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States up the online ante

Insider BuzzInsider Buzz: States up the online ante
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The director of the New York State lottery said a few months ago he had cleared hurdles in his quest to sell lottery tickets over the Internet, but now that plan is stalling.

When the U.S. Justice Department in December narrowed its interpretation of the 50-year-old Wire Act, saying it banned only sports betting and not other forms of online gambling, the decision sparked hope in state capitals that lotteries could start selling tickets online and lead a charge into online gambling.

But the convenience-store lobby in New York protested the state's plan, and now the plan is under review as the governor's office re-examines state gambling policy. Lottery directors in other states also are sparring with store owners fearful of losing customers who buy tickets.

The battle is one front in a broader struggle among state lotteries, casino operators, Internet companies and convenience stores that could determine how an expected wave of legal online gambling takes shape in the U.S.

State lotteries and their suppliers, lottery-technology companies GTech Corp. and Scientific Games Corp., are at the forefront of a host of would-be online gambling operators. Others looking to join the action include online games maker Zynga Inc. and casino operator Caesars Entertainment Corp. The big casino firms are pushing Congress to pass a bill that would limit states' online lotteries but let the firms operate online poker sites.

The lotteries' first test is in Illinois, where lottery director Michael Jones last month beat back opposition from convenience-store owners to begin the first online lottery sales for individual drawings in the U.S. Lotteries across the country are watching Illinois to guide their own online plans.

Other state lotteries hope to push the envelope further into areas — such as instant tickets, slot-machine games and blackjack — that could invite more controversy. In Delaware, the lottery has developed a plan, which it hopes legislators will introduce in a bill in the next couple of weeks, allowing the lottery to offer online blackjack and slot-machines games, in addition to ticket sales.

Lottery directors say they have long felt pressure to find new sources of revenue since lotteries in most states have matured and are no longer an area of growth. Moreover, many recession-hit states are in desperate need of money.

"If you stand still, you'll lose ground in this fast-paced industry," said Vernon Kirk, director of Delaware's lottery. "The world is going to be in cyberspace. You need to get out there."

Lotteries began discussing forms of online gambling as far back as 1990, when Minnesota briefly considered allowing people to play the lottery through Nintendo game machines connected to telephone lines.

One longtime obstacle to the lotteries' online hopes was the Justice Department's interpretation of the 1961 Wire Act, which bans sports betting over communication wires. Justice interpreted the law as also barring most forms of Internet gambling.

Many lottery-industry insiders argued the law shouldn't apply to gambling within state borders, and a handful of states began experimenting with limited lottery-ticket sales over the Internet.

In Illinois, the legislature in 2009 passed a law directing the lottery to start experimenting with online sales. The law asked the lottery to seek U.S. approval. The provision was included in a capital-projects bill promoted by the governor to create much-needed jobs.

Lotteries in other states began to request that technology providers bidding on lottery-systems contracts include proposals for Internet sales and other online gambling in case the lotteries decided to expand online. That could provide a boon for companies like GTech, which already provides technology to lotteries that take in 67% U.S. lottery sales.

GTech, a unit of Italy's Lottomatica Group SpA, included Internet wagering in bids it submitted in 2010 and 2011 for lottery contracts in New York, Virginia, Maryland and Illinois, the company said.

When the Justice Department gave Illinois the green light in December, many state lotteries had a built-in head start over many start-ups and casinos. Apart from new online-poker regulations in Nevada, states don't authorize private companies to operate most forms of online gambling. But 19 state lotteries now can probably sell tickets over the Internet under existing laws, and in nine states, lotteries might be able to offer full casino games, according to an analysis by GTech.

Gordon Medenica, director of New York's lottery, said in December the state would start to sell tickets online this year. "We've built the system and had it on a shelf waiting for more legal certainty," he said.

But lottery sales are important to gas stations, liquor stores and other convenience outlets due to the foot traffic they bring, according to the National Association of Convenience Stores. Lottery customers spend $10.35 in an average purchase, compared with $6.29 for a non-lottery customer, according to the National Association of Convenience Stores.

"We're very uncomfortable with the idea of our customers being able to access lottery games online," said Jim Calvin, president of the New York Association of Convenience Stores. Mr. Calvin said he got assurances from the New York governor's office that the plan wouldn't move forward without further study.

