Coronavirus Pandemic Boosts Lottery Sales: Trouble Looming?

lottery boost coronavirus

The US gambling industry has been both a winner and loser during the COVID-19 global pandemic. Some products suffered, and some products benefited.

On the hard-hit side of the ledger were land-based gambling operators and sports betting. Casinos and other gambling venues closed their doors, and virtually every sports league suspended its season – decimating the fledgling legal US sports betting industry. 

Conversely, with people spending most of their waking hours at home, online gambling revenues skyrocketed in the few states it’s available. An increase in online gambling isn’t surprising, but lotteries, both retail and online, also saw a sharp revenue increase during the shutdowns. And that is somewhat of a surprise.  

How US Lotteries Managed to Grow During COVID-19

According to research firm Eilers & Krejcik Gaming, after an initial decline, lottery sales increased during the worst months of the pandemic:

“In 2Q20, total US lottery sales increased +6.8% y/y and +7.8% q/q to $22.3 billion across the 46 US jurisdictions we track in our report… What was initially a negative impact on lotteries became a unique environment in which lottery sales actually grew at record rates.”

The unique environment that spurred on the growth was three-fold:

  1. Increased downtime and disposable income (stimulus checks and unemployment benefits)
  2. A lack of competition for people’s gambling dollars
  3. The availability of online lottery products 

Here’s a closer look at each of these factors, followed by some thoughts on the trajectory of lottery sales moving forward.

Money to Spend

Statewide shutdowns began in mid-March, resulting in some 21 million unemployed Americans. Most US residents received a stimulus check starting in mid-April, and at the same time, many received extra unemployment benefits that far exceeded their pre-pandemic pay.

After a month of uncertainty, the CARES Act created a unique situation of people having more money and more free time. That resulted in an initial dip in sales, followed by rapid growth.

The E&K Lottery Report highlighted a study conducted by the University of Chicago (distributed by the National Bureau of Economic Research) that “showed 2/3 of those on unemployment earn more with the additional boost. The study further showed ~20% of the group was earnings twice as much as their lost earnings.”

Bottom line: a lot of people had more discretionary income and very few things to spend it on.

The Only Game in Town

At the start of state shutdowns, people were only leaving the house for essential services. Along with an uncertain economic future, that almost certainly harmed lottery sales. But as restrictions eased, and the distribution of stimulus checks and unemployment benefits, lottery retailers began to see more foot traffic, and a significant spike in lottery sales.

One explanation for the lottery’s growth is the lack of competition.

Many lottery retailers (often convenience stores, grocery stores, and gas stations) are considered essential services and stayed open, while casinos, race tracks, and other entertainment venues remained closed.

In most locales, the lottery was one of the only gambling products available. And even if people were cautious about leaving the house, they could still play lottery games in quite a few locales, thanks to the proliferation of online lotteries in the US.

Lottery Tickets Without Ever Leaving the House

It doesn’t get as much attention, but online lottery products are available in more states than online sports betting.

Online sports betting is available in 11 states (some with in-person registration requirements).

Compare that to the 12 state lotteries that sell online lottery products (five of which are subscription services), and the six states plus the District of Columbia where residents can purchase draw game tickets through the third-party Jackpocket app.

Online Lottery States

Online Lottery Subscription States:

  • Maine– 13, 26, and 52-week subscriptions are available.
  • New York– The minimum subscription length is two weeks.
  • North Carolina– Subscription lengths range from a single draw to a full year.
  • North Dakota–Subscription lengths range from a single draw to a full year.
  • Virginia– The minimum subscription length is two weeks.

States where Jackpocket App is available:

What Happens Next?

The bad news is the growth state lotteries experienced during Q2 is unlikely to continue and could likely stall out entirely.

States are well into their reopening processes (including casinos in most locales), and the added unemployment benefits ended in July. That eliminates the advantages lotteries had during state shutdowns:

  • The extra time is gone, and additional unemployment benefits have sunset
  • Competition for gambling dollars has or is in the process of reopening
  • People are venturing out more, which lessens the need for online options

A second round of stimulus is still possible.

However, Congress hasn’t shown any urgency to get a bill passed, and COVID-19 numbers are improving. So, that horse may have already left the barn.  

More worrisome, the economy hasn’t recovered. Millions are still out of work, and states are phasing out moratoriums on evictions and deferments for loans and utility bills. Many of the same people who saw their income rise in May, June, and July are now seeing their income fall below pre-pandemic levels, and could soon face even more financial burdens.

It’s no secret that low-income Americans are more likely to play the lottery and spend a far larger percentage of their income on lottery products. As this Wall Street Journal explains, “studies have long shown a steady association between poverty and lottery play. Many scholars report that the poorest third of Americans buy more than half of all lotto tickets.”

And the poorest Americans are the ones that have been hardest hit by the pandemic. With the second round of stimulus checks and unemployment benefits in limbo, it’s hard to envision a scenario where lottery sales don’t suffer.  

Similar Posts