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After working for a Las Vegas-based casino company, Assistant Professor of Marketing Wayne Taylor has focused much of his research around casinos and gambling, including the impact of gambling’s increasing prevalence via legalized online casino and sports gambling.

How did you start researching legalized online gambling?

Wayne Taylor: There are a few reasons why this project made sense. Prior to getting my Ph.D., I worked for Las Vegas Sands Corporation in casino marketing. One of the co-authors approached me about [the project] because, due to my experience in the industry, I had a better understanding of how it operates. 

But the main reason is because online gambling legalization is a huge topic right now and is impacting a lot of states. We’re a few years post-legalization in some states, so we can look at what’s happening there and how legalization has impacted consumer behavior.

Can you offer more background about what led to the legalization of online gambling and how it’s been rolled out across the country?

WT: In 2018, there was a big Supreme Court case, Murphy v. National Collegiate Athletic Association, which reversed an earlier decision that said the federal government can’t ban state-sanctioned sports betting. That 2018 case said, “OK, let’s switch this decision back to the states.”

One of the goals of this paper was to present the facts and let policymakers evaluate the trade-offs for themselves.

Since then, it has just taken off. Most states decided to adopt online sports betting. For example, New York and Louisiana legalized online sports betting in January 2022. Illinois did it back in June 2020. But these states are all over the board on when they decided to enact it.

We’re talking about two different things here: online sports betting and online casino gambling. How do you analyze the differences in behavior between the two?

WT: Differentiating the effects is tricky, because there wasn’t a state that legalized only online casino gaming and not online sports betting. The typical path states take is that they first legalize retail sports betting, where a gambler has to go to a physical location to place a sports bet. After this, some states proceed with online sports betting.

Next is the most extreme, which is online casino gaming. In the states with online casino gambling, we saw some surprising things. The taxable revenue was higher, meaning the amount of play was greater in those states with online casino gaming. But with that, we also saw a big increase in rates of irresponsible gambling.

Taylor is an assistant professor of marketing at the Cox School.

Can you expand on how you measured the increase in irresponsible gambling?

WT: One unique aspect of our analysis is that we observe income. A study from the Canadian Centre on Substance Use and Addiction found that individuals who spend more than 1% of their income on gambling have an increased risk of negative psychological, financial, relationship and health effects. Because of this, we focused on 1% as a level policymakers should pay attention to. 

In states with online casino gaming (Connecticut and Michigan), we saw this rate jump from about 1% to 5%, meaning 5% of people were gambling more than 1% of their income. In states with just online sports betting, the effect was lower but still significant at about 2–3%. 

Did anything in your findings surprise you beyond the increase in irresponsible gambling?

WT: A few things were surprising. One is the sheer pervasiveness of online sports betting. In aggregate, a lot of people are spending a lot of money on sports betting. On the other hand, the median total spend over five years was only about $100. So while a lot of people are gambling, the vast majority are doing so at pretty modest levels.

In aggregate, a lot of people are spending a lot of money on sports betting. On the other hand, the median total spend over five years was only about $100.

Related to this, and similar to what happens in the casino industry, is that there are only a handful of “whales” driving much of the volume. So even though the vast majority of people are playing at low levels, a handful of gamblers are winning or losing millions of dollars.

What are the implications of these findings for how policymakers approach regulating online gambling?

WT: One of the goals of this paper was to present the facts and let policymakers evaluate the trade-offs for themselves. Here is what we think the anticipated tax revenue effect is, but here’s the anticipated change in rates of irresponsible gambling. Presumably, states are in a better position to determine which trade-offs matter.

For example, if a state recognizes that legalization will likely increase rates of irresponsible gambling, they may need to plan on dedicating funds to treatment centers, hotlines or other resources to help. States have many levers at their disposal to mitigate rates of irresponsible gambling, whether it’s raising tax rates on gambling, implementing stricter customer data policies or numerous other strategies. 

Where do you see taking your future research?

WT: One of the things we want to understand is how gambling expenditures affect spending in other categories. To fund gambling, are people shifting spend from other “wants” categories, such as entertainment, or from “needs” categories, such as groceries? We have access to spend in these other categories, so it would be interesting to see what these substitution patterns look like. Even if gambling spend is relatively modest for the average person, it’s important to explore how it can impact other aspects of their lives.