"The retailers are very important to us," Mr. Medenica said in an interview. "We need to make sure that if we move forward it will not hurt their business."

Conflicts have also taken place in Maryland and Washington, D.C.

In Maryland, convenience-store owners protested this year when the governor included $2 million in his budget proposal that he expected the state to reap from online lottery sales. After conflict erupted in the legislature, the lottery successfully beat back an attempt by the state Senate to prevent the plan from going into effect. Now the lottery hopes to be running online by January, said Stephen Martino, the lottery's director, and is considering selling all of its lottery product online. Beyond traditional numbers drawings, that includes instant ticket sales and Keno.

In Washington, lottery director Buddy Roogow in 2010 had crafted a plan he thought might avoid such headaches: creating a full slate of casino games — including poker, blackjack, slot-machine-like games and a game that resembled the board game Battleship — to avoid competing with retailers selling traditional lottery products.

The city council voted to authorize the plan, but last year residents complained at a series of community meetings that the plan was tainted by special favors and lacked transparency and proper oversight. In February, the city council reversed itself, quashing the project.

"We all have to deal with the politics of it," Mr. Roogow said in a recent interview. "Lottery directors aren't independent animals who can move on their own."

Now the focus is on Illinois, which so far has kept its online push alive.Earlier this year, Mr. Jones met with convenience-store owners in his state. "We thought, 'Dangit, this is just going to kill our foot traffic,' " said Kyle Vaubel, who owns 10 gasoline stations.

Mr. Jones told Mr. Vaubel and others that studies of online lotteries in Finland and other countries showed retailers' sales actually rose. One Illinois lottery survey indicated that the number of retail players in the state would expand to 5.7 million people from 5.25 million people, while revenues at retail outlets would expand to $282 million from $275 million, the lottery said. Store owners say they didn't buy it.

"Our franchisees aren't willing to risk their business," said Keith Jones, director of government relations for 7-Eleven Inc., the biggest lottery-ticket seller in the U.S., and a unit of Japan's Seven-Eleven Japan Co.

7-Eleven and other convenience-store owners lobbied the Illinois legislature, which was considering a bill to expand online sales to the multistate Powerball numbers draw. All sides eventually agreed to an amendment to the bill that directs a committee of industry and lottery officials to study the effect of the Internet sales on retailers. They also agreed to consider introducing prepaid cards that could be bought in retail outlets and used on the Internet.

Despite opposition, the lottery began Internet sales in late March, dovetailing with a $656 million Mega Millions drawing that attracted thousands of people to test the online system. The first week saw huge sales and didn't appear to take away from stores. Around 116,000 people bet $1.1 million online, against an overall take of $32 million.

Lottery directors in other states, including North Carolina and New Hampshire, say they are closely watching the pioneers. "It's the next phase" for the lottery business, said Charlie McIntyre, director of the New Hampshire lottery. "But I've been in this life long enough to know not to jump in the pool when I don't know the temperature of the water."

Wall Street Journal

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7 comments. Last comment 2 years ago by mcginnin56.
Page 1 of 1

United States
Member #111446
May 25, 2011
6323 Posts
Offline
Posted: April 30, 2012, 9:25 am - IP Logged

The director of the New York State lottery said a few months ago he had cleared hurdles in his quest to sell lottery tickets over the Internet, but now that plan is stalling.

When the U.S. Justice Department in December narrowed its interpretation of the 50-year-old Wire Act, saying it banned only sports betting and not other forms of online gambling, the decision sparked hope in state capitals that lotteries could start selling tickets online and lead a charge into online gambling.

But the convenience-store lobby in New York protested the state's plan, and now the plan is under review as the governor's office re-examines state gambling policy. Lottery directors in other states also are sparring with store owners fearful of losing customers who buy tickets.

The battle is one front in a broader struggle among state lotteries, casino operators, Internet companies and convenience stores that could determine how an expected wave of legal online gambling takes shape in the U.S.

State lotteries and their suppliers, lottery-technology companies GTech Corp. and Scientific Games Corp., are at the forefront of a host of would-be online gambling operators. Others looking to join the action include online games maker Zynga Inc. and casino operator Caesars Entertainment Corp. The big casino firms are pushing Congress to pass a bill that would limit states' online lotteries but let the firms operate online poker sites.

