groups and understates direct effects in legal states. We show that states bordering legal markets already bear a disproportionate share of the harm of legalization while collecting none of the revenue, strengthening the incentive to legalize.

Suggested Citation

  • Jacob Goss & Daniel Mangrum, 2026. "Sports Betting Across Borders: Spatial Spillovers, Credit Distress, and Fiscal Externalities," Staff Reports 1184, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednsr:102832
    DOI: 10.59576/sr.1184
    Note: Revised October 2026.
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    1. Alvaro Muniz-Fernandez & Brad Humphreys & Jane E. Ruseski, 2026. "The Impact of Legalized Sports Betting on Divorce," Working Papers 26-06, Department of Economics, West Virginia University.

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    Keywords

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    JEL classification:

    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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