Kentucky Becomes Latest State to Move Toward Online Lottery Ticket Sales

By: Ifrah Law

Earlier this month, the Kentucky Lottery Corporation (“KLC”) presented state lawmakers with a timeline for the launching of an online lottery ticket sales platform by the middle of 2015.  The KLC’s plan is to launch multi-state drawing games such as Powerball first and then launch other lottery products in the following months.  Online lottery ticket sales represent an untapped market for state lotteries that could see rapid expansion in the next several years.

In 2011, an opinion issued by the Department of Justice (“DOJ”) in response to an inquiry by the lotteries of Illinois and New York allowed for states to offer lottery ticket sales online.  The DOJ opinion found that “garden-variety lotteries” such as those proposed by Illinois and New York that do not involve sports wagering were not within the prohibitions of the Wire Act, and therefore, tickets to those lottery games could be sold online.  Previously, state lotteries had hesitated to offer ticket sales online because it was unclear if the DOJ would interpret the Wire Act broadly to encompass lottery ticket sales.

Thus far, only Delaware, Georgia, Illinois, and Minnesota have offered online lottery ticket sales. Florida, Massachusetts, and New Jersey have considered legislation to offer online lottery ticket sales within their borders and Michigan is moving forward with a plan to offer sales online by the end of the year.  Internet sales of lottery tickets in the four states currently offering sales represent less than one percent of the market, but present an enormous potential revenue stream.  In 2012, state lotteries sold $68.78 billion in lottery tickets and sales have been consistently rising in recent years.  A move to allow tickets to be sold online could further increase revenues for lotteries.

The slow movement on laws authorizing online lottery ticket sales may be due to the significant opposition across the country from brick and mortar retailers of lottery tickets who have been influential in lobbying efforts at the state level.  The brick and mortar businesses have argued that online ticket sales will hurt ticket sales at their stores and the foot traffic that comes with those sales.

Earlier this year, Colorado enacted a bill banning the sale of online lottery ticket sales and Maryland passed a bill enacting a one year moratorium on online lottery ticket sales.  In Minnesota, where the state lottery went live with online sales without express authorization from the legislature, several bills were introduced to prohibit online lottery ticket sales that all failed.

Offering online lottery ticket sales makes sense for Kentucky and other states as a way to generate additional revenues.  States that are starved for cash to cover budget shortfalls will continue to look for additional ways to generate revenue and online lottery ticket sales could offer significant additional revenue.