While there was no mention of it in Governor Cuomo’s January 17 budget proposal, New York Lottery recently revealed that it is preparing to begin letting customers play Mega Millions, Powerball, Lotto, and Sweet Millions via the Internet, now that the U.S. Department of Justice has issued an opinion that it's legal for states to sell lottery tickets online.

NYACS believes this has the potential to cause a major loss in foot traffic, which would not only affect our lottery sales, but also reduce ancillary sales of other products such as newspapers, beverages, prepared foods and snacks.

Until there is convincing evidence that Internet sales of New York Lottery games will not adversely affect lottery retailers, and jeopardize the jobs they provide, NYACS cannot support such an initiative. There needs to be a thorough, objective examination of the potential impacts on brick-and-mortar lottery retailers.

NYACS President Jim Calvin met January 11 with New York Lottery Director Gordon Medenica (left) and his senior staff concerning the online lottery issue. Here is a NYACS summary of some of the dialogue.

Which Games Would Be Offered on the Web?
Mr. Medenica said it would be a “modest effort” initially. They’d like to offer Mega Millions, PowerBall, Lotto and Sweet Millions via Internet. They have been offering online Lotto subscriptions for many years and online Mega Millions subscriptions since 2006. (I looked it up, and these games combined accounted for 13.3% of "traditional" lottery sales in the most recent annual report). Instant games, Take 5, Win 4, Pick 10, and Daily Numbers would continue to be sold only in stores.

Won’t That Take Business Away From Brick-and-Mortar Retailers?
“The objective,” said Mr. Medenica, “is to expand the pie, not to just shift share from one channel to another.” He said there has been no decline in lottery business at brick-and-mortar retailers in European countries that have introduced Internet sales. The United Kingdom, he said, started slowly in 2003, gradually building their Internet lottery sales to 15% of overall lottery sales in 2010, yet retail sales were higher in 2010 than in 2003.

Continued Role of Brick-and-Mortar Lottery Retailers
Mr. Medenica assured me they don’t want to hurt lottery sales at retail stores, which he said has always been “the core of our business” and will be for the foreseeable future. He said they know the network of retail outlets is “our bread and butter” and that they will not do anything to jeopardize that relationship.

Do They Need to Get Approval From Legislature?
Mr. Medenica sounded certain that no new legislation is necessary because existing law already authorizes the Lottery Division to do this. However, they will need to get an OK from Governor Cuomo. Mr. Medenica said they are preparing a presentation for the Governor and his staff seeking the green light.

What’s the Timetable for Implementation?
Either they really don’t know or they didn’t want to say.

What Are Other States Doing?
Illinois hopes to launch Internet sales of online lottery games in March. Washington DC plans to soon offer Internet poker, which Mr. Medenica said is “not even on our horizon.” Many other states are considering the opportunity.

Benefits to Lottery Division
Mr. Medenica said the Internet initiative would not just grow sales, but strengthen lottery operations, logistics and marketing. Having people open accounts online creates opportunities for the Lottery to market products and promotions to individual customers directly, including promotions for scratch-off tickets and other games they could only play at retail outlets.

How Would They Verify the Age of the Customer?
Using technology. Customers would have to first set up an online account providing date of birth, credit or debit card account number, and other information that would be matched against available databases to meet the Lottery’s obligation to verify that the user is at least 18 and physically located inside New York State. Mr. Murray said the Price Waterhouse has audited these controls and found them to be 96% effective.