Should Sports Betting Be Banned? - by Maxwell Tabarrok
You may have seen this recent paper on the financial effects of legal online sports betting floating around econ twitter a few weeks ago:
Gambling Away Stability: Sports Betting's Impact on Vulnerable Households by Baker, Balthrop, Johnson, Kotter, and Pisciotta (2024).
The headline result: legalizing online betting increases betting by about $25 and decreases investments in stocks by about $50 per household per quarter.
These are averages across all households in a state, including the ones that never bet. For households that actually begin betting after legalization, betting expenses rise to about $179 per quarter, on average.
The negative effects on investment are large relative to the sample mean. The average household invests about $380 a quarter so a $53 decrease in investment is a loss of 14%. These negative effects are concentrated among the top few percentiles of bettors and especially the biggest bettors who were already financially constrained by low incomes, debt, and bank overdrafts.
The author’s identification strategy relies on the staggered rollout of sports betting legalization across states after a 2018 supreme court decision which struct down a federal ban. They do a difference-in-difference regression which means they compare similar households in states that legalize to ones in states that don’t both before and after legalization.
