Welcome to Thoughts on the market. I'm Michael Zesus, head of Public Policy Research and Municipal Strategy for Morgan Stanley.

Along with my colleagues bringing you a variety of perspectives, I'll be talking about the intersection between U.S. public

policy and financial markets. It's Wednesday, May 27th at 11 a.m. in New York.

Let's take a break from geopolitics this week. Instead, let's talk about games,

specifically online gambling.

What does online gambling have to do with the challenges facing the world today?

Well, it's one way US states may try to cope with their challenge finances

to fill their budget gaps, and that could turn into an opportunity for investors.

You might recall our podcast a few weeks back when we talked about the whole and state budgets.

It's going to be as high as $375 billion in our view.

And even if states use their rainy day funds

and free spending at current levels,

there's still over $200 billion short.

Now, of course, Congress could just come in

and appropriate that money to the states and there's increased

discussion in DC about the possibility, but let's assume for a moment this doesn't happen.

This is where online gambling comes in.

My colleague Thomas Allen, who covers the sector for our Equity Research

Department, has been quick to note that some states have been reticent to approve

and tax online gambling. But in light of this deficit they could reconsider as

they're faced with the tough choices of raising taxes

cutting essential spending or both. Hence budget stress could be an opportunity for

...