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

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.