Its not about growing the lottery market, its about changing lottery player behavior. At least this is the motto of Phil Wilson, COO of Winners Group, a lottery software company that has been in business for over twenty years and offers a sharp software solution for the secondary lottery vertical.
Secondary lotteries have recently gained some traction in the online gambling industry, meaning brands that allow players to essentially bet on the outcome of lottery jackpots around the world. Such brands sell “synthetic” tickets by insuring the jackpot or offer “lottery messengers” to buy a ticket on behalf of the player.
“Eighty-plus percent of consumers in Europe play lottery on a regular basis. What we’d like to do is change player behavior”, stated Wilson.
“So rather than just buying your local lottery, people are now starting to chase bigger jackpots more frequently and these sort of things”, he shared.
Regulatory hurdles
While there is much room for growth in the secondary lottery vertical, operators must be wary of regulatory hurdles, especially when dabbling in an industry such as lottery where regulation is notoriously an issue.
Its important to remember state lotteries are the competition of secondary lotteries, yet Wilson advises “not to poke the bear”.
“The thing is, we always say you’ve got to be as good as the state operators because forget the secondary lottery, the messenger services and so on, they’re not really the competition. The state lotteries are the competition because again, we’re trying to change player behavior”, Wilson said.
Implementing competitive strategies such as offering cheaper tickets than state lotteries for the same jackpots could backfire on secondary operators, however.
“Going head to head against state lotteries is probably not the wisest thing to do. And we certainly wouldn’t advise any of our operators to do that. It can be fun to go and undercut the state lotteries, but with a small change to regulation, that could very quickly put you out of the market”, warned Wilson.
“You’ve only got to look at what happened in South Australia, for example, where one of the leading brands there has been completely blocked from selling secondary lottery to all South Australian residents. Not the smartest move, in my opinion”, he added.
UK and potential secondary lottery restrictions
The UK government announced an open consultation on “Prohibiting Third Party Betting on Non-UK EuroMillions Draws” earlier this week, a move that could potentially impact secondary lottery companies such as Winners Group.
“The thing we have on our side is that governments are very slow moving, so irrespective of any consultation things will take time. Regulation always takes time”, said Wilson.
However, he does recognize the “monolithic lottery monopolies” are supporting charities and local communities, a moral high ground secondary lotteries are unable to take.
“Of course we can choose to donate a portion of royalties and so on to charity, but it doesn’t have the same impact. And it’s a very easy message for them to go to the wider public and say, ‘hey, don’t do this, you’re taking money from hospitals and schools’”, Wilson said.
“But I think going forward, its going to be very difficult to stop because if you were to look at that and look at, for example, sports betting in general, what you’re really doing with the secondary lottery is you’re actually just placing a bet on the outcome of some external event”, he added.
An opportunity for change
Taking into consideration the situation in South Australia and potential regulatory complications in the UK, Wilson has identified an opportunity for change in the secondary lottery industry.
“I think in the longer term we’ll all just have to get a little bit smarter by avoiding using branding and so on. I think very quickly its going to come to a point where actually you’ll be able to offer those big jackpots irrespective of whether you’ve got a name like EuroMillions behind it”, Wilson said.
“So I think there’s a really big opportunity for the industry as a whole to actually change”, he said.
Big jackpots, big risk management
For interested iGaming operators, the biggest concern associated with offering secondary lottery is how to cover paying out the massive jackpots. Even large, public companies would have trouble covering these jackpots, it’s a genuine risk.
“The biggest challenge is risk management and insurance and the policy you take and hold is probably the biggest question you need to answer. We’ve gone down a very traditional, institutional route with Lloyds, for example, but there’s lots of things like ILS insurance out there which can be very muddy in terms of what you’re actually getting”, Wilson explained.
Regardless of what insurance a secondary lottery operator holds, the most important thing is to remain transparent so the industry maintains its good reputation and keeps regulators at bay.
“You can choose to go down the road of advertising big jackpots but actually stipulating silly terms and conditions which aren’t transparent, but again its just a matter of choice and I think the more transparent we all are, irrespective of what platform you run, which B2C operator you are, who your competition is, it shouldn’t matter”, Wilson said.
“We should all be trying to operate against the state because it comes back to the point I made earlier which is you’re biggest competitor is the state and you have to be squeaky clean”, he advised.
