Minnesota Phases Out State Lottery-Operated Online Games

By: Michelle Cohen

Minnesota’s legislature recently passed a bill that bars the Minnesota Lottery from offering online games, following a four month transition period. Specifically, the new law bans the lottery director from offering “the play of, on an electronic terminal, through a Web site, or by any other means or device, casino-style games, including but not limited to blackjack, craps, keno, dice games, roulette, or poker.” The legislation also bans the sale of lottery tickets through a self-service device at gas stations or ATMs, and the Lottery may not sell instant win lottery tickets through a Web site. Tickets sales remain permitted for “draw” games.

Minnesota’s new law rolls back the clock. Minnesota was the first state to sell instant-play games via the Internet. However, state legislators asserted that the Lottery had exceeded its authority by allowing electronic games without legislative approval. Rep. Tim Sanders (R) argued that each expansion of gaming activity is required to be reviewed and approved by the Minnesota legislature. Apparently, Sanders’ colleagues agreed – the GOP-led House voted 122-6 on the bill. The Senate previously voted 56-8 on the new prohibition. Last year, Governor Dayton vetoed similar legislation, but Dayton allowed it to become law this year, without his signature.

Interestingly, the Minnesota law requires the Minnesota Lottery to suspend contracts associated with these new banned activities – for instance, contracts for sale of lottery tickets at ATMs, gas stations, and on websites. The new legislation does not address compensation to the contracting parties under these agreements. It would not be surprising to see litigation over these suspended contracts. Reportedly, lottery officials have warned that Minnesota could face suits and up to $12 million in early termination charges. Minnesota players who have enjoyed the convenience of buying these now banned tickets at ATMs, gas stations, and online, may get a rude wake-up call in a few months; as of today, the Minnesota Lottery’s social media sites do not appear to be advising of the upcoming ban. Minnesotans may want to “fill up” before the games are shut down.