Lottery announces game promotion to account for error

Error only happened under certain conditions

By Kate Northrop

The California Lottery's Daily Derby game was affected by a software glitch that could potentially limit the number of possible combinations a player could receive on their ticket, if their plays were purchased in specific ways.

Following the discovery of a software error in the Daily Derby game, the California Lottery announced a compensatory promotion that will increase the game's overall prize pool.

On Monday, the Lottery published a press release detailing the extent of the glitch affecting the Daily Derby game and how it impacted players who bought tickets. The Lottery found that the issue never impacted a player's odds of winning a prize, but prize payouts for winning tickets may have been influenced for a subset of players.

It is not the first time Daily Derby has seen flawed lottery results. Back in 2005, a computer error had prevented the game from producing repeating numbers in one of the drawn combinations.

Daily Derby is a digitally operated game in which players select two sets of three numbers. The first set represents three horses the player bets will finish in first, second, and third place. The second set of numbers represents the winning race time.

The issue is more nuanced in a game like Daily Derby since the sets of number combinations are not as straightforward as, say, a Pick 3 game. Daily Derby features two sets of numbers, in which number order matters for one of those sets but does not for the other. These variables, the Lottery explained to Lottery Post, unfortunately adds a degree of complication in the game's programming.

"The higher the level of customization for a game, the higher increase of risk there is for an error," Carolyn Becker, the Deputy Director of Public Affairs and Communications at the California Lottery explained to Lottery Post.

The software glitch affected players who opted for a Quick Pick, which allows the machine to choose the numbers for them. However, the error was limited to "two specific kinds of California Lottery ticket machines and only under certain circumstances," the Lottery's press release reads.

Those machines are the Flex terminals and the Game Touch machines. Flex terminals are stationed behind the counter and are operated by retailer staff, whereas the Game Touch machines are self-service customer-facing terminals akin to vending machines.

Whether a ticket was impacted by the error depended on the circumstances at the time of purchase. If a player went to a clerk at a Flex terminal and handed them a play slip denoting a Quick Pick for the second set of numbers, the "race time," the error impacted the wager. Only the second set of numbers was affected at the Flex terminals, not the first set.

If the player handed the clerk a play slip denoting a Quick Pick for the first set of numbers, the finishing order of the horses, the wager was unaffected. If the player asked the clerk for a Quick Pick without a play slip, the wager was also unaffected.

For all Quick Picks purchased at the Game Touch vending machines, the error affected both the first and second sets of numbers on those wagers.

Depending on the machine and the purchasing circumstance, the machines affected by the glitch produced Quick Pick tickets with the affected sets of numbers only in ascending order and, in some cases, without repeating digits.

Those who bought affected Daily Derby tickets when the glitch was live were only able to receive tickets containing a fraction of all possible number combinations. However, the Lottery emphasized that the odds of winning Daily Derby were never impacted because all potential number combinations have the same chance of winning.

"Players who purchased their tickets from an impacted machine were still given a valid set of numbers," the Lottery said in a press release. "The California Lottery's system that randomly selects the winning numbers in a Daily Derby drawing was never affected by the software error."

At the same time, the Lottery continued, prize payments on winning tickets "may have been impacted by the software error," considering the California law that awards all prizes on a pari-mutuel basis. This means the prizes will change each drawing based on the number of tickets sold and the number of tickets that win at each prize level.

"Because the error resulted in a subset of players having access to only limited combinations of numbers, more winners were likely produced when these limited combinations turned out to be selected than in cases where the winning numbers matched those from the larger pool of all possible combinations," the Lottery explained.

The Lottery discovered the problem when two lottery players — a couple — sent in a letter outlining their observations about Daily Derby in April of this year.

After receiving the letter, the California Lottery reached out to the players by phone to discuss their observations and gather more information.

"They were noticing some numbers were only being printed in sequential order on their Quick Pick tickets that they purchased using Game Touch vending machines," Becker related. "They purchased from multiple machines at different locations and observed the same pattern, and we are so thankful they came to us."

Lottery leaders immediately launched an investigation, and that's when it was discovered that the error impacted both the Game Touch machines as well as the Flex terminals. Upon confirming there was indeed a software issue, the Lottery updated their machines and resolved the error within a day.

