However, most states that legalize sports betting already receive substantial tax revenues from other forms of gambling, like lotteries, video lottery terminals (VLTs), and casino table gaming. States legalize sports betting in order to generate new tax revenues, generally in the form of license fees for the operation of sports books and taxes on net revenues earned from bookmaking. Many others are currently considering legalization. 17 states (Delaware, New Jersey, Mississippi, West Virginia, Rhode Island, Pennsylvania, New Hampshire, Rhode Island, Arkansas, New York, Illinois, Indiana, Iowa, Montana, Colorado, North Carolina, and Tennessee) legalized sports betting as of early 2020. Some, like West Virginia, passed laws legalizing sports betting before the SCOTUS decision.

Following this SCOTUS decision, the power to legalize and regulate sports betting devolved to states.Ī number of states legalized sports betting soon after the decision. PASPA made sports betting legal in Nevada and illegal in almost every other state. On May 14, 2018, the Supreme Court of the United States (SCOTUS) declared the Professional and Amateur Sports Protection Act of 1992 (PASPA) unconstitutional. 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. 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.

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. 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. Most states already permit other forms of gambling and receive tax revenues from these sources.

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.

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