With an Eye to the Future, Some States are Betting on Internet Lottery Sales

In April 2016, the Kentucky Lottery began selling lottery tickets and offering ‘instant play’ arcade-style lottery games all via their website, making Kentucky the fourth state that sells lottery tickets online and the third state to offer online gaming. Massachusetts is eyeing a similar path, according to the Boston Globe. Supporters believe that moving state lottery games online will help to attract new customers like millennials, who will be an increasingly crucial demographic in the years to come. Opponents worry these changes will, among other things, increase gambling addiction problems and decrease revenues to local businesses that sell physical lottery tickets.

Illinois became the first state to sell lottery tickets online in 2012 with the passage of SB 3497. The program, however, was a pilot program that only had a lifespan of four years and would require further legislative action to make the online sales permanent. Although the pilot program technically expired in March of 2016, the Illinois Lottery continues to sell lottery tickets via its website.

In February 2014, Minnesota State Lottery officials introduced scratch-off tickets that could be purchased either online or at gas station pumps, according to the Minneapolis Star Tribune. This was enacted without the Minnesota Legislature’s approval, which immediately ignited a bipartisan political firestorm calling for an abrupt end to such sales. After only a year and a half in operation, Gov. Mark Dayton signed SF 229, which brought an end to scratch-off ticket sales online and at gas pumps.

Two other states, Georgia and Michigan, currently offer online lottery sales and instant play games on their websites and have seen relative success since online sales began. According to the Georgia Lottery’s Financial Statement Reports, Georgia had roughly $75 million more in online sales in FY 2015 than it did in its first year, 2012. Over this same time period, contributions to Georgia’s Lottery for Education Account increased from $901 million in FY 2012 to $980 million in FY 2015. The Michigan Lottery introduced its online lottery ticket sales and games, known as iLottery, in 2014 and credits the iLottery for contributing to record revenues and record contributions to the state’s education system.

It’s hard to argue against the billions of desperately-needed dollars that state lotteries contribute to education funds, but the idea that an electronic scratch-off ticket may only be a few clicks away is concerning to some. This increased accessibility could not only exacerbate gambling addictions, but also disproportionately hurt poor consumers.

Decades of academic literature has shown a link between poverty and lottery spending. On average, lottery purchases made by poorer citizens make up a greater percentage of their income than purchases by their higher income counterparts. A study using Massachusetts census data published by the Federal Reserve Bank of Boston found that each $10,000 decrease in median household income led to, on average, a 0.4 percentage point increase in the share of income spent on lotteries. The author notes that “the average share of income spent on lotteries in the fiscal year 2009 in regions of Massachusetts with median incomes between $50,000 and $70,000 was 2.2 percent, whereas for regions with median incomes between $30,000 and $50,000, the share was 3.4 percent. Although 1.2 percentage points may not seem like a big difference, 1.2 percent of a $40,000 income is $480 per family each year.”

Despite the aforementioned concerns voiced by critics, the shift toward the internet and mobile gaming may still be a key to survival for the state lottery. In a wired world of ever-changing technological advances, state lotteries will likely need to adapt to survive.