The complementarities between tourism and gambling at the local level are examined empirically from two rather different gambling environments (Indiana, USA and Eilat, Israel) in order to show how gambling acts as an import substitution activity and impacts on existing demand. In both contexts, the sources of demand for gambling, the extent to which these are 'tourist' sources and the question of gambling-generated demand displacing existing tourist demand, are examined. Despite the rather different market and political contexts in Indiana and Israel, the findings on the gambling-tourism relationship and the effect of gambling on local economies, are remarkably consistent. In both cases, gambling is seen to be grounded in import-substitution rather than pure 'export' activity. Additionally, in both cases there is evidence that the introduction of gambling displaces tourist demand. The policy implications of these findings point to the need to differentiate between local and national impacts of gambling and between the local fiscal and local economic development impacts.