Online Lottery Is Spreading And No, It’s Not Cannibalizing Retail Sales

Sports betting and online casino and poker garner the most attention, but there’s another form of online gambling more and more states are turning to when they go in search of new revenue: Online lottery sales.

Online lottery has managed to avoid the contentious debates that have stymied online poker and online casino expansion in the US. As such, its spread has gone largely unnoticed.

Its spread has been helped by a seemingly innocuous ability to approve games some legislatures granted lotteries. That makes branching out into online sales easy, as it doesn’t always require legislative approval. The same power was used by the Oregon Lottery to bring online sports betting to the state.

The genesis of the power to approve games was to let the lottery bring new, but similar games to market. It’s safe to say that few legislatures envisioned sports betting or online lottery sales to be among the games. But here we are, with some form of online lottery products in 11 states.

Where Can You Buy Lottery Tickets Online?

Six states possess full-fledged online lotteries:

  1. Illinois – Online lottery went live in March 2012. Draw games only.
  2. Georgia – Online lottery went live in November 2012. Draw and instant win games.
  3. Michigan – Online lottery went live in August 2014. Draw, instant win games.
  4. Kentucky – Online lottery went live in April 2016. Draw games only.
  5. Pennsylvania — Online lottery went live in June 2018. Instant win games only.
  6. New Hampshire — Online lottery went live in September 2018. Draw and instant win games.

Minnesota was briefly an online lottery state. After the state lottery approved it, the sale of online lottery tickets went live in the Gopher State in February 2014, but the legislature repealed online sales in 2015.

Five other states offer online lottery subscriptions. Subscriptions are usually sold in blocks, but some states (North Carolina and North Dakota) allow the purchase of a single ticket, making them de facto online lotteries:

  1. Maine– 13, 26, or 52-week subscriptions.
  2. New York– Subscription length must be for at least two weeks.
  3. North Carolina– Subscription lengths range from a single draw to a full year.
  4. North Dakota– Launched in 2005. Subscription lengths range from a single draw to a full year.
  5. Virginia– Subscription length must be for at least two weeks.
Blue (online lottery) Green (subscription) Red (repealed)

The Opportunity

The success of online lottery varies by state, with Michigan being the state all other online lottery states are striving to imitate.

And for a good reason. Now in its fifth year, Michigan’s online lottery continues to grow by leaps and bounds and is producing some big numbers:

  • FY 2014-2015: $18.5 million in net online profit from $146,189,761 in sales.
  • FY 2015-2016: $48 million in net online profit from $384,992,537 in sales.
  • FY 2016-2017: $77.9 million in net online profit from $613,382,462 in sales.
  • FY 2017-2018: $93.7 million in net online profit from $770,064,903 in sales.

Pennsylvania is the closest to emulating Michigan’s performance. According to its most recent revenue reports, the Pennsylvania Lottery produced online sales of $381 million in its first full year. That puts Year 1 in Pennsylvania on par with Year 2 in Michigan. And that’s a good sign for Pennsylvania.

And here’s how some of the other online lottery states performed in the most recently reported FY:

  • Georgia – $50.4 million
  • Illinois – $27.6 million
  • Kentucky – $14.7 million
  • North Carolina – $6.8 million (subscription-only)
  • North Dakota – $1 million (subscription-only)

What About Cannibalization?

Michigan’s lottery has been growing alongside its online offerings. Michigan has set a sales record in each of the last two years, with retail sales growth increasing, despite the presence of online games.

Pennsylvania FY-over-FY was $4.5 billion compared to $4.2 billion. That’s an increase of nearly 7%. When we factor in its online sales of nearly $400 million, the state saw a small decline in retail lottery revenue.

Like Michigan, Kentucky has set revenue records in each of the last two fiscal years.

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