The Current State of Online Lottery Sales and the Outlook for 2015

By: Ifrah Law

As states continue to search for ways to generate additional revenue, several states have explored the possibility of selling lottery tickets online.  Online lottery ticket sales represent an untapped market for state lotteries that could see rapid expansion in the next several years and it also looks to be a hot issue in several state legislatures for 2015.

In 2011, an opinion issued by the Department of Justice (“DOJ”) in response to an inquiry by the lotteries of Illinois and New York allowed for states to offer lottery ticket sales online.  The DOJ opinion found that “garden-variety lotteries” such as those proposed by Illinois and New York that do not involve sports wagering were not within the prohibitions of the Wire Act, and therefore, tickets to those lottery games could be sold online.  Previously, state lotteries had hesitated to offer ticket sales online because it was unclear if the DOJ would interpret the Wire Act broadly to encompass lottery ticket sales.

In 2012, state lotteries sold $68.78 billion in lottery tickets, with sales consistently rising.  A move to allow tickets to be sold online could further increase revenues for lotteries, but is often met with resistance from brick and mortar retailers of lottery tickets who have influential lobbying efforts at the state level.  This year, that influence led to Colorado enacting a bill banning the sale of online lottery tickets and Maryland passing a one year moratorium on the sale of lottery tickets online.

On the other hand, this year Michigan went online with its lottery ticket sales. The legislatures in Florida, Massachusetts and New Jersey all considered bills to authorize online lottery ticket sales and the West Virginia legislature considered a bill that would authorize a study on the impact of online lottery ticket sales.

Earlier this year, the Minnesota legislature passed a bill by wide margins in both houses that would have prohibited online lottery ticket sales, but Gov. Mark Dayton (D) vetoed that bill at the urging of the state lottery director.  The legislature could not override the veto because it had adjourned for the session, but many observers believe that with bipartisan support, the legislature will take the matter up again in the spring.  Gov. Dayton has stated that he believes that the lottery, which began selling tickets online in February, has the unilateral authority to offer online ticket sales without legislative action.

In Florida, a bill was introduced in the state senate last month that would authorize the state lottery to create a platform to sell lottery tickets online.  The text of the bill does not offer any details outlining how an online ticket sales program would work, other than that sales would be restricted to individuals over the age of 18.  The bill was referred to two state senate subcommittees earlier this month.  A similar bill was introduced earlier this year, but that bill died in committee.

In West Virginia, the state lottery director has indicated that the state will give serious consideration to online lottery ticket sales and he thinks it can be done without requiring a change to current state law.  His comments also implied that he believed that the state could be online with lottery ticket sales in the near future.  Earlier this year, a bill was introduced in the West Virginia House of Delegates that would authorize a study on the iLottery and iGaming industries, but the bill did not advance out of committee.

Kentucky expects its lottery to begin sales online in Fall 2015 after selecting their online lottery platform provider last month.  Officials in Kentucky are projecting $8.5 million in sales for the first year of the iLottery platform.  The state plans to launch multi-state drawing games, such as Powerball, first and then launch other products in the following months.

In the states which currently offer online lottery ticket sales, it has been a profitable venture.  Illinois, which has had an online lottery ticket sale system in place since 2012 and limits online purchases to $150 a day,  has grossed roughly $40 million since its launch. Meanwhile, Georgia has expanded its offering of lottery games available to purchase online and has generated $6.6 million in sales.

As 2015 state legislative sessions begin in the new year, many states may begin to explore the untapped market of offering sales of lottery tickets online.  Offering online lottery ticket sales makes sense as a way to generate additional revenue for states that are starved for cash and looking for additional ways to cover budget shortfalls and we are likely to see many states explore it in the upcoming year.