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State lotteries on the web? Bet on it - Boston Globe
State lotteries on the web? Bet on it

As revenues from traditional games decline, lawmakers look to the Internet for income

By Bruce Mohl, Globe Staff | February 13, 2006

With sales of scratch tickets and lotto games starting to slow down, states are looking to the Internet to breathe new life into their lotteries.

Lawmakers in Illinois, Georgia, North Dakota, and a handful of other states are exploring Web-based lottery games, even though the US Justice Department insists that all forms of online gambling are illegal.

''It's their last great opportunity for substantial revenue increases," said Anthony N. Cabot, a Nevada attorney who specializes in gaming law. Cabot said that in his opinion, nothing prevents state lotteries from going online, notwithstanding the Justice Department's position.

State Treasurer Timothy Cahill, who oversees the Massachusetts Lottery, which is starting to experience a revenue slowdown, said he has no plans to pursue the Internet option.

''It's fairly radical and I don't want to go down that road," Cahill said. ''I'm not looking to push gambling down the throats of anyone in this state."

But a just-completed consultant's study commissioned by Cahill indicates online lottery games would not only reduce costs but stimulate sales by bringing in consumers who would never think of picking a number or scratching a ticket in a convenience store.

Christiansen Capital Advisors LLC, in its report on growth options for the Massachusetts Lottery, said lotteries in other countries, particularly the United Kingdom, Germany, France, and most of Scandinavia, have responded to slowing revenues by moving more of their games on to the Web, interactive television services, and mobile phones.

Online gambling worldwide totaled about $12 billion last year, according to Christiansen Capital, with lottery games representing about 15 percent of the total. By 2010, the consulting firm is forecasting that online gambling will total $24.5 billion worldwide, with lotteries accounting for $4 billion, or 16.5 percent.

Online lotteries are perceived as having three advantages: they appeal to gamblers who rarely shop at a convenience store, they reduce retail agent costs, and they make it possible to identify who's playing the games and market loyalty programs or other products to them.

''No single step, with the possible exception of adding machine games to its product lines, would yield larger long-term benefits to the Massachusetts Lottery and to its owner, the Commonwealth of Massachusetts," Christiansen Capital said in its report.

The report issued no revenue projections for online lottery games, but it implied gains could be substantial. It noted, for example, that consumer surveys indicate 46 percent of the public buys lottery products at convenience stores, but only 2 percent say they shop at convenience stores regularly.

''The Massachusetts Lottery will be a diminishing presence in people's lives if its products aren't available where people spend increasing amounts of their time," the report said, specifically mentioning the Internet.

In other countries, lotteries have aggressively pursued interactive games on the Internet or mobile phones. The United Kingdom's national lottery ( for example, features an assortment of lotto games online, as well as Web versions of scratch tickets and other instant games.

But here in the United States, lotteries have been reticent to move to the Internet. The lone exception has been New Jersey, which began experimenting on the Internet in 2004 with two games called Tetris and Cyber Slingo, which have generated just $15 million in revenues since being launched.

A Tetris or Cyber Slingo ticket costs $5 and works much like a scratch ticket, except instead of rubbing off the surface of the ticket the player plays the Internet game. A good player can make the game last an hour before discovering whether the ticket is a winner or a loser. Tickets must be purchased and redeemed at lottery locations.

''Players cannot claim or actually win a prize on the Internet given the current laws banning Internet gambling," the New Jersey Lottery says on its website.

Drew Wade, a spokesman for the Justice Department, said online gambling is illegal under a number of provisions of federal law, but he declined to discuss how the law would apply specifically to lottery games.

''The operation of a commercial gambling business where bets or wagers are transmitted in interstate or foreign commerce is illegal under federal law, and that includes Internet communications," Wade said.

But Cabot, the Nevada gaming law expert, said the Justice Department's interpretation of the law wouldn't extend to lotteries. He said federal laws generally apply only to interstate wagers and wouldn't cover an in-state lottery game that a state has specifically authorized.

Cabot also noted that bills are regularly filed in Congress to outlaw Internet gambling, but most of the measures make exceptions for state lotteries.

Despite the uncertain legal environment, a number of states have taken tentative steps toward Web-based lotteries. In most of the states, proponents have dealt with concerns about underage players by requiring participants to open gambling accounts or collect prizes in person.

In Georgia, a bill approving lottery games on the Internet passed the House last year but stalled in the Senate. A Georgia Lottery spokesman said the lottery took no stand on the legislation, but would need legal clarification before proceeding.

In North Dakota, the House last year passed a bill to allow for-profit companies to operate Internet poker games. The bill was defeated in the state Senate.

In Illinois, the state Senate last year approved a measure authorizing online games. The bill is now in the House and may have a chance this year because the state is scrambling for revenues.

Illinois Governor Rod Blagojevich has opposed online lottery games in the past, but he seemed to hedge early this year when he proposed and then withdrew a keno game to fund school construction bonds.

Illinois state Senator John Cullerton, a Democrat from Chicago, said his bill authorizing the lottery's expansion to the Internet would bring in an additional $150 million a year, with most of that increase coming from Internet-savvy, higher-income people.

''It's those people who don't stand in line at the 7-Eleven," he said. ''A whole new group of folks would be buying tickets."

Bruce Mohl can be reached at
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