Video Gambling Adoption and Tax Revenues: Evidence from Illinois

Illinois legalized video gambling in 2009 but afforded municipalities the option of allowing or prohibiting it within their jurisdictions. Using municipal-level data, this paper seeks to shed light on the underlying factors influencing this decision process and, conditional on adoption, the primary drivers of video gambling tax revenues. The analysis suggests that political and moral considerations, rather than fiscal needs or defensive legalization, underpin the decision to adopt. Conditional on adoption, the exposure to and prevalence of video gambling is associated with greater tax revenues. Video gambling also appears to be a substitute for casino gambling, leading to some intra-industry cannibalization.