Fantasy Sports and Online Lotteries – trends to watch

Looking for the trends behind the news is a kind of game for me; it is something I do it with everything that I read or see anywhere. It is comparable to reading a mystery story, or playing any game that require analysis of the strategies of all the players – it requires looking for trends and for links between seemingly disparate events.  The king of Denmark’s expedition to Yemen in the 16th century, two espionage agents plotting the return of Lenin to Russia in 1917, fantasy sports leagues and the privatization of the lottery in Pennsylvania all represent trends or links to me.   The king of Denmark and Lenin are a little too esoteric for today, but fantasy sports and lotteries are not; each is likely to have a significant impact on the casino industry in the future.

Both have been in the news of late; Pennsylvania because of the open debate over whether it is a good idea to allow the British lottery company Camelot to operate the Pennsylvania lottery; and fantasy sports because we are nearing the Super Bowl and the end of the 2012 National Football League’s season.  In Pennsylvania, Camelot has promised to increase the profits of the lottery dramatically – the strategic plan is to involve a higher percentage of the citizens in the state in the lottery.  Camelot says that as a percentage of the population twice as many citizens of the United Kingdom play the lottery as citizens of the Commonwealth of Pennsylvania; Camelot purports to have the necessary skills to increase the lottery’s penetration in Pennsylvania.

The tactics include better marketing, more exciting products, bigger jackpots, keno, VLTs and online ticket sales.  Pretty straightforward, except that the last three, keno, VLTs and online games will change the gambling playing field. The changes will have a dramatic impact the state’s casinos.  The impact will go beyond on Pennsylvania, most lotteries in the country are watching and waiting their turn.  While they are fighting against federal legislation for online gambling, they want to reserve the right to offer some form of online lottery products within their own states.  It is an end-run around the casino laws and regulation and it is an end run around the casinos themselves.  To continue the metaphor, the defense of the industry is not prepared for that pending end-run play.

Fantasy sports is less controversial at the moment; probably because it is not seen as a threat to anyone.  Even the professional sports leagues that fight tooth and nail against any sports betting appear to be indifferent to it.   The leagues are currently in a lawsuit against the state of New Jersey over legalizing sports betting – they declare with a straight-face that it will corrupt all sports, amateur and professional.  And yet, 30 million people playing fantasy sports and betting against each other does appear to threaten the integrity of anyone.  Fantasy sports began before the internet, but with the Internet its has expanded dramatically.  As everyone knows, betting on sports is illegal – in all but a couple of states – but, betting on fantasy sports is not. Go figure.

So that is it, two seeming unrelated events and yet they are not unrelated in my mind. They are related in the cyber-world – the Internet plays or will play a significant role for both.  More importantly, both are skirting the regulations that limit and control the commercial gambling industry.   For most of its modern history, state lotteries have flown beneath of the radar of the gaming industry – lotteries were just not any real competition. Two things are changing that, first multiple-state, mega-jackpots and now on the horizon, online lotteries; combine the two, online games and mega jackpots and lotteries will be major competition for casinos.  Not only will lotteries have competitive products, they will have a direct link to the players that casinos do not have and they will do it without the huge capital invest that casinos are required to make.

Fantasy sports is like the lottery in someways, but unlike it in others.  As with the lotteries, no one is required to invest hundreds of millions or billions of dollars in a bricks and mortar location, and it can bypass all federal and state laws and get straight into the lives of the players via the Internet and all of the other personal communication devices that permeate our society.  However, there is one major difference – fantasy sports has no master or captain of the ship, no CEO or commanding general.  No one person or entity controls fantasy sports – it is driven by the logic of the Internet and shared information.  However, that is not to say that no one has a vested interest in fantasy sports or that no one is profiting from it, because there are people who stand to gain from its growth.  It might be called wiki-sports – what works, works because people use it, they control it and shape it.  But saying people in that broad context control something is like saying the sky or the ocean control the weather.  Both the sky and ocean affect the weather, help shape it, but the weather and fantasy sports are self-constructed and self-regulated systems.  And that means no one and no thing is in control.

So there you have it, the reasons that I think both the Pennsylvania lottery and fantasy sports are front page, leading story news; that is why I think everyone interested in the gaming industry should be paying them some mind.

 Camelot, which runs the national lottery in the United Kingdom and is a consultant to the California Lottery, is pledging to generate at least $34 billion in profits over a 20-year contract. Camelot’s plans include introducing keno to bars and restaurants, expanding the number of lottery retailers, improving the portfolio of games and changing marketing strategies to capture a broader spectrum of lottery players [including online sales], particularly those in higher income households. Mark Scolforo, Associated Press, 12-31-12

 Delaware’s latest effort to squeeze state revenues out of an increasingly competitive regional gambling market launched Tuesday with the activation of Keno instant lottery terminals at 81 bars, restaurants and other private businesses. Lottery Post, 1-23-13

Massachusetts Lottery players would be able to purchase tickets and play lottery games online under a bill being filed on Beacon Hill. The bill would authorize the Massachusetts State Lottery Commission to create internet gambling games, including establishing the price of tickets, the number and size of prizes, the manner of selecting winners and the frequency of drawings. Lottery Post, 1-25-13

 Fantasy Football Becomes A Game Of Skill; While betting on individual football games is prohibited by law, betting on fantasy football is not. Fantasy football is a billion-dollar industry and includes everything from private fantasy sports consultants to website subscriptions offering fantasy advice. Among the recent innovations in fantasy sports are websites offering short-term fantasy leagues in which participants pay a fee ranging from $5 to $100 to play in a league organized through the website. The winner(s) of the league takes a percentage of the money in the pool and the website collects its rake. This is perfectly legal. Gambling on sporting events over the Internet is prohibited by law. Websites such as that once permitted an individual to make an easy $10 bet against the Bears have been shut down by the federal government and replaced with a cordial message that it is unlawful to conduct an illegal gambling business in violation of 18 U.S.C. Section 1955. Benjamin Haskin, Chicago Daily Law Bulletin, 1-7-13


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