In an online game the lottery will hold the trump card

Lotteries and casinos are both in the gambling business; each offers its customers an opportunity to make a wager and to buy a chance at the big jackpot.  Both the lotteries and the casinos operate under state law and each is regulated by state regulations. The regulations shape the way gambling is operated, which games will be played, how much can be wagered and when and where the wager can be placed.  For commercial casinos, gaming regulation is exacting – follow the rules or lose your license.

Lotteries do not face the same threat; lotteries are also regulated and have rules to follow; but unlike casinos lotteries are not only regulated by a state agency, they are operated by a state agency; the lotteries are owned, operated and regulated by the state.  In many cases, the lottery commission both operates and regulates the lottery.  The state never fines a lottery or takes away its license to operate.

In 2013, casinos and lotteries are operating in a very challenging economic environment; both are under constant pressure from competition and from the economy.  For casinos, it has become very difficult to increase gaming revenues; to make a profit is even more challenging.  And it must always be done within the regulations and the under the watchful eyes of ever vigilant regulators.  A casino’s responses to the economic and competitive challenges are limited by regulation.  A casino cannot introduce a new game or type of wager, nor it engage in marketing campaign that the regulating agency does not find suitable.  Everything a casino does has to meet the approval of the state regulatory agency.

 For lotteries it is different; lotteries too are under pressure from competition and the economy.  But they are also under continual pressure from the state government to increase sales and to send more money to the government.  However, unlike casinos, lotteries are not as limited and constrained by regulation; when regulations get in the way of increasing lottery revenues; the lottery commission has the power to change the regulations.

The difference between casino and lottery regulation can be seen in the case of ATMs.  ATM machines where invented for public convenience, to allow people access to their bank accounts 24 hours a day; those convenient machines can be placed anywhere a person might want some of his money; they are in gas stations, supermarkets, malls and nearly everywhere else people might wish to find them.  But for casinos, existence and placement of ATM machines is subject to regulation.  Some states forbid placing ATMs in casinos, while in other states limit the number and location of ATMs in casinos; and all states control where in the casino they can be placed.  After all, instant access to cash might cause a person to bet more than they can afford, right?

In fact, that is just the type of behavior regulations are meant to control.  Regulations are intended to keep casinos honest and to protect the gambling public from the casinos and from harming themselves. Not since the 19th century has anyone suggested that it was necessary to protect players from a corrupt lottery; would the government ever knowing cheat its citizens?  Of Course not!  Although occasionally a person who sells and redeems lottery tickets is arrested for cheating players.

However, protecting the players form themselves is an important issue in every state with a lottery.  Each state in the course of authorizing its lottery promised to protect the problem or vulnerable players from themselves.  It was easier to promise than it is to live up to the promise; that promise becomes more difficult as lotteries strive to increase sales.  Every year lottery commissions and lottery directors look for ways to increase sales; better advertising campaigns, new games, linked games and more points of sale are all considered. Each new ticket, advertising campaign or new point of sales is meant to reach more people, people who have not played the lottery before or those who play very little.

The Missouri lottery is in just that position, sales are declining while the need for lottery funds continues to increase. What is a lottery to do?  How about making tickets available at the gas pump or lottery options at the ATMs?  Yep, for the Missouri lottery that seems like a good idea and a solution to this year’s budget crisis.

That is why I think lotteries just may be the biggest long-term threat to the casino industry.  Lotteries are not bound by the same rules – when they need more money, they just change the rules.  Gas pumps, ATMs and the internet, it is all the same to the lottery director trying to drive sales.  And while the legislatures around the country are debating online gambling, the lottery directors are making plans to go online.  No big license fees, no outrageous tax rates and no limitations on the games they can offer; and if there is a limit, in many states the lottery itself can change the rules.  Even in states where both casinos and lotteries might eventually offer online gambling it will not be a level playing field.  Lotteries will be holding the best hand – always.

 Missourians will soon be able to electronically purchase Powerball and Mega Millions lottery tickets at a handful of gas pumps and ATMs around the state.  The new effort, intended to encourage more ticket sales, comes as the state budget has grown more reliant on the Missouri Lottery to fund public education.  In the budget that takes effect July 1, the state Legislature is gambling that the lottery will generate record sales and transfer a record $298.5 million back to the state.  “We’re going to aggressively pursue that goal,” said Judy Gehrke, chief financial officer for the Missouri Lottery. Elizabeth Crisp, St. Louis Post Dispatch, 5-31-13


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