Pandemic likely to speed up US lottery change

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The impact of the coronavirus pandemic is likely going to speed up the pace of change in the US lottery industry, according to David Isaacson, vice president of Spectrum Gaming Capital.

With retail operations under threat due to the implementation of physical distancing measures, the need for diversification throughout the betting and gaming industry has been brought sharply into focus.

Lotteries are no outlier to this and Isaacson believes the effects of the current crisis are likely to trigger a change in attitudes towards the sale of online lottery products, not only from within the industry but also among lawmakers and customers.

“A consequence of the Covid-19 pandemic on the gaming industry is that we are likely to see increased adoption of digital gaming across the spectrum,” he said.

Even as retail operations are gradually allowed to resume and current restrictions are lifted, Isaacson expects that it’ll be at least one or two years before the industry returns to normal, particularly with the anticipated shift in customer behaviour.

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Money is therefore going to move online, he says. “The tax revenue contributed by the retail casino, betting and lottery sectors has all but dried up and it’s not going to come flooding back once you turn the lights on again,” Isaacson added. 

“The states that rely on this source of funding will want to quickly refill their pockets and go back to making money from this industry – online lottery and gaming is an avenue to do so.”

Although the first order of business will be to reopen retail sites and help people return to work, casinos are now armed with a powerful reason to launch online operations. Lobbying efforts to legalise digital lottery sales will likely intensify and will be top of mind for gaming legislation, according to Isaacson.

Before coronavirus outbreak, there had been some reluctance from the retail industry and among political circles to increase the accessibility of lottery sales and bring online gaming into people’s homes.

However, those positions are shifting. The recent and ongoing spike in online gaming revenue in legalised states, such as New Jersey and Pennsylvania, is demonstrating consumer appetite for igaming and ilottery. As retail gaming businesses continue to suffer, the Spectrum Gaming Capital vice president believes that “the long-term pain is possibly going to force the hand of legisilators.”

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He also emphasised that online lottery should not be seen as a threat to retail operations.

“In states such as Michigan, Kentucky, New Hampshire, Georgia and Pennsylvania where ilottery sales are available, thus far online has not had a cannibalistic impact on the retail lottery sector,” he said.

“In these markets we’re seeing significant growth in both businesses. They are complementary not competitive.”

As more states move to embrace the online sector, questions have been raised over the status of state monopolies. However, for Isaacson, while competition on an operator level is unlikely to increase, legalisation will instead give way to an influx of game manufacturers and technology companies.
“ilottery requires a level of sophistication and diversification, as well as a varied games and technology offering to attract players,” he said. “You don’t necessarily need that on the retail side, but online is a different business that requires creativity.” 

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As demonstrated in Pennsylvania, which has legalised both online gaming and lottery sales, state monopolies are likely to face friction from the casino sector.

“Those two forms of gaming are going to be directly competing for customers,” he said. “Online lotteries will need to have the requisite technology and the games innovation to remain competitive.”

David Isaacson will be speaking at ICE North America Digital Conference next week, which takes place online from May 11-16.

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