Beyond Regulations: How Lotteries Should Approach Sports Gaming

Tuesday May 8, 2018

Sports gaming is coming whether we like it or not and lotteries will either suffer from this expansion or capitalize on its popularity.

And yet, it’s a natural instinct to be skeptical about the idea of adding competition to an already saturated gaming market. Aren’t we just contributing to breaking what isn’t broken? Sure it could grow the pie, but there’s also the risk it could cannibalize existing revenue and take away from bellwether products like Powerball, Mega Millions and the ever-changing portfolio of scratch off tickets lotteries offer every year.

Why should lotteries engage in sports gaming? Because lotteries are perfectly positioned to do it better than the competition and our participation allows for a bulk of the profits to go to the good causes our industry supports.

The recently established West Virginia model is the most obvious and straightforward one. Bring the regulation of sports betting under the purview of the lottery and allow the inevitable revenue to be realized on the lottery’s balance sheet. This will help expand the reach of the lottery and allow for it to further satisfy its mission to support education, senior citizens and tourism in The Mountain State. This is an extremely logical approach and one I hope spreads across the country.

But as long as we keep our eyes open and focused on what can be and not just what is, that’s only one piece of the sports gaming puzzle. Imagine a world where sports gaming is not just a game of skill, where the other half of the marketplace – our half of the marketplace – gets a chance to play games based on live sporting events through an interactive lottery product.

There will be those reading this piece that will immediately scoff at this notion. After all, sports betting has always been a game of skill and lotteries are chance-driven enterprises. But why hold onto that notion? What evidence, aside from “it’s always been done that way,” do you see that precludes games of chance on live sports? There’s nothing about the psychology of a game-of-chance player that fundamentally keeps them from being sports fans. If that were the case, we wouldn’t offer scratch off tickets themed with local sports teams or conduct giveaways and lottery sponsorships at live sporting events. Sports gaming has been known solely as a game of skill because that’s the only way it’s ever been offered.

There is a game in the marketplace that our company has developed, a game of chance based on live horse racing. But while we’ve begun to earn real traction within the lottery industry, that’s just one example of what’s possible and it’s only the beginning for the live sports category in lottery. That’s really what we’re building at EquiLottery Headquarters, a new and interactive category of draw games based on live sports. And one that overcomes the concern about profitability inherent in the current sports gaming model that lottery industry leaders like Mark Hichar, a partner at Hinckley Allen, and the Maryland Lottery’s Gordon Medenica adeptly addressed at the PGRI conference in Miami. Sports gaming as a lottery game works within an existing tax structure and licensing model that keeps the revenue sharing from being oppressive to the entity attempting to create profitability.

How do you plan for a product category that is only in its infancy? Lay the legislative groundwork now. As your state starts to redefine its sports gaming statutes, be sure to carve out the express ability to offer sports gaming based on chance through the lottery. This is a strategy we recommend whether your statutes are currently silent on the issue or have a strict ban on combining lottery and live sports. When major legislation like sports betting passes, it’s likely to be opened up once in a generation. Take advantage of the moment and leverage the momentum to ensure lottery has a future in live sports lottery gaming.

As the only company expressly in this space, we want to help lead the way. When developing your live sports lottery strategy, please feel free to reach out and see how we can assist. We are happy to share our thinking on how this category should develop, consult on the development of player research or even testify in front of legislative committees on behalf of proposed legislation. I’ll also be pontificating on this subject over the summer as an invited speaker at gaming conferences such as GiGse in Miami and the East Coast Gaming Congress in Atlantic City.

This is an exciting time to be in the gaming industry. But we must fully recognize what’s possible now so that we aren’t left conducting business as usual while the rest of the gaming industry embraces new forms of wagering. That kind of thinking will grow the pie of our competitors to the detriment of the lottery industry and the good causes we represent. And that’s not a chance worth taking.