Where Gambling Is Popular, Bitcoin Options Draw More Attention and Riskier Bets

Bitcoin options have grown into a large derivatives market in only a few years. The asset underneath them is famous for wild price swings and heavy speculation. A new study asks a direct question about that market: how much of the activity is investing, and how much is gambling?

The authors are Matthew James Flynn and Yifan Liu, both Assistant Professors of Finance in the Department of Finance and Economics at McCoy College of Business, Texas State University. The paper appears in the Journal of Behavioral and Experimental Finance.

The study

The researchers start from a simple idea. If Bitcoin options attract people with gambling motives, then places where gambling is more popular should show more interest in those options. They measure interest with Google Trends, which tracks how often people in each U.S. state search for terms related to Bitcoin options. They then compare that attention with measures of each state’s gambling propensity, meaning the local appetite for betting.

To test whether the link is really about gambling, they use a natural experiment. States legalized sports betting at different times. That staggered rollout lets the authors see what happens to Bitcoin option attention when a new, easy, legal way to gamble appears in a state.

Finally, they connect attention to market outcomes. These include option trading volume, open interest (the number of contracts outstanding), the share of trading in out-of-the-money contracts, and the volatility of Bitcoin itself. Out-of-the-money options are cheap contracts that pay off only if the price makes a large jump, much like a lottery ticket.

What the researchers found

Local gambling propensity raises attention to Bitcoin options, and the effect is significant. States with a stronger taste for betting search for Bitcoin options more often.

The sports betting evidence points in the same direction. In high-gambling states, legalizing sports betting reduces attention to Bitcoin options. A low-friction way to bet on games appears to pull some people away from betting on crypto. The authors read this as substitution among entertainment venues. For those traders, Bitcoin options are one option among several ways to gamble.

Gambling propensity also shows up in the trading data. It increases option volume and open interest, and it increases the preference for out-of-the-money contracts. In other words, gambling-prone regions do not just look at Bitcoin options more. They trade more, and they tilt toward the contracts with the longest odds.

There is a spillover to the spot market as well. Attention to Bitcoin options increases the volatility of Bitcoin’s own price. The authors describe two distinct channels: gambling motives shape the options market, and attention shocks feed back into the underlying asset.

What it means for investors and policymakers

For investors, the study is a reminder that part of the order flow in Bitcoin options is driven by the same impulse that fills casinos. That flow leans toward cheap, low-probability contracts. Anyone pricing or hedging with these options should expect that demand to be uneven across regions and to shift when gambling rules change.

For holders of Bitcoin itself, the volatility finding matters. Bursts of attention to the options market are a warning sign for the spot price.

For regulators, the sports betting result is useful. Gambling demand does not disappear when one outlet closes or opens. It relocates. Policy on sports betting, crypto derivatives, and other speculative products should be viewed as connected, since decisions in one area change behavior in the others.

This summary is based on the paper’s abstract. The full article reports the data, methods, and detailed results.

What it means for managers

• A meaningful share of Bitcoin option demand looks like gambling. Attention, volume, and open interest all rise with local gambling propensity, and so does the preference for out-of-the-money contracts.
• Gambling venues compete with each other. Once a high-gambling state legalizes sports betting, attention to Bitcoin options falls, which suggests some traders treat the two as substitutes.
• Attention is not harmless for the spot market. Surges in attention to Bitcoin options are followed by higher volatility in Bitcoin itself, a risk factor for anyone holding the coin.

Flynn, M., & Liu, Y. (2026). Gambling on Bitcoin options? Journal of Behavioral and Experimental Finance, 49, 101142. 10.1016/j.jbef.2026.101142