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The lottery of the future?

Md.'s lottery chief says no to online games, but they're an idea that isn't going away.

Among the most interesting details exposed by the dispute over the $263 million contract to run the operations of Maryland's lottery is one buried on page 126 of the agency's request for proposals. At some point during the term of the contract, the Maryland Lottery and Gaming Control Agency may, at its sole discretion, ask the successful vendor to create a website and applications "for play from personal computers or mobile devices."

That's not a novel idea — a handful of other states have already begun Internet lottery sales to one degree or another, and many others are considering it. The models range from selling subscriptions to particular drawings, as states have done by mail for years, to new, high-tech instant games that marry popular, skill-based mobile game experiences with something akin to an electronic scratch-off.

Despite the inclusion in the RFP, Maryland Lottery Director Gordon Medenica insists that moving toward Internet play is "not a priority for us," and for good reason. The experience of states that have been leaders in Internet lotteries — notably Minnesota, Michigan, Georgia, Kentucky and Illinois — has been that they produce piddling sales. In the first two months of Minnesota's program, for example, it sold $200,000 in scratch-off tickets online and $139 million at traditional retailers. Kentucky projects online sales will account for about $7 million of its nearly $1 billion in total lottery sales this fiscal year.

Meanwhile, Mr. Medenica notes a number of costs and complications related to online sales, including the need for software to verify that players are over 18 and within state borders, plus electronic transaction fees. Maryland's retailers are diametrically opposed to online sales — out of proportion, perhaps, to their likely impact; Georgia and Michigan both claim retail sales have increased since they adopted online lotteries. Nonetheless, Mr. Medenica said that, in the classic Annapolis formulation, the juice wouldn't be worth the squeeze. He says he sees much more up-side in Maryland maximizing traditional scratch-off revenues.

Nonetheless, Internet lotteries remain a hot idea nationally at a time when a younger generation has proven relatively uninterested in the traditional variety. Illinois' experiment in online lotteries didn't end without a fight from proponents who see them as the wave of the future, and Minnesota only stopped its program because Native American casinos there lobbied to kill it out of fear that it would erode their business. Others back Internet lotteries as a gateway to Iegalizing online poker and other casino games.

Although Internet lottery sales have been common in Europe for years, it's clear that the medium is evolving rapidly, and what looks today like a bad bet may seem more compelling to Maryland lottery officials in the future. This fall, Georgia's lottery debuted Star Match, a mash-up between a Candy Crush or Bejeweled-like game and a scratch-off ticket. (The better a player does in the initial skill portion of the game, the larger the prize he or she might win in the luck portion.) The CEO of LottoInteractive, the company that developed Star Match, noted to USA Today that "the mobile gamer spends almost $300 a year and they don't win anything. They just win virtual prizes," adding that they would undoubtedly spend more if they had a chance at winning real-world cash. It may not be a big business now, but it's not hard to imagine that it could be. (Incidentally, Star Match runs on the iLottery platform developed by IGT, which is one of the companies protesting the award of Maryland's new lottery contract.)

The state Senate voted in 2013 to prohibit Maryland's lottery agency from marketing Internet games, but the bill died in the House of Delegates. When lawmakers return to Annapolis in January, they should amend the law to make clear that the lottery agency can't move forward with online sales and games without explicit legislative approval. Nothing in current law prevents it, and although we are heartened by Mr. Medenica's assurances, circumstances could change. Internet lotteries clearly have the potential to become a new form of gambling with new social and economic consequences — not to mention challenges associated with making sure a product explicitly targeted at young people isn't used by those under 18. The legislature needs to make sure we don't move forward with Internet lottery games without a robust and public debate.

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