Home Online lottery How the expansion of online lottery overtakes online casinos in the United States

How the expansion of online lottery overtakes online casinos in the United States

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When it comes to legal online gambling in the United States, there is a kind of race between the lotteries and the casinos. Eight years later, it appears that online lotteries are winning.

Retail lottery tickets and land-based casino games can be very different products, but the online experience blurs this distinction. Instant online “tickets” may look more like video lottery terminals (VLTs) – and therefore slots – than scratch tickets. Lawmakers interested in expanding gambling must therefore decide whether to legalize one or the other is sufficient, or whether it is better to have both.

At the moment there are only two states with active online casinos but none online lottery. Conversely, five states offer instant iLottery games but no online casinos, and two have both. This does not include states that only sell raffle tickets online, but lack instant play because they are not comparable to online casinos.

Lotteries lead 2-1 in 2020, as casinos seek to match

This year’s model echoes the larger trend. In May, new online lotteries were launched almost simultaneously in Rhode Island and Virginia. West Virginia got its first online casino two months later. Depending on the progress of the regulatory process for Michigan online casinos, we might see the blocked account before the end of the year.

Until this year, Virginia was among the states selling raffle tickets online using a subscription service to circumvent existing laws. Its sports betting bill, which passed in March, also gave the lottery explicit power to sell tickets online at its discretion. Two months later, he launched a full online lotto site, including slot-type instant games.

Rhode Island was more of a surprise. Although few outside the legislature noticed it at the time, the 2019 sports betting extension bill what allowed the lottery to launch mobile sports betting also gave it more general powers to enter into contracts with third parties to offer other types of online betting. However, using these powers to start an online lottery was more of a long-term plan, until COVID-19 forced casinos to close. Establishing an iLottery has therefore become a practical way to compensate for this loss of income.

These are all the states that now have a full online lottery, along with their respective schedules:

  • Georgia (2012)
  • Michigan (2014)
  • Kentucky (legalized in 2013, launched in 2016)
  • New Hampshire (2017)
  • Pennsylvania (2018)
  • Rhode Island (legalized 2019, launched 2020)
  • Virginia (2020)

Similar starting points

This choice between iLottery and online casinos has existed since the United States began to liberalize its position on online gambling. Indeed, the first successful iLottery bill and the first successful online casino bill came just three months apart, in 2012.

This moment is no accident. Two important things happened in 2011 that served as the starting point for the race. First, the gray market situation that previously existed ended on April 15 that year, what is now known in the poker world as Black friday. It was the day the Department of Justice (DOJ) issued indictments against the three largest online poker rooms of the time and seized their estates.

Later that year, the logistics of legalization became easier, with the DOJ advising that the Wire law only applies to sports betting. New Jersey had already made an attempt to pass an online gambling bill by then. However, this interpretation of the Wire Act removed a major hurdle that had previously set most lawmakers back on the idea. It was really at this point that such efforts became widespread.

Illinois and Delaware led the charge the following year, passing bills for iLottery and online casino respectively. Georgia, which followed Illinois by creating an iLottery later in 2012, was the first to offer casino-style instant play. As of this writing, Illinois only sells raffle tickets online, which is why it is not listed above.

Why is iLottery the most popular option?

Every condition is different, with its own set of concerns and complications. Even so, there are a few universal factors that may prompt more legislatures to establish an iLottery rather than legalize online casinos.

The first is simplicity. An online casino invoice is bound to be complex, and most of them span several dozen pages. Every detail needs to be taken into account, from the allocation of responsibilities and licensing procedures, tax policies and technical requirements. It also usually happens that the Senate and the House of a State each draft their own bill. These will differ in detail, and further work will then be needed to reconcile them.

Paving the way for an iLottery, on the other hand, is usually as easy as changing a single sentence in an existing law. Often, it is sufficient to add the words “including Internet sales” to the section detailing the responsibilities of the lottery board. After that, lawmakers can move on, leaving the details of the iLottery to the lottery commission itself.

The second reason is money. Taxpayers’ money is the main incentive for any expansion of the game, but with the private sector involved, inevitably some money has to stay with shareholders. Conversely, 100% net profits from a lottery end up in the public coffers.

There are valid arguments the industry can make as to why private sector involvement is necessary. For example, legal online casinos can compete with illegal offshore casinos in a way that an iLottery cannot. However, not all lawmakers will be receptive to these points. The argument about where the profits go is easy to follow and difficult to dispute.

There are more than two choices

Of course, iLottery and the online casino are not mutually exclusive. Some states choose a third way.

One option is to follow Delawareis lead. The compromise found by its legislators was to legalize online casinos, but to have them operated by the lottery. It was the natural solution there, as their land-based casino works on the same principle. Rhode Island is a good candidate to follow a similar path, since it has the same arrangement with its land-based casinos. He may not even need additional legislation to do so, as the same law that allowed him to launch his iLottery and mobile sports betting could also cover casino games.

States that do not have this type of relationship with their casinos can implement both, but separately. Usually this means iLottery first, due to its simplicity, followed by private sector iGaming later. What’s this Pennsylvania did, and what Michigan is doing.

The problem here is that it can lead to turf war. Online slots and iLottery instant games are similar enough that you can’t help but step into each other’s market. In Pennsylvania, it led to casinos to try in vain to continue the lottery to offer games that are too similar to their own slot machines. In Michigan, the lottery ended the possibility of interstate play because of concerns that the big progressive jackpots on slot machines could lead to lower sales for large interstate draws, such as Powerball.

However, these conflicts are resolvable. Having both is the most natural long-term solution, and what we see in most of Western Europe. In the short term, however, simplicity wins out in the United States. For now, we can expect more states to start with iLottery and work towards online casinos than the other way around.


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