Minnesota’s online scratchers on life support; Illinois Lottery falls short (again)

TAGs: GTech, Illinois, Illinois Lottery, Minnesota, minnesota lottery, Northstar, Scientific Games

minnesota-lottery-endangered-speciesIt’s not looking good for the Minnesota Lottery’s attempts to drag itself into the 21st century. On Thursday, a conference committee of three state senators and three representatives approved a bill that would prohibit the Lottery from offering online scratch tickets, which critics have unfavorably compared to online slot machines. The bill would allow the Lottery to continue to offer online sales of traditional draw tickets but explicitly bars the Lottery from offering online “casino-style games,” including blackjack, craps, keno, roulette, poker or dice games. Sales of draw tickets at gas station pumps would also be scrapped.

Minnesota launched its Spicy 7’s online scratchers in February, becoming the first state lottery in the US to offer instant win tickets online. Lottery director Ed Van Petten justified the online wrinkle as both a way to lower the median age of lottery customers as well as a promotional tool to boost ticket sales at traditional retail outlets. But legislators reacted angrily to the launch, accusing Van Petten of overstepping his mandate and suggesting that the new state slogan should be Land of 10,000 Lakes Of Hellfire in Which Our Children Burn for Eternity. (Got to admit, it would sell bumper stickers.)

The bill now faces a vote in both legislative chambers, and if passed, would take effect Oct. 30. A spokesman for Gov. Mark Dayton said the guv had yet to form a position on the bill and wouldn’t be commenting until the legislature hands him a bill to sign. Dayton has previously expressed vague support for the Lottery’s online initiative, suggesting the pushback was more to do with the state’s other gambling interests fearing competition. A Dayton veto could stand because the current legislative session ends on Monday and legislators likely wouldn’t have time for a vote to override Dayton’s veto.

Scientific Games Corp. (SGMS), the Lottery’s technology provider, has warned legislators that it may sue if the state scraps the Lottery’s online initiative. SGMS president Pat McHugh said a preliminary examination had estimated the shutdown would cost the company over $4m, and that didn’t include “reasonable profit recoverable as just compensation.” Legislators have scoffed at this threat, saying SGMS wouldn’t jeopardize its existing deals with the lottery’s other products.

The Illinois Lottery was the first to offer online draw ticket sales two years ago, but the company managing the lottery’s operations is coming under fire for failing to meet revenue projections. Northstar Lottery Group, a joint venture of SGMS and GTECH, became the first private manager of a state lottery in 2011. Under Northstar’s management, the Lottery’s revenues have improved but nowhere near the lofty totals Northstar had promised prior to winning the contract.

In March, Northstar admitted it would once again come up short of its annual projections for the fiscal year ending June 30, the third straight year of missed targets. To date, the Lottery has fallen $440m shy of its projections. This week, Rep. Jack Franks called the privatization program “nothing less than a disaster” and said it was time for the state and Northstar to “go their separate ways.” The Chicago Tribune quoted Franks urging Gov. Pat Quinn to stand with the people of Illinois, “not with a bad decision he made three years ago.”

A Quinn spokesman said the guv was “closely monitoring the situation.” A Northstar spokesman defended the company’s performance, pointing out that it had paid the state $60m in penalties for failing to meet its projections. “As a result, the state has received every dollar [it was] guaranteed.”


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