BOSTON — If the Massachusetts State Lottery is to continue to thrive and return hundreds of millions of dollars to cities and towns, it must have the ability to move online in some fashion, its executive director said, but it first needs permission from the Legislature to test the World Wide Web’s waters.
“It’s critical to the Lottery’s future ability to produce revenue that we’re allowed to engage clearly changing technology and, to me, what is a very strong change in the commerce pattern that consumers engage in,” Lottery Executive Director Michael Sweeney told the News Service. “That’s increasingly online and I think that the marketplace is driving just about every business in that direction … it’s certainly a space the Lottery has to have the opportunity to also occupy.”
To facilitate the Lottery’s internet exploration, Sen. Jennifer Flanagan (D-Leominster) has filed a budget amendment that would give the Lottery the ability to issue a request for proposals and begin the process of making Lottery products available online.
“We have the most productive, most successful lottery in the country, our cities and towns benefit from that, the state benefits from that,” Flanagan said. “But we cannot be left behind. We really need to start to look forward, and the amendment allows the Lottery to begin that process.”
Flanagan’s amendment — which she said mirrors a bill she’s filed each of the last two sessions — would authorize the Lottery to offer its current slate of games online as long as it is able to verify that players are at least 18 years old and are in Massachusetts.
“It’s important that we give the Lottery time to ease into this,” Flanagan said. “Certainly the world around us is changing, everything is going to mobile and if you’re going to move a lottery to an online system it’s going to take time. I think it’s important to, and we have a responsibility to, look ahead.”
Sweeney also noted that any move onto the internet would take time. The length of the procurement and contracting process, he said, “adds to the urgency of hopefully getting something passed during this current legislative session.”
The Lottery has gone as far as it can without enabling legislation, Sweeney said, and it is “critical we get this guidance from leadership on the House and Senate sides.”
Flanagan’s amendment is expected to be considered this week as the Senate debates its fiscal 2017 budget proposal. Sweeney said the amendment would give the Lottery the ability to explore a diverse array of online options and provides “the flexibility to be able to accurately respond to marketplace and consumer demands.”
“We view the language in Sen. Flanagan’s bill as being a very broad-based mandate and frankly that is what we’re looking for,” Sweeney said. “It’s critical because what I’ve found in studying this over the last year is that technology in this world — the online world and the lottery world — is changing and developing so quickly that if too many language parameters are put around it in an enabling act, I’m concerned that would constrict our ability to react, potentially too narrowly.”
The Lottery has already begun to study some of the possibilities. In December, the Massachusetts Lottery Commission issued a request for information, inviting organizations to submit proposals for development, implementation, operational support and maintenance of an online lottery system.
That RFI — which garnered 20 responses — asked for proposals for “the development and integration of digital versions of existing and new lottery games (‘iLottery Games’), including but not limited to social gaming and daily fantasy sports options.”
The Lottery was also interested in information about “gaming systems that allow for cross-pollination between online applications and physical retailer space and any other progressive gaming opportunities that may be available.”
Convenience store owners, who rely on the Lottery for some of their business, have strongly opposed a Lottery move to the Internet.
Sweeney last year told House and Senate budget writers about the need for innovation at the Lottery, “We’re running an operation that is cash dependent and also has no online presence. And I think businesses in the private sector that have followed that particular model have quickly ended up in the scrap heap of history.”
A 2012 report from then-Treasurer Steve Grossman’s Online Products Task Force concluded that if the Lottery does not jump into the online world, other web-based products will eventually cannibalize the Lottery’s players and revenues.
“The introduction of online products and play is inevitable as it is indisputable that the world is shifting rapidly to online and mobile for all manner of commerce,” the report’s conclusion states. “The threat is imminent.”
Despite its dire warning, the task force’s report also concluded that opening up an online channel for the Lottery to sell its products “may not significantly increase the number and type of players who currently engage with Lottery products.”
And Treasurer Deborah Goldberg late last year cautioned lawmakers that the recent string of record-level Lottery sales will not continue unless the Lottery adapts to compete with the state’s growing casino gaming industry and daily fantasy sports contests.
Goldberg has touted the idea of a Lottery-run fantasy sports game, which she said would attract a younger audience that favors playing on mobile devices, particularly 25-to-45-year-old males “who are not Lottery players (and) who are extremely excited by sports-related fantasies.”
While Flanagan’s amendment deals solely with existing Lottery products, Sen. Eileen Donoghue of Lowell has filed a budget amendment to establish a special commission to study “the regulation of fantasy gaming and daily fantasy sports in the commonwealth.”
Donoghue’s amendment calls for nine people to be appointed to review all aspects of fantasy gaming, including “economic development, consumer protection, taxation, legal and regulatory structures, implications for the Massachusetts gaming community, burdens and benefits to the commonwealth and any other factors the commission deems relevant.”
The governor, Gaming Commission, attorney general, Senate president, House speaker and the minority leaders of each branch would appoint members to the nine-person commission, and Donoghue’s amendment calls for the commission to report back with its findings and recommendations by March 2017.
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