How Do Gambling Laws Influence Cryptocurrency Prices?

Patel, Tarun; Whitehurst, Peyton

doi:10.2139/ssrn.5433418

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How Do Gambling Laws Influence Cryptocurrency Prices?

SMU Cox School of Business Research Paper No. 25-25

39 Pages Posted: 11 Sep 2025 Last revised: 10 Nov 2025

See all articles by Tarun Patel

Tarun Patel

Southern Methodist University (SMU) - Finance Department

Peyton Whitehurst

Unaffiliated Author

Date Written: November 09, 2025

Abstract

This paper documents a triangular trade through cryptocurrencies that enables bettors to access legally restricted gambling markets. We investigate how cryptocurrency prices respond to changes in US gambling law. A major Supreme Court decision and subsequent state laws expand legal sports betting markets, motivating substitution from cryptocurrencies to the dollar. Using these natural experiments to implement stacked event studies, we find cryptocurrencies have substantial negative cumulative abnormal returns of -40\% to -9\% when legal gambling markets expand. The findings suggest cryptocurrency prices reflect their usefulness in circumventing legal restrictions, connecting regulation of real markets with exchange rates.

Keywords: Cryptocurrency, Gambling Law, Sports Betting, Casinos, Exchange Rates

JEL Classification: E41, G18, K10, Z23, Z33

Suggested Citation: Suggested Citation

Patel, Tarun and Whitehurst, Peyton, How Do Gambling Laws Influence Cryptocurrency Prices? (November 09, 2025). SMU Cox School of Business Research Paper No. 25-25, Available at SSRN: https://ssrn.com/abstract=5433418 or http://dx.doi.org/10.2139/ssrn.5433418