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 Online Market Launch and the Distribution of Gambling <span>Risk: Evidence from Online Sports Betting</span>
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When a legally restricted, predominantly offline product category becomes digitally accessible, who begins participating and how is spending distributed relative to consumers' financial capacity? We study online sports betting market launches using Generalized Synthetic Control methods applied to financial panel data covering 1.2 million individuals in 11 treatment and 12 control states between 2019 and 2023. We measure spending levels alongside the Income-Adjusted Gambling Expenditure Ratio (IGER), which flags individuals whose rolling three-month gambling spending exceeds a threshold fraction of income. Online market launch increases monthly observed spending per individual by $3.64 and increases the share of individual-months above the 1%-of-income threshold by 0.78 percentage points. The central finding is distributional: dollar spending increases with income but less than proportionally, so IGER increases substantially more for lower-income consumers — a disparity that widens at higher thresholds. Two decompositions reveal dynamics that the roughly stable aggregate effects mask. First, new users account for roughly one-fifth of the participation increase but less than 12% of spending; their contributions decay within months while returning-user spending persists and grows. Second, about 42% of the IGER treatment effect reflects repeated threshold crossing in consecutive non-overlapping three-month windows; this persistent component grows throughout the observation period and concentrates among lower-income and pre-launch-active consumers, while one-off crossings attenuate. These estimates capture observed activity within regulated digital channels. The results suggest that market expansion and income-relative risk exposure follow different paths across consumer segments, with implications for segment-specific consumer protection policy.

Keywords: Digitization, Gambling, Generalized Synthetic Control, Online Casino Gaming, Online Sports Betting, Quasi-Experiments

Suggested Citation: Suggested Citation

McCarthy, Daniel and Taylor, Wayne and Wilbur, Kenneth C.,

Online Market Launch and the Distribution of Gambling Risk: Evidence from Online Sports Betting

(April 09, 2026). SMU Cox School of Business Research Paper No. 24-7, Available at SSRN: https://ssrn.com/abstract=4856684 or http://dx.doi.org/10.2139/ssrn.4856684