The lotteries' first test is in Illinois, where lottery director Michael Jones last month beat back opposition from convenience-store owners to begin the first online lottery sales for individual drawings in the U.S. Lotteries across the country are watching Illinois to guide their own online plans.

Other state lotteries hope to push the envelope further into areas — such as instant tickets, slot-machine games and blackjack — that could invite more controversy. In Delaware, the lottery has developed a plan, which it hopes legislators will introduce in a bill in the next couple of weeks, allowing the lottery to offer online blackjack and slot-machines games, in addition to ticket sales.

Lottery directors say they have long felt pressure to find new sources of revenue since lotteries in most states have matured and are no longer an area of growth. Moreover, many recession-hit states are in desperate need of money.

"If you stand still, you'll lose ground in this fast-paced industry," said Vernon Kirk, director of Delaware's lottery. "The world is going to be in cyberspace. You need to get out there."

Lotteries began discussing forms of online gambling as far back as 1990, when Minnesota briefly considered allowing people to play the lottery through Nintendo game machines connected to telephone lines.

One longtime obstacle to the lotteries' online hopes was the Justice Department's interpretation of the 1961 Wire Act, which bans sports betting over communication wires. Justice interpreted the law as also barring most forms of Internet gambling.

Many lottery-industry insiders argued the law shouldn't apply to gambling within state borders, and a handful of states began experimenting with limited lottery-ticket sales over the Internet.

In Illinois, the legislature in 2009 passed a law directing the lottery to start experimenting with online sales. The law asked the lottery to seek U.S. approval. The provision was included in a capital-projects bill promoted by the governor to create much-needed jobs.

Lotteries in other states began to request that technology providers bidding on lottery-systems contracts include proposals for Internet sales and other online gambling in case the lotteries decided to expand online. That could provide a boon for companies like GTech, which already provides technology to lotteries that take in 67% U.S. lottery sales.

GTech, a unit of Italy's Lottomatica Group SpA, included Internet wagering in bids it submitted in 2010 and 2011 for lottery contracts in New York, Virginia, Maryland and Illinois, the company said.

When the Justice Department gave Illinois the green light in December, many state lotteries had a built-in head start over many start-ups and casinos. Apart from new online-poker regulations in Nevada, states don't authorize private companies to operate most forms of online gambling. But 19 state lotteries now can probably sell tickets over the Internet under existing laws, and in nine states, lotteries might be able to offer full casino games, according to an analysis by GTech.

Gordon Medenica, director of New York's lottery, said in December the state would start to sell tickets online this year. "We've built the system and had it on a shelf waiting for more legal certainty," he said.

But lottery sales are important to gas stations, liquor stores and other convenience outlets due to the foot traffic they bring, according to the National Association of Convenience Stores. Lottery customers spend $10.35 in an average purchase, compared with $6.29 for a non-lottery customer, according to the National Association of Convenience Stores.

"We're very uncomfortable with the idea of our customers being able to access lottery games online," said Jim Calvin, president of the New York Association of Convenience Stores. Mr. Calvin said he got assurances from the New York governor's office that the plan wouldn't move forward without further study.

"The retailers are very important to us," Mr. Medenica said in an interview. "We need to make sure that if we move forward it will not hurt their business."

Conflicts have also taken place in Maryland and Washington, D.C.

In Maryland, convenience-store owners protested this year when the governor included $2 million in his budget proposal that he expected the state to reap from online lottery sales. After conflict erupted in the legislature, the lottery successfully beat back an attempt by the state Senate to prevent the plan from going into effect. Now the lottery hopes to be running online by January, said Stephen Martino, the lottery's director, and is considering selling all of its lottery product online. Beyond traditional numbers drawings, that includes instant ticket sales and Keno.

In Washington, lottery director Buddy Roogow in 2010 had crafted a plan he thought might avoid such headaches: creating a full slate of casino games — including poker, blackjack, slot-machine-like games and a game that resembled the board game Battleship — to avoid competing with retailers selling traditional lottery products.

The city council voted to authorize the plan, but last year residents complained at a series of community meetings that the plan was tainted by special favors and lacked transparency and proper oversight. In February, the city council reversed itself, quashing the project.

"We all have to deal with the politics of it," Mr. Roogow said in a recent interview. "Lottery directors aren't independent animals who can move on their own."