What followed was an internal deep dive into the scope of the problem, including an examination of whether the game's odds were impacted, Becker said.

While the Lottery concluded with certainty that the odds were untouched by the error, it is impossible to tell how far back in time the glitch took place and for how long it affected the game.

"We can't say with certainty when the error started affecting tickets. It may date back to when they were first installed at retailers," Becker supposed, noting that this was merely a possibility and not an answer. "For the Flex terminals, that was beginning in late 2018. For the Game Touch machines, that was in 2022."

In pure conjecture, Becker suggested that one possible reason we may never know the full timeline is the limitations of data storage.

"There are also limits on how far back data can be stored," Becker supposed. "My gut is that we will never know for sure when this error started impacting players."

Becker further explained that, had the Lottery had the ability to trace the issue back to a specific date or period, the Lottery would have likely made that information part of their initial announcement on Monday.

At the very least, if the Lottery could not answer the question of when the issue began, the next best question to answer was how many tickets, or wagers, could have been possibly affected in a given period of time.

According to the Lottery's business analysts, about 20% of Daily Derby wagers were impacted by the glitch. In a study that observed a twelve-month period between Fiscal Year 2022 to Fiscal Year 2023, the Lottery found that about 4 million wagers would have been affected. For comparison's sake, larger multi-state games such as Powerball and Mega Millions generate hundreds of millions of wagers each year, the Lottery pointed out.

To be clear, Becker noted, the one-year span of the data the Lottery analyzed in its study in no way indicates that the problem persisted for more or less than a year, rather its purpose was to provide an observable picture of the larger impact.

The final question the Lottery asked itself was how they would correct the problem. In its press release published on Monday, the Lottery announced a Daily Derby promotion. Starting today, July 16, the overall prize pool for the game will be boosted by $100,000 each day for 12 days.

"This means winners at any prize level will have the opportunity to win bigger prizes than they would without the promotion," the Lottery said. "If the grand prize is not won during the promotional period, the money added to the grand prize will remain in the pot until someone wins the top prize."

Across the 12-day span, the Lottery is adding a total of $1.2 million to the Daily Derby prize fund. The promotion ends on Sat., July 27, 2024.

IGT, in an effort to own up to the software error, is funding the promotion, something "hugely important" to the California Lottery so as not to take away funds intended for public education and beneficiaries.

Since the Lottery only tracks the wagers themselves and has no idea of knowing who is purchasing every single play, it is impossible to "make it up" to individual lottery players. Instead, the Lottery is hoping to address all Daily Derby players with its promotion and perhaps even extend a welcoming gesture to other players who may not be familiar with the game.

"What we're trying to do is make good to those who may have been impacted without knowing for sure who [was affected]," Becker said.

Despite IGT and the Lottery already having "robust quality controls," digital draw systems and room for human error mean that game systems are not foolproof.

"We want to be clear that we don't think there's ever going to be a hundred percent certainty that we can catch every potential glitch, error, or mistake, but we want to catch as many as we can, mitigate that, and enhance quality control," Becker emphasized. "As a result of this particular issue, the Lottery is reviewing additional statistical sampling on our side, and IGT, to their credit, is doing the same thing. No one wants to see a repeat of this."

At the end of the day, the software error is gravely unfortunate, especially since, at this time, there is no surefire way to figure out when the problem began and exactly how it influenced the prize payouts of every individual player. While digital draw methods offer efficiency and convenience, especially when drawings occur frequently or deal with large number matrices such as the ones in Keno, it is important to acknowledge that they inherently carry a margin for coding errors, underscoring the need for ongoing scrutiny and improvements in the system.

In moments like these, Becker indicated that it is the Lottery's goal to use these pitfalls as opportunities to educate and be upfront with players about the goings-on behind the scenes.

"Any kind of delay or extra time needed on analysis or storage issues all stems from the importance of integrity with these games," Becker said. "I only speak for California, but I am confident that for our fellow state lotteries, certainly California, the integrity of their games and the fairness of which they are executed is so critically important. I am always hopeful that the public will appreciate that thoughtfulness when it comes to issues like that."