Expert Panelists Assess The Lottery’s Place In The Legal Sports Betting Era

A panel of gaming experts in New Orleans analyzed the lottery's role in 2019 and whether it should be part of the sports betting picture.
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With all of the talk about legalization of sports betting, online poker, and other innovations, one of the most venerable gambling institutions of them all — the lottery — has lost its place in the spotlight.

“We are an aging industry. We call it ‘your grandma or grandpa’s gaming,'” said Rose Hudson, the president of the Louisiana Lottery, of a pastime that dates back to founding father Benjamin Franklin, if not earlier.

So what’s next? That was the topic of a panel at the National Council of Legislators From Gaming States winter meeting in New Orleans last week.

And for one prominent New Jersey lobbyist, there is a clear pathway — and a clear roadblock — for those next steps.

“We should be talking about online lotteries,” said William Pascrell III, a partner at Princeton Public Strategies. “Lotteries should be given the tools to enable them to get into the 21st century.”

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Added Pascrell, who has his own personal mini-focus group of three adult children in their 20s: “Lotteries are challenged today because of demographics. They need to embrace the digital divide which is occurring.”

That sentiment was echoed by Gordon Medenica, the director of the Maryland Lottery.

“For years, there has been a legislative bugaboo about lotteries being on the internet, and the most obvious resistance we face is opposition from retailers,” Medenica told the audience at Harrah’s. “But there is no evidence that retailers are hurt by sales on the internet. A half-dozen states already have it, and it is inevitable that there will be more.”

Lotteries and sports betting

So what path does Pascrell not see as sensible for lotteries?

“Lotteries are very good at what they do,” Pascrell said. “But — and I say this with respect — they should not be engaged in the practice of sports betting. The reason for that is that the lottery client is very different from the punter, the sports betting customer.”

There is another reason, Pascrell told some 260 attendees, including more than 60 state legislators, that the lottery is not the ideal choice to oversee sports betting.

“You should not have one operator in a state for sports betting because it doesn’t allow you to realize the potential of the market,” said Pascrell, who pointed to the New Jersey model that allows for up to 42 “skins” that would be affiliated with Atlantic City casinos or current or former New Jersey racetracks.

“I think that lotteries should not regulate sports betting independently because that would be like allowing Netflix to regulate Hulu,” added Pascrell. “We need to allow for diversity of competition.”

Medenica noted that about 70% of legal sports betting worldwide is run via lotteries. The Delaware lottery currently runs that state’s sports betting at the state’s three racinos, and would do the same if the state enters the online sports betting sphere.

D.C. forging ahead

Earlier this week, the Washington, D.C. City Council took up a bill that would allow the District’s lottery to cut a deal that would bring in an exclusive sports betting operator without a bidding process.

“The whole conversation about sports betting for the most part has not involved lotteries,” Medenica said. “They could have a role to play, depending on bet type, such as very simple bets like parlays.”

Mississippi’s pending addition to the lottery world will leave only five states without one, Medenica said: Alabama, Utah, Hawaii, Alaska, and Nevada. Medenica said a typical lottery model sends about 60% of revenues back to players, with 30% going to “good causes” such as education, 6% being returned to retailers, and 4% for operating expenses.

The popular comment that “you are more likely to get struck by lightning than win the lottery” is not true, Medenica insisted, amusing the audience. He said there were about 2,000 million-dollar prize winners in the U.S. last year, versus only 67 people getting struck by lightning.

The lottery’s role in online poker progress

The Department of Justice’s 2011 clarification of The Wire Act of 1961 — which in many respects opened the door for online poker legalization — came in response to inquiries by New York and Illinois in 2009 on whether online lotteries would be exempt from the Act’s limitations. The act was found to have been intended to prevent interstate communication, by phone, of horse racing wagers.

Ironically, said Medenica — who worked at the New York Lottery at the time of the inquiry — New York did not follow through on adding an online lottery in spite of getting a favorable ruling. He blamed “pressure from retailers” for the stalemate, allowing Illinois to become the online lottery pioneer.

One of the most intriguing panelists of the three-day event this past weekend was Peggy Daniel, the US General Manager of The Lotter Group (not sure why there is no ‘y’). She served as a wakeup call to the numerous AARP-eligible attendees that the times, they are a-changing.

Daniel, who appears to be a millennial herself, said that in 2019 millennials will finally surpass Baby Boomers in sheer numbers.

“If we don’t start transforming the way lottery tickets are purchased, we will be missing out on one of the biggest markets in the U.S.,” Daniel said.

Youth movement

Daniel’s company is part of a growing trend of “couriers,” companies who enable you to buy lottery tickets online even if your state doesn’t directly offer it. Medenica said these companies range from legitimate to rogue, with the worst kind, “parasitic lotteries,” not even actually buying the lottery tickets.

“They just take bets on the outcome of lotteries,” said Medenica.

Pascrell said that in 2017, New Jersey passed a law regulating legal courier lottery ticket sales that he said could serve as a model for other states.

Daniel showed a video about how her company’s process works. She also opened some eyes about how the traditional lottery is perceived by her generation.

“It is not easy for younger people to go into stores and purchase a lottery ticket,” Daniel said. “When you walk into that retail environment, the clerk doesn’t want to take the time to even show you how to do it.

“And when you ask about it, guys or women behind me on line are giving me the ‘stink eye’ because I am taking too long,” Daniel added. “So the lottery just lost a customer willing to spend 20 dollars. That is revenue that the state is missing.”

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