Online Lottery Sales Offer Minor Reprieve As Sales Decline

online lottery sales coronavirus

As with most other U.S. industries, state lottery revenues have been decimated in response to the coronavirus outbreak. Online lottery sales in a handful of states have helped bridge the shortfall, and are now being highlighted as a new revenue source for drying government coffers.

But initial online lottery increases are just a slight boost compared to the traditional retail product, which makes up the vast majority of overall sales. As most Americans began sheltering in place last month, March lottery revenues fell by an average of 25% to 33% in most states compared to the same time a year earlier.

April revenue reports have not been released, but with nearly every state issuing some sort of social distancing measures for the month’s entirety, these figures will likely be even lower.

Online lottery advocates hope this will spark renewed legislative interest in expanded internet products, but it remains to be seen if lawmakers share that same political appetite. With most statehouses facing dramatic budget shortfalls, online lottery sales remain a relatively straightforward new revenue opportunity, but such a small portion of the overall recovery it may be overlooked by more dramatic measures to combat economic hardships wrought by the coronavirus.

Lottery Revenues Face Declines

Along with Puerto Rico and Washington D.C., every state has a government-run lottery, excluding Utah, Hawaii, Alaska, Nevada, and Alabama. Nationwide sales topped $91 billion last year, which in turn generated a collective average of nearly 1% of total revenues collected by all states.

Far and away the most popular option in the larger realm of regulated U.S. gambling, dwindling lottery ticket sales has a drastic effect on state governments, most of which use these to fund education and other government programs.

In Pennsylvania, one of the largest lottery markets on a per capita and gross basis, lottery sales generate more than $101 million in revenue in March 2019 and a profit of more than $1.14 billion in fiscal year 2018-2019.

One of six states with a full array of online lottery sales, Pennsylvania reported about a 25% decline for scratch-off and draw game sales since social dissenting measures were enacted and roughly 30% of the nearly 10,000 Pennsylvania Lottery retailers closed. In the Keystone State, that means millions in lost revenues for programs benefiting state senior citizens.

There was a 29% increase in online lottery play last March, but lottery officials said that doesn’t make up for the lost revenues. Online sales of Powerball and Mega Millions tickets, the two largest lottery games, were just 4% of overall sales. Comparatively, about 70% of lottery revenues come from scratch-offs.

Other States Struggle

Pennsylvania is far from alone among digital and traditional lotteries.

The other five states with a full range of iLotto games, Michigan, New Hampshire, Georgia, Illinois, and Kentucky, have all suffered declines.

In Michigan, lottery sales were down 5% during the first week of statewide social distancing orders compared to the same time in 2019. A week later, the decline accelerated to a 35% drop year-over-year. That was despite a 123% increase in first-time online players and a 21% jump in online sales.

New Hampshire expected to generate around $100 million in revenues this fiscal year, and as recently as February, the state was on pace to eclipse that estimate by $3 million. By March’s end, the state was projecting a $1 million decline by year’s end, even with a 10% increase in online lottery sales and a 38% increase in first-time online ticket buyers compared to the prior month.

Other states, with and without online sales, saw similar drops.

California, home to the nation’s second-largest lottery by revenue, saw a 33% average drop in weekly sales during March 2020 compared to the same time frames a year prior. Last fiscal year California’s $7.4 billion in lottery sales generated $1.8 billion for education.

One of the hardest-hit states in the coronavirus outbreak, California could lose more than $500 million for education if this year-over-drop extends for the rest of the calendar year, further crippling what is already a difficult situation for the nation’s largest state budget.

New Online Lottery Opportunities

Though online lotteries haven’t been a panacea for beleaguered state budgets, the pandemic has helped digital lotteries grow while nearly every other form of gaming falters.

Despite prevailing fears online sales cannibalize retail sales and needed foot traffic for brick-and-mortar retails such as convenience stores, the past few weeks have shown little detriment to retail stores all while providing another revenue stream should in-person contact become impossible.

In Massachusetts, home to the nation’s largest lottery by per capita spending, state Treasurer Deborah Goldberg is lobbying lawmakers to allow digital options as soon as possible. The Fitchburg Sentinel & Enterprise reports Goldberg told elected officials the commonwealth faced a 33% year-over-year lottery revenue decline and that coronavirus “dramatically exposed the limitations and vulnerabilities of the Lottery’s all-cash, in-person business model.”

Additionally, online lottery sales can help pump up sagging jackpots. Some states are slicing their top payouts by half or more, which could further discourage players.

Challenges for Internet Lotteries Remain

But lobbying efforts in Boston and other state capitals may still prove difficult.

Aside from Virginia, which legalized online lottery sales before the full effects of the coronavirus outbreak reached the U.S., no other bills are eminent. A handful of legislatures, including Massachusetts as well as Ohio, meet year-round, but their meetings are still subject to further logistical challenges posed by the coronavirus.

Other states such as Missouri that could realistically consider online lottery legislation this year are remaining in session or returning to the statehouse, but these sessions too are likely to be short, subject to unprecedented social distancing handicaps, and perpetually under the overwhelming reach of the virus.

There are also political hurdles. While states such as Kentucky and Georgia that have opposed most regulated gambling forms legalized digital lottery sales, gaming expansion remains controversial in many politically and culturally conservative states. There remain further concerns in most statehouses related to problem and compulsive purchases if tickets can be acquired through the click of a button instead of a trip to the convenience store.

Legal sports betting, which is facing an even more dire financial situation from the pandemic, has been approved in about half of the nation’s legislatures but has proven far more politically palatable than other options. Like full-scale online casino games or real money poker, online lottery sales legalization measures have failed in all but a handful of states.

Lawmakers that are set to return, or that will be called to a special session later this year, will focus almost entirely on health care protections and a diminished budget once they arrive in their respective capitals. Recent online lottery sales have been a bright spot in a seemingly universal revenue decline, but the few million dollars in new iLotto revenues could easily be overshadowed by the billions in shortfalls facing most state lawmakers.

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