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Expanded responsibilities to oversee new forms of gambling such as sports betting are creating new challenges for U.S. state lotteries to juggle their dual roles of operators and regulators.
Lottery jurisdictions throughout the U.S. are uniquely different in terms of regulations, size and even products offered to consumers whether it is a traditional scratch-off ticket sold by a convenience store, an online ticket or, even in a few states, a chance to wager on sports.
Many lotteries are simply operators of traditional lottery games to generate revenue for their beneficiaries, typically state education funds, but in a small but growing number of states, such as Delaware and North Carolina, the lottery acts as both operator and regulator of other forms of gambling.
“There was always legislation that said we are going to combine the lottery commission with the gaming commission,” said May Scheve Reardon, vice president of government relations with Pollard Banknote and former executive director of the Missouri Lottery.
Missouri is one jurisdiction where separate state commissions oversee the lottery and commercial gaming in land-based casinos.
“I just hated that idea because the gaming commission was all about guns and badges and the lottery was all about balloons and confetti,” Reardon said. “I thought the two should never come together.”
During fiscal year 2023, U.S. lottery sales totaled more than $113.3bn, according to the North American Association of State and Provincial Lotteries (NASPL).
In North Carolina, the state lottery commission now oversees both traditional lottery games run by the state lottery, as well as mobile sports betting, which launched in early March. Currently, there are nine sports-betting operators in North Carolina.
“We traditionally ran the lottery. All of our messaging was around generating sales,” Madison Mackenzie, an associate attorney with the North Carolina Education Lottery, told attendees at a regulator seminar during the National Council of Legislators from Gaming States (NCLGS) summer meeting in Pittsburgh.
Mackenzie and Reardon were joined for a discussion on U.S. lotteries by Helene Keeley, director of the Delaware Lottery, and Angela Wong, vice president of global lottery solutions at Gaming Laboratories International (GLI).
“We were thrown a bit of a curve ball by the legislature with this new regulatory function,” Mackenzie said. “We really had to look at our organization’s structure and make some real intentional adjustments to accommodate that new function.”
The lottery commission issued rules for implementing a statute signed into law in 2023 that legalized commercial sports betting. Those rules became effective on January 8, 2024.
Mackenzie said lottery officials made sure to be mindful to not create a conflict of interest and “really draw a line and define roles for our employees that we could expand and meet the challenge” of launching sports betting.
“We are still struggling to build that messaging around our new roles,” she said. “We are natural storytellers when it comes to the lottery, but we are still really defining ourselves as a regulator four months into sports betting.”
Mackenzie said one of the things North Carolina officials did was to create a new commission logo when communicating as the regulator, so they were not communicating to the public with the lottery’s logo.
Other U.S. jurisdictions where the lottery is the regulator of sports betting include Virginia, Maryland, New Hampshire and the District of Columbia.
From a Delaware perspective, Keeley said the state lottery is both the operator and regulator all in one.
“We have been doing this for 50 years,” Keeley said. “For sports [betting], technically and legally we were allowed to have it since 1976 and then the [federal] ban came in [in 1992] and we started up again in 2009 using parlay cards.”
Delaware offered parlay cards for NFL and college football games through lottery retailers, but once the U.S. Supreme Court overturned the Professional and Amateur Sports Protection Act of 1992 (PASPA) in May 2018, the lottery began to offer retail sports betting at land-based casinos.
The lottery also operates online casino games via its contracted partner Rush Street Interactive.
“I understand the struggle that they have,” Keeley said. “Are you in competition with yourself in some of the games that you put out there or sports [betting]? At least in Delaware, we don’t struggle with that but as we look to the possibility of adding more product … how much more can we add until we are competing against ourselves?”
Keeley noted that the state lottery in neighboring Pennsylvania offers iLottery games similar to online casino games so the competition is tangible here. She added that the Delaware Lottery was not going to have iLottery with casino-type games when it already offers iGaming.
Casinos in Delaware are regulated by the lottery and restricted to the state’s three racetracks.
“Yes, we are their regulator, and they know that,” she said. “Even though we can sit down at a table and have these great conversations about how well their businesses are doing, at the end of the day, if our inspectors find something or our auditors find something, we will fine them and do whatever we need to.
“If there is something they are not doing right under the regulations, then we have to be that big brother,” Keeley added.
