Economic benefits of sports gambling questioned

Larry Limpf

Economists surveyed about the potential financial benefits of legalized sports gambling in Ohio and whether any benefits are outweighed by the policy’s costs were mixed in their responses.
Scioto Analysis, an organization that poses monthly policy questions to a field of economists, conducted the survey.
Ten of 23 economics professors agreed with the statement: “Legalization of sports gambling in the State of Ohio would create economic benefits that outweigh the policy’s economic costs.”
“I think it is possible for benefits of legalized sports gambling to be greater than the costs, however, the law needs to be carefully designed to maximize small amounts of recreational gambling and minimize problem gambling,” said Kevin Egan, of the University of Toledo. ”A relatively high tax rate for legal gambling is optimal to discourage problem gambling and ideally part of the tax revenue be used to help the few that do become problem gamblers. Optimally, gambling needs to be taxed at a higher rate than other substitute forms of entertainment.”
Gov. Mike DeWine signed House Bill 29 last month which legalized in-person, online and mobile sports betting in the state. The bill starts the rulemaking process by the Ohio Casino Control Commission, the regulatory body designated to oversee sports betting throughout the state.
Faria Huq, of Lake Erie College, also agreed with the statement but warned that poorer people would more likely to be hurt by legal gambling.
“Tax revenue and job creation would be some of the economic benefits,” he said. “However, there would be social costs due to the addictive nature of gambling, which would disproportionately affect lower income households.”
Vinnie Gajjala, of Tiffin University, agreed. “It is addictive – especially for young adults – and hence a higher percentage of the net revenue should be set aside for problem gambling services.”
Nine economists were uncertain and four disagreed.
Michael Jones, of the University of Cincinnati, said sports betting would have a negative impact on casino revenues.
“Mobile sports betting is highly competitive and will cannibalize higher margin, on-site casino revenue. If mobile betting is legal, Ohio citizens will be more comfortable with the technology (and gambling in general), and they will turn to global, cryptocurrency platforms with built-in anonymity. This will simultaneously deprive the state of any of this potential tax revenue while siphoning revenue existing gambling sources,” he said.
The economists were also mixed in their responses to another statement: “Legalization of sports gambling with new revenue dedicated to education or low-income tax breaks would reduce inequality in the State of Ohio.”
Nine of the respondents agreed while seven disagreed and seven were uncertain.
Jonathan Andreas, of Bluffton University, disagreed: “In theory, this could undo some harms that gambling tends to disproportionately inflict upon low-income and low-education people, but education spending is fungible and existing funding is likely to get crowded out by gambling funds with zero long-run increase,” he said. “Plus gambling revenues are more volatile than traditional tax revenues, so the instability from year to year would create new challenges for education funding.”
Kathryn Wilson, of Kent State University, agreed with the statement: “This depends greatly on how exactly the tax revenue is spent. If it is targeted towards education with a disproportionate number of low-income children then it may help reduce inequality some. However, I would not expect it to be a large effect.”


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