U.S. iLottery Lagging Sports Betting's Rapid Rollout

April 11, 2023
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Internet casino gaming is not the only segment of the U.S. online gambling market struggling to expand to new states, with interactive lottery or iLottery offerings also moving at a much slower pace than mobile sports betting.

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Internet casino gaming is not the only segment of the U.S. online gambling market struggling to expand to new states, with interactive lottery or iLottery offerings also moving at a much slower pace than mobile sports betting.

Just 11 of 46 state lotteries currently allow players to buy tickets for popular lottery games such as Powerball and Mega Millions directly from their websites or apps, with eight also offering interactive versions of instant lottery games.

No new states have launched iLottery since 2020, however, as proponents share some of the same frustrations of advocates for online casinos or iGaming who had equally expected the pandemic to be a natural tipping point in convincing states to embrace digital gambling offerings.

There are two main reasons why states remain more reluctant to allow interactive lottery products even though many have moved quickly to approve online sports betting, according to Mark Hichar, a shareholder with Greenberg Traurig law firm and a long-time legal expert on the U.S. lottery market.

“First and foremost, there is the continued opposition to iLottery by bricks-and-mortar lottery retailers who have significant influence in several states,” Hichar told VIXIO GamblingCompliance.

“Second, there is the discomfort of some state legislators with making government-operated gambling more accessible — particularly if it could become accessible to those under the legal age to play — notwithstanding that there are safeguards to prevent this.”

iLottery Expansion Pipeline

As 2023 shapes up to be another barren year for iGaming expansion, there are at least a few states in the pipeline when it comes to iLottery.

North Carolina Governor Roy Cooper, a Democrat, last month included anticipated revenue from interactive instant lottery games in his proposed 2023-25 state budget that has been submitted to lawmakers for their approval. North Carolina presently restricts its iLottery offering to draw-game tickets.

The West Virginia Lottery recently held a procurement process for an iLottery system provider and has publicly stated its intention to launch an iLottery program within the coming months.

Connecticut has similarly sought a system provider to support the launch of online ticket sales and keno games in line with a 2021 state law that also included provisions for sports betting and online casino gaming.

The New Jersey Lottery Commission proposed new regulations last year to enable the state lottery to directly sell tickets for draw games through its website and mobile app.

There have been several frustrations at state legislative level, however.

For example, the Indiana General Assembly last year passed a bill to prevent the Hoosier Lottery from offering interactive instant games without express legislative approval. Provisions for iLottery were included in a bill to authorize internet gaming in Indiana earlier this year, but that legislation failed to even receive a committee hearing.

In Ohio, a bill to authorize iLottery operations was approved by the state's Senate last year but never taken up by the House, with a pending contract between the Ohio Lottery and its chosen iLottery system partner having been left waiting final approval from the state’s controlling board for over three years amid concerns from traditional lottery retailers.

According to VIXIO data, total U.S. iLottery sales across participating states reached $4.93bn in the 2022 fiscal year ending July 1.

That iLottery total was up around 10 percent on the preceding fiscal year, driven mainly by strong growth of e-instant games in Virginia, but still accounted for less than 5 percent of a total U.S. state lottery market worth around $100bn in total sales annually.

There is a growing body of evidence that iLottery does not cannibalize traditional retail lottery sales and can help state lotteries appeal to younger players, said Hichar of Greenberg Traurig.

“Still, the reality that iLottery and retail lottery products are not in direct competition — and that iLottery increases the overall pie — continues to be rejected by lottery retailer organizations.

“Thus, regardless of the experience of other states and regardless of the position that studies support, state legislators are influenced by the views of their constituents, and retailer opposition to iLottery, where it exists, is an important factor they will take into account when considering legislation that would authorize online sales of lottery products.”

Lottery Couriers Continue To Grow

As iLottery expansion stays in a relatively low gear, state lotteries themselves are no longer the only game in town when it comes to bringing their products to digital and mobile channels.

Independent lottery courier services such as Jackpocket, Lotto.com and Mido Lotto allow players in more than a dozen states to create accounts to order lottery draw-game tickets which are then acquired on their behalf from licensed lottery retailers by courier agents.

Lottery courier services are licensed and regulated in New Jersey and New York but have been able to expand to additional markets, sometimes with the blessing of the applicable state lottery, because state lottery laws and regulations do not prevent them from doing so.

Jackpocket is currently live in 15 states and intends to expand into at least seven more this year, CEO Peter Sullivan said at last month’s iGaming Next conference in New York.

The company’s app recently made it to number one in the Apple App Store when there was a billion-dollar Mega Millions jackpot and Jackpocket typically accounts for 15 to 19 percent of all sales of Powerball sales in New York alone, expecting to move past 20 percent this year, according to Sullivan.

“It’s been a whacky way to get there, but states are finally understanding that they get economies of scale when they work with a company like us,” Sullivan said.

Jackpocket is also set to become the first lottery courier to attempt to integrate online lottery sales with online casino games, having recently announced a partnership with White Hat Gaming to provide its iGaming platform in New Jersey, where the company is already licensed as a lottery courier service.

The New Jersey Lottery Commission approved new regulations last year to allow lottery couriers to offer regulated online casino games and sports betting on their platforms, including using a shared wallet.

Speaking at iGaming Next, Sullivan drew comparisons with Netflix, which originally started out mailing DVDs to customers before moving into streaming and then original content.

“Lottery’s a really compelling place to start … the largest common denominator of real-money gamers are lottery [players],” he said.

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