The pandemic set up a sort of catch-22 for Massachusetts lawmakers over the future of lottery in the state.
In a joint committee hearing last week, a Massachusetts Lottery representative asked permission to bring the lottery online to make them pandemic proof.
However, lottery retailers argue that they’re already struggling coming out of the pandemic. Losing lottery sales to online could put them out of business.
Meanwhile, some Massachusetts lawmakers want online lottery games to provide additional local aid to cities and counties, which could put that money toward pandemic recovery.
“What we’re here today asking the state legislature for is consideration to allow the Mass Lottery to be a continued and successful local aid revenue generator by allowing us to move with today’s technology and customer’s expectation,” said Michael Sweeney, executive director of the Massachusetts State Lottery Commission.
Lottery legislation being considered in Massachusetts
Online lottery bills from Sen. Paul Feeney (S 203) and Rep. Dan Cahill (H 316) were the main topics of discussion at the Joint Committee on Consumer Protection and Professional Licensure hearing on June 21.
Sen. Brendan Crighton’s S 181 modernizes lottery payment options by allowing debit cards be used for lottery ticket purchases. He projects a $30 million increase in lottery revenue by allowing cashless payments.
Crighton added that he supports online lottery as well.
“I believe that if we don’t modernize our current lottery through these measures it will soon not be able to compete for consumers and we will see significant revenue reductions for our cities and towns.”
Massachusetts Lottery actually did well during pandemic
Despite many retailers facing closures or restrictions during the pandemic, the Massachusetts Lottery recorded its third-best year in revenue in 2020. Coming out of the pandemic, the lottery is projecting near-record numbers this year with more than $1 billion in revenue.
“Over the course of the pandemic, the lottery provided a valuable source of revenue for many small businesses across the state, including supermarkets, gas stations, restaurants, convenience stores, and your local corner store,” Sweeney said. “Protecting local aid and supporting our network of retail partners remains a critical approach.”
Rob Mellion of the Massachusetts Package Stores Association used that success as a reason a change isn’t needed.
“If we were talking about a system that wasn’t working, that wasn’t making money for the state, I think that would be different,” Mellion said. “But the lottery has produced record numbers in five of the past seven years.”
Pandemic accelerated changes in customer behavior
Facing the threat of COVID-19, people shifted to buying more and more items online last year. And they became more conscious of passing around dollar bills. The Massachusetts Lottery wants to adjust to these changes.
“During the pandemic, society saw an acceleration in the shift of consumer behaviors towards online, cashless transactions, as well as dramatic increases in delivery apps and curb-side pick-up orders that no longer require customers to even set foot in some stores, including traditional lottery locations such as supermarkets and restaurants,” Sweeney said. “While these developments were certainly necessitated by the pandemic, they are likely to have a permanent impact on consumers and their behaviors as well as how businesses operate.”
The Massachusetts Lottery already has taken some steps to go online, creating a lottery app that allows customers to scan their tickets and see if they are winners. Since the app launched late last fall, Sweeney stated that 28,000 users have registered.
He added that 13 of the 45 state lotteries in the US now have some form of an online lottery, including neighboring New Hampshire and Rhode Island. Connecticut also passed a law this year allowing limited online lottery products.
Lottery retailers ask for status quo
Mellion contended that retailer need the foot traffic that the lottery provides them. If lottery tickets move online, he fears they’ll lose customers.
“Brick and mortar is under assault from every direction right now and is taking hits from every direction, and iLottery is another hit for them. Lottery brings people into stores. I don’t think anybody can contest that. When we go to a cashless system, when we go to a system that is checking tickets online, that is driving people out of stores. … That is a person who is not going to come to the store anymore. And that’s what happening to retailers, convenience stores, markets all across the state.”
Mellion pointed out that retailers already lost flavored tobacco in the last year. Plus they’re facing competition on liquor sales from restaurants offering cocktails to go. Lottery retailers argue that the debit card fees would eat up their profits.
Ryan Kearney of the Massachusetts Retailers Association said foot traffic to stores already is down while the lottery continues to flourish.
“In particular this year with the pandemic, these folks are struggling to get back on their feet and the only way they do that is foot traffic. Allowing for online lottery will decimate that foot traffic.”
Can online and retail lottery both grow?
Sweeney refuted these claims that taking the Massachusetts lottery online would harm retailers.
He pointed out that the Michigan Lottery went online in 2014 and hasn’t shown such cannibalization.
“We’ve seen that neither retail sales nor the online sales have suffered any sort of decrease during that entire time period in Michigan,” Sweeney said. “Each year, retail sales and online sales have both continued to move upward.”
