How much do states make from gambling. Less than meets the eye, according to Steve Malanga:
[A] reason that gambling has failed to close states’ deficits is that it doesn’t capture money for the government that otherwise would be spent on untaxed illegal betting, as supporters claim. A 2002 National Bureau of Economic Research study of 21 states by economist Melissa Schettini Kearney found that, in the first year after a state instituted a lottery, consumer spending on other purchases fell by about $42 per month per household—nearly as much as was being wagered on the new lotteries. After California’s lottery was introduced, the state’s grocers’ association reported a 7 percent decline in sales. One northern California retailer, Holiday Quality Foods, announced that it would stop selling lottery tickets because its profits had fallen 10 percent after starting to offer them.