Now the focus is on Illinois, which so far has kept its online push alive.Earlier this year, Mr. Jones met with convenience-store owners in his state. "We thought, 'Dangit, this is just going to kill our foot traffic,' " said Kyle Vaubel, who owns 10 gasoline stations.

Mr. Jones told Mr. Vaubel and others that studies of online lotteries in Finland and other countries showed retailers' sales actually rose. One Illinois lottery survey indicated that the number of retail players in the state would expand to 5.7 million people from 5.25 million people, while revenues at retail outlets would expand to $282 million from $275 million, the lottery said. Store owners say they didn't buy it.

"Our franchisees aren't willing to risk their business," said Keith Jones, director of government relations for 7-Eleven Inc., the biggest lottery-ticket seller in the U.S., and a unit of Japan's Seven-Eleven Japan Co.

7-Eleven and other convenience-store owners lobbied the Illinois legislature, which was considering a bill to expand online sales to the multistate Powerball numbers draw. All sides eventually agreed to an amendment to the bill that directs a committee of industry and lottery officials to study the effect of the Internet sales on retailers. They also agreed to consider introducing prepaid cards that could be bought in retail outlets and used on the Internet.

Despite opposition, the lottery began Internet sales in late March, dovetailing with a $656 million Mega Millions drawing that attracted thousands of people to test the online system. The first week saw huge sales and didn't appear to take away from stores. Around 116,000 people bet $1.1 million online, against an overall take of $32 million.

Lottery directors in other states, including North Carolina and New Hampshire, say they are closely watching the pioneers. "It's the next phase" for the lottery business, said Charlie McIntyre, director of the New Hampshire lottery. "But I've been in this life long enough to know not to jump in the pool when I don't know the temperature of the water."

The sooner the better, this is the next logical step for lottery growth. This is a WIN-WIN for everybody.  Type

    spy153's avatar - maren

    United States
    Member #28409
    December 15, 2005
    1198 Posts
    Offline
    Posted: April 30, 2012, 11:02 am - IP Logged

    The convenience store owners need to be scared: I have several reasons why I would play online vs. the store.

     

    1) Mean, nasty store clerks with crinkled up little faces looking down on me 'cause they had a rough day when the jackpots get high. 

    Only this weekend I had a "new" clerk mess up a ticket of mine and tried to charge me twice the price.  When I told her to look on the tickets themselves and she could see she was the wrong one, she cleared out the tickets from the machine and tossed them to the side.  I told her to give them to me because those were my numbers and i didn't want anyone else to have them.  She told me "No." So I told her to "Then tear them up." But her actions were sketchy so I asked her for the tickets.  Again, she said "No.," and stuck the torn ticket up in her pocket.  I told her she could watch me burn them outside, I didn't care, but she was NOT keeping my numbers.  Come to find out later on, the "new" clerk had given tickets to a customer previous me and didn't  collect the money from him and was trying to get it from me to clear her butt.  It's behavior like this and others I would rather not experience while getting my tickets. 

    2) Weather.  I hate storms. I particularly hate tornadoes.  And since they have been more prevalent here than normal, I would much rather play online at home.

    3) Everytime I go to the store to get my tickets, my hubby wants to play scratch offs.  It puts me off my budget we supposedly worked out together beforehand and I leave angry at him... and have to go home with him.

    4)  Priority.  I don't need everything in the store, just my tickets please.  But because I am "just another lottery player" I have to take a back seat to the customers there for gas, food, whatever.  They wait on them first and all lottery players last. Mad

    5) I can see claiming the ticket as being alot easier online than with traditional tickets.  But I am not sure on this one.

     

    Now the only reason I have to NOT play online is security reasons.  How would you ever manage to be anonymous that way?

    voir-vous dans mes reves!Cool

      joshuacloak's avatar - avatar 23415.gif

      United States
      Member #32537
      February 12, 2006
      639 Posts
      Offline
      Posted: April 30, 2012, 11:51 am - IP Logged

      dear Association of Convenience Stores of any state , u are being fearful of the unknow, get over it. aholes.



      this is future,and its best thing for players, more options.

      these fearful beeps should not even have the right to bully players  into less options cease they want a "monopoly" , as thats what it is, over the lottery sells

      cry me a freaking river, mr monopoly retailers.  their ofc making online option out to be some kind of big bad wolf,and anyone in their right mind, knows these people are full of u know what bullcrap.


