The Massachusetts State Lottery Plans a Site for Online Lotto, DFS, and Social Gaming
The State Lottery of Massachusetts is interested in expanding its online operations in a number of directions, including social gaming and daily fantasy sports. Last week, the Massachusetts Lottery Commission issued a general call from technology firms for information on how best to expand online lottery ticket sales. It also asked for ideas on building a social gaming platform, while also exploring the idea of limited daily fantasy sports contests.
The Lottery Commission told respondents that their new proposed online gaming platform would be called the “ILottery System”. This would include online lottery sales, social gaming like the games found on Facebook, and DFS gaming. Massachusetts sells iLottery tickets on its official website, but the commission would like to make such sales a bigger part of the overall picture.
iLottery System Website
The idea behind the iLottery System would be to diversify lottery sales to a wider range of possible gaming options, like an investor might diversify their stock portfolio. Massachusetts State Treasurer Deborah Goldberg has complained in the past that the keno and scratch ticket sales account for far too large of a percentage of lotto sales. The keno and scratchcards account for 87% of revenues. Since those are among the forms of gambling with the lowest payout percentages, it represents a bad playing option for the vast majority of lottery gamblers.
Officials might not care about the relative odds players have in-and-of-itself, but Deborah Goldberg fears that trend is apt to lead to declining lotto sales over the next few years. Data shows that the younger generation is more savvy about lottery payouts than the older generations, so fewer of them bet on scratchcards and keno tickets. That means the revenues from those forms of lottery betting are going to decline over the years.
Impact of 3 Brick-and-Mortar Casinos
The expansion of brick-and-mortar casino gambling in the state is also likely to hurt lottery sales. Massachusetts is set to open 3 new land-based casinos in the next 4 years. Two of them are massive new integrated resorts at both ends of the state. When the Wynn Everett Casino in the Boston area and the MGM Springfield Casino in Western Massachusetts are opened, gamblers around the state will have more gaming options than playing the lottery at the local convenience store.
As much as people deride casino gambling, the house edge on casino games is much smaller than it is on lottery gambling. Lotto tickets have a house edge of 30% to 40%, meaning the average person loses $30 to $40 of every $100 spent on lottery wagers. Casino games are prohibited by law to offer such lousy odds. Casinos would lose their licenses, if they did so (though casino-based keno outside of Las Vegas and Reno is usually an awful bet).
More Than Lotto Ticket Site
Streamlining the online lotto sales represents an opportunity to offer a product the brick-and-mortar casinos cannot. If people could buy lotto tickets at home, that adds another level of convenience that lotto vendors could not. But since most people fill-up with gas at the local convenience store, offers standard ticket sales through the computer might not hold much attraction for gamblers. Offering other attractions, like social gaming and daily fantasy sports, would make the online product much more attractive to customers — especially younger gamblers who prefer games of skill.
The inclusion of daily fantasy sports is ironic. Back in November 2015, the Lottery’s Executive Director, Michael Sweeney, said DFS was the biggest threat to the future of the lottery. Daily fantasy sports offers game enthusiasts the chance to enter contests with some measure of skill involved, which is a far cry from the pure game of chance the lottery represents. In the weeks after Michael Sweeney made his statements, daily fantasy sports companies like DraftKings and FanDuel have come under tremendous pressure from officials in New York, Nevada, and Illinois. That industry is facing a serious — perhaps even an existential – threat in the current lawsuit brought by New York Attorney General Eric Schneiderman.
Maura Healey’s Proposals for DFS
Since then, Massachusetts Attorney General Maura Healey has suggested regulations for the daily fantasy sports industry. At the time, those suggestions appeared to involve the licensing, regulation, and taxing of private DFS companies. But with laws still to be written before any such regulatory actions could be taken, it is possible the new law would allow the Massachusetts Lottery Commission to also offer such games.
Something like the ILottery System has obstacles. The lottery has longstanding business partnerships with the land-based vendors. Any attempt to go online with lotto sales would undercut those partners’ business, creating hard feelings. That is why the Lottery Commission asked for guidance from technology companies, because they would like the best way to support “cross-pollination between the online applications and physical retailer space.“