Stock Market Reaction to the Supreme Court’s Consideration of PASPA

Kevin Krieger and Justin L. Davis

A landmark decision (Murphy v. NCAA) by the Supreme Court of the United States (SCOTUS) in 2018 ruled that the federal government could not prohibit individual states from allowing sports wagering. Our study explicitly assesses the stock market’s response to this case’s progression through legal review phases, culminating with a landmark SCOTUS decision. Surprisingly, we find that the stock market failed to efficiently interpret key events precipitating SCOTUS’ eventual decision. Even though serious indications suggested that the Professional and Amateur Sports Protection Act (PASPA) was likely to be overruled, markets did not acknowledge such a possibility early. Instead, prices only responded when SCOTUS’ ruling was finalized.