Members of a Minnesota House committee recently voted to ban internet ticket sales that have been available for four years and stop selling online scratch-off tickets that debuted in February. The bill now heads to the House Rules Committee, and the Senate will consider a slimier measure.
The move could cause the state to potentially lose $8 million in sales, and park upkeep, wildlife preservation and other environmental projects would lose funding could lose funding.
Leading up to the vote, state Rep. Greg Davids said, “The lottery is way out of bounds here and we have to rein them in and tell them how it’s going to be.” He added, “This is a massive, massive expansion of gaming with no statutory authority to do so. This is not the online lottery, this in online crack. This is addictive and this will destroy families.”
Senate Taxes Committee Chairman Rod Skoe said that in a hearing before the session started, he was struck by what he called Van Petten’s brazen disregard for legislative approval. “At that point, it was clear to me they were, ‘Damn the Legislature, we are going to do what we want to do. That was a mistake, in my opinion,” Skoe said.
But Lottery Director Ed Van Petten insisted, under existing law, his agency had authority to proceed with offering the new games. He added brick-and-mortar lottery sales are declining and the new online games are essential. “We are using this technology to evolve. The retail environment has to evolve,” Van Patten told the committee. He noted the instant-play games were designed to build brand awareness and to attract players under 40 years old who are technology-savvy. “That is the emerging market for all of us,” he said.
Van Petten was supported by David Gale of the North American Association of State and Provincial Lotteries, who told committee members Minnesota must continue online sales “if you expect to remain relevant, if you expect to have a player option 10 years from now.”
Van Petten also pointed out if the proposed ban on internet sales prevails, the lottery could be exposed to a potential breach-of-contract claim by a key vendor that could cost the state $2.5 million. But Rep. Ann Lenczewski said, “We have ability to say we are not going to pay back that $2.5 million. The lottery can eat that.”
Democratic Governor Mark said he respects lawmakers’ concerns but believes they are micromanaging the lottery. When Dayton appointed Van Petten to the lottery job in early 2012, the governor’s charge to him was simple: “Be successful, generate money for the great causes we are serving,” Van Petten recalled. Dayton said he would like to meet with Van Petten and legislative leaders who want to stop online sales. “Gambling is something that the citizens of Minnesota were willing to support for the revenues and the good things that could be done with that,” Van Petten said.
The governor added he wants to know whether opposition to online sales only is coming from interests groups. Casinos and charitable organizations that sell pull-tabs in bars and restaurants had said the online lottery games will cut into their sales. Some brick-and-mortar stores worry about declining purchases and compulsive-gambler support groups said it leads to addiction. However, Van Petten said the scratch-off games are not affecting retail pull-tab sales and in fact should help them. He also said the lottery does not compete with charities that sponsor scratch-off games, but Al Lund of Allied Charities disagreed, and stated charities would lose money to online lottery sales.
In two months, instant-play online games generated $170,000. The online drawing games, launched in November 2010, have netted $3.3 million. About 8,500 players actively use new online accounts, compared to about 1.2 million Minnesotans who purchase tickets at least once a month. Online players spend $30 a week on average. They must pre-register a bank account for wins and losses. Special software verifies their age and residency and caps weekly electronic purchases at $50 per player.
The Minnesota Lottery generates more than $500 million a year in total revenue; about 60 percent is paid out in prizes. In fiscal year 2012, $124 million helped fund a variety of state programs.
