["International Journal of Finance &Economics, EarlyView. ", "\nABSTRACT\nExtensive research finds that Payments for Watershed Services (PWS) yield positive ecological and economic effects. However, prior studies have yet to investigate whether Gamble‐based Payments for Watershed Services (GPWS) generate similar positive outcomes. Using a sample of Chinese A‐share listed firms located in provinces that signed GPWS agreements during 2009–2023, this paper employs a staggered DID approach to examine the effect of GPWS on corporate green innovation. We document asymmetric upstream–downstream effects: GPWS promotes green innovation among upstream firms while impeding such innovation in downstream firms. This asymmetry arises because GPWS strengthens environmental regulations and increases environmental subsidies in upstream regions, while weakening environmental regulations and reducing environmental subsidies in downstream regions. Moreover, GPWS exerts a stronger inhibitory effect on green innovation in downstream firms than its promotive effect in upstream firms.\n"]