U.S. Lotteries Remain Valuable State Assets In Digital World

July 25, 2023
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The U.S. lottery industry’s importance to state finances, as well as retailers that sell millions of scratch-off tickets, has been underestimated by lawmakers captivated by the potential of other forms of gambling, say industry officials.

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The U.S. lottery industry’s importance to state finances, as well as retailers that sell millions of scratch-off tickets, has been underestimated by lawmakers captivated by the potential of other forms of gambling, say industry officials.

Every time someone in a state buys a lottery ticket, part of that money goes to the state, while a portion goes to the retailer. In fiscal year 2022, the 45 state lotteries posted total revenue of about $100bn.

Scott Gunn, senior vice president corporate public affairs for IGT, said there were some 210,000 lottery retailers in the U.S. and they got an average commission of about 6 percent, which equals about $6bn annually.

Besides offering traditional lottery games, Gunn said nine state lotters offer video lottery terminals (VGTs) and racino-casino type environments. Another ten lotteries plus the District of Columbia operate sports betting.

North Carolina and Vermont have approved sports betting, but they are not operational yet, while in Tennessee the decision was made last year to replace the lottery with the Tennessee Sports Wagering Council to regulate sports betting.

“It’s important for lawmakers and regulators to understand that states are authorized to operate lotteries in the U.S.,” said Gunn. “They were given that approval by the U.S. Congress in 1975. All state lotteries operate as a government agency or quasi-government agency.”

For example, Gunn highlighted Nebraska where the lottery operates as part of the Department of Revenue, while the Pennsylvania Lottery is a standalone agency.

Currently, ten states offer iLottery, or distribution of their existing lottery products online or through a mobile app.

“It is the state’s asset, and you need to think about it that way,” Gunn said.

In terms of distribution, whether its through traditional retailers, online or couriers, he said, it is “about getting players to engage with a product in a place where they can engage with the product.”

During his presentation to lawmakers and regulators on July 13, he stressed that consumers want to consume products they like in a convenient way and that means digitally.

“They want a digitized everything,” he added. “You start talking about iGaming, you need to include iLottery. That’s a conversation that needs to occur between the operator and the community about what the right policy decisions are for a state.”

Gunn was one of eight speakers focusing on various sectors of the gaming industry from traditional gaming and its economic impact to sports betting and tribal gaming at the National Council of Legislators from Gaming States (NCLGS) summer meeting. The four-day conference was held from July 12-15 in Denver.

“The iLottery debate is really accelerating right now [and] in some places it is a negative discussion with a couple of legislatures that just wrapped up — not to name, names here,” Gunn said. “But there are courier services that are operating in more than 20 states right now.”

In fact, iLottery is not legal in Colorado but these lottery couriers operate in the state, he said.

Courier services operate by allowing players to create online accounts and order state lottery tickets through their phones. Tickets are acquired by the couriers from licensed retailers, with players either receiving winnings directly into their accounts or a notification when they win a larger prize.

“So, the existence of these couriers and the fact that there is specific language legalizing the activity in only two states, New Jersey and New York, is fueling a policy discussion because a lot of lawmakers are coming in and asking when did we approve internet lottery and the lottery director says we haven’t approved iLottery.”

Gunn added the disconnect over lottery couriers is fueling a “discussion that is welcome.”

Silver State Lotto

Nevada is unique among the five states without a lottery due to the fact it already generates billions of dollars in annual gaming revenue from casinos and taverns with thousands of slot machines state-wide.

But residents may get a vote on legalizing a state lottery in three years after Assembly Joint Resolution 5, a proposed constitutional amendment removing the prohibition on a lottery, was approved by both chambers of the Nevada legislature this session.

According to Nevada law, a constitutional amendment must pass through two legislative sessions before it can become a vote of the people. Lawmakers will next convene in Carson City for the legislative session in 2025.

The 2025 bill is required to be the same one approved this year. Should lawmakers approve the measure a second time, the lottery initiative would be placed on the 2026 ballot.

Gunn told NCLGS attendees that he thinks policymakers in Nevada will get it right, but he was sure that some of his operator colleagues probably have opinions on the issue.

“Should Nevada ever make that decision, IGT would be happy to appear at that point in time to let them know that we think we would be a good supplier to them,” Gunn said. “But prior to that, I wish the policymakers and the operators in Nevada good luck in figuring that out.”

Currently, there are 45 state lotteries plus the District of Columbia, Puerto Rico and the U.S. Virgin Islands. Besides Nevada, Utah, Hawaii, Alabama and Alaska are the states without state lotteries.

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