      as spy153 points out,   bye bye scaming lottery clerks.  "i sure say go to biger places like kroger, so if 1 does try to scam u, u can get manager that cares about their customers." 

      i have a feeling if people get screwed or have a bad time with how lottery clerks treat them , they just go online. if not a other store!!     if option their in the future.

      also am all for states making more money. "save the trees too.....................  jk  rofl ."

      i to however would keep playing by paper/retailer, cease i want the anonymous part, if my "trust" can't play online LOL, no biggie thro long as i got a means to do it.


      also, The big casino firms are pushing Congress to pass a bill that would limit states' online lotteries but let the firms operate online poker sites.,

        ooo a other ahole group, once again trying to limit options for everyone,

      but push their own "monopoly" thats rich, dear   casino firms,  u pricks have already did way to much damage as it is, aka buying "all the for sell state lawmakers"  in their monopoly states ,where they never can pass a state lottery , cease u know for sure,

       all people road blocking it, would be all people in pocket of the  casino world  in their state.  and that's reality.

      screw u jerks,  who buy congress to pass your "laws"  and to the  whores of congress who sell them self's off to highest bidders to boot.

      they just trying to  screw the rest of us.  they should all be shamed of them self's,    but they never are majority of time, aka  business as usual !

      if the people/people of any state, want a lottery online, its our right!, screw off casino aholes, and screw off   Association of Convenience Stores , 

      sup

        surimaribo24's avatar - img1901pn
        NEW YORK. RIVERHEAD
        United States
        Member #106375
        February 17, 2011
        9078 Posts
        Offline
        Posted: April 30, 2012, 12:05 pm - IP Logged

        "dear Association of Convenience Stores of any state , u are being fearful of the unknow, get over it. aholes."

        Green laugh ROFLI Agree! couldnt be better .. im glad to have good clerks around my area . but men everytime im on the road  and stop at a lotteryspot to get digit . its always a hassle . either they dont frkn understand numbers you tell them 205 they will repeat 102 Mad or they will come with a bs that the machine is not working . its a verry common issue in ny. online is a great solution do it jimmys ..

        PETS#=105-215

          JonnyBgood07's avatar - Patriots logo1.jpg
          Connecticut
          United States
          Member #61623
          May 29, 2008
          19507 Posts
          Offline
          Posted: April 30, 2012, 6:14 pm - IP Logged

          the only reason they are fearful is because now there will be less people going to the counter that they can lie to about how much they won when a winner hands them a ticket to validate whether its a winner or not.Jester Laugh

          "...Life is not a matter of holding good cards,but sometimes playing a poor hand well...
          'Fortune Cookie wisdom'

           


            Avatar
            Pittsburgh, PA
            United States
            Member #113047
            July 1, 2011
            17 Posts
            Offline
            Posted: April 30, 2012, 9:41 pm - IP Logged

            The Seven Elevens and the Patels of the convenience store world have to realize the transition to digital technology that has taken place over the years.  They want to challenge a state's right to sell online?  I'm sure a majority of lottery fans welcome the opportunity to purchase lottery tickets online.

            More and more people have switched to the internet to read their bank statements and pay their bills.  Also may I mention the continuous transitions to direct deposit.  Maybe the US Postal Service should have cried foul because businesses and people alike are making smart decisions by doing their business online and saving time and money.


              United States
              Member #111446
              May 25, 2011
              6323 Posts
              Offline
              Posted: May 1, 2012, 1:44 pm - IP Logged

              The Seven Elevens and the Patels of the convenience store world have to realize the transition to digital technology that has taken place over the years.  They want to challenge a state's right to sell online?  I'm sure a majority of lottery fans welcome the opportunity to purchase lottery tickets online.

              More and more people have switched to the internet to read their bank statements and pay their bills.  Also may I mention the continuous transitions to direct deposit.  Maybe the US Postal Service should have cried foul because businesses and people alike are making smart decisions by doing their business online and saving time and money.

              The USPS has and is crying loudly  Crying  about their shrinkage of business in the last 10 years. Unfortunately it's to little and to late for them.

              They need to be downsized and run by a privatized firm such as UPS or FedEx. Like any federally run sector of the government, there is way

              to much entitlement, fat and waste involved.