Let it Ride! An Empirical Investigation of Problem Gambling and the Implications of Legalized Online Sports Betting

Abstract

In 2018, the Supreme Court of the United States struck down the Professional and Amateur Sports Protection Act (PASPA), ending a nearly 30-year federal ban on sports betting and paving the way for dozens of states to legalize such operations. The impact has been pronounced, with the sports betting market growing nearly 27% year on year since the decision. Yet, while our understanding of the financial effects of these markets is beginning to emerge, the downstream consequences of the legalization of sports betting remain understudied. In this paper, we examine the impact of legalization of both offline and online sports betting on the well-being of individuals in those jurisdictions. We focus on two outcomes: the number of calls to the National Problem Gambling Hotline and the number of suicides reported per state as a result of legalization of sports betting. Using a difference in differences approach to exploit the phased legalization of sports betting at the state level, results indicate that while the number of calls associated with problem gambling is uncorrelated with the legalization of physical sportsbooks, it is strongly correlated with the legalization of online sports betting. Further, results suggest that the legalization of online betting is correlated with an increase in suicides, an outcome historically associated with problem gambling. Finally, we observe that these deleterious effects manifest more strongly for particular groups (viz. young, unmarried, and relatively less educated men). Our work informs policymakers of the implications of legalization of sports betting, thereby adding to the growing research addressing this important topic.