Ege Can, Mark Nichols, Chaehyun Pyun
This paper provides quasi-experimental evidence on the effect of online casino legalization on land-based casino revenues in the United States. Exploiting the concurrent 2013 legalization wave in New Jersey and Delaware, our synthetic difference-in-differences specifications estimate a persistent 13% contraction in land-based revenue. To account for the concurrent expansion of land-based competition in neighboring states, we construct a gravity-weighted measure of out-of-state competitor casino capacity from property-level regulatory data; the estimated contraction is essentially unchanged when this exposure measure is controlled for. A state-specific falsification and mechanism test sharpens the interpretation: the decline is concentrated in New Jersey, where a substantial regulated online market emerged (an 18% contraction, largely unchanged after inclusion of the competition measure and significant under placebo-variance inference), while Delaware, whose online market remained negligible, exhibits no detectable decline under a synthetically weighted counterfactual. We show that the net fiscal effect of legalization depends on the gap between online and land-based tax rates and on the scale of the online market a state can sustain. Finally, drawing on evidence that online gambling revenue is concentrated among heavy and problem gamblers, we discuss how part of the new tax revenue may function as a regressive transfer.