Turf War Between Online Casino And Online Lottery Persists In Pennsylvania

October 26, 2021
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The relationship between online casino and online lottery remains incongruous as the two genres are forced to co-exist in several major U.S. markets, particularly in Pennsylvania.

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The relationship between online casino and online lottery remains incongruous as the two genres are forced to co-exist in several major U.S. markets, particularly in Pennsylvania.

The state’s casinos remain mired in a legal dispute with the Pennsylvania Lottery over perceived similarities between the lottery’s suite of digital instant games and the online casino products launched by Pennsylvania’s land-based gaming operators.

A commonwealth judge dismissed the suit filed by seven casinos earlier this year, but that dismissal is currently on appeal to the state’s Supreme Court.

Pennsylvania’s 2017 gaming expansion law sought to differentiate between internet gaming and internet lottery by expressly prohibiting the state lottery from launching games that simulate slot machines or other traditional casino products.

In May, a state judge ruled that iLottery games could still have certain features in common with online slot or table games, provided they did not replicate their appearance.

“We believe we’re operating in accordance with the law; we know that’s the case,” said Drew Svitko, executive director of the Pennsylvania Lottery, during a panel discussion at the East Coast Gaming Congress in Atlantic City on Monday.

“Largely the iLottery product and the e-scratch games that we sell are a reflection of features that we’ve had in other lottery games for many years, with the exception that technology allows us to do additional things that we can’t do in a terrestrial, physical scratch-off ticket.”

The casinos have argued that the games are too similar to online casino products through the use of random number generators on the back-end, digital animations and bonus features, among other things.

“I think the notion really is that the iLottery was meant to be an internet version of lottery games, and iGaming was meant to take on another path, maybe a parallel path, being the online version of casino games,” said Karin Ashford, vice president of legal and business affairs for Penn National Gaming, one of the seven casino operators included in the lawsuit against the Pennsylvania Lottery.

“There are a number of different features in these games that one could argue is more like a slot machine versus a lottery ticket, and that is what litigation has delved into.”

The litigation in Pennsylvania directly addresses an issue that many legal observers predicted ever since the launch of online gaming in New Jersey and internet-based instant lottery games in Georgia and Michigan in the early years of the decade.

“When we would develop a scratch-off ticket that would go to the printing floor, its evolution is almost identical to what today is an iLottery ticket,” said Richard Weil, a consultant for state lotteries. “That outcome is predetermined and is presented in a graphical way.”

“I think the products are different,” he added of online casino and internet lottery. “In many aspects there are the appearance of similarity because at the end of the day, all gambling products are essentially the same, putting money down to engage in something and then have an outcome or result.”

“Nike can’t tell Chanel not to make sneakers,” added Peggy Daniel, U.S. general manager of the NJ Lotto, which sells lottery tickets online as a third-party service. “We’re kind of getting into a situation like that where there’s games out there, there’s going to be overlay of the market.”

“Maybe we do have to have certain criteria and examples of how the games need to be developed, but at the end of the day, we’re marketing to the same audience, we have to figure out how to work together.”

The battle between online casino and online lottery is not unique to Pennsylvania.

Michigan now has online casino, but the staunchest arguments against the 2019 legalization came from the state lottery, which already had a successful online lottery program in place with a suite of digital instant games.

That opposition resulted in online casino being passed with a tax rate between 20 and 28 percent of adjusted gross revenues, significantly higher than the 8 percent rate included in legislation that was vetoed a year prior in the state.

Earlier this year, Connecticut passed legislation to authorize both online lottery games and internet gaming, but specifically limits the Connecticut Lottery to draw-based games and keno, not instant games.

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