Fourteen years ago I gave a speech to the National Association of State and Provincial Lotteries at their annual meeting, held that year in Minneapolis. They gave me a hand-carved wooden duck decoy that’s on my bookshelf today. My topic was this thing called the Internet and what it would mean to state lotteries and organized gambling in general. I told them it would rock their world. And it has. But thanks to a ruling last week from the U.S. Department of Justice, the lotteries may finally be in a position to fight back.
What amazed me back in 1998 was that the lottery folks weren’t Las Vegas-type gambling executives but more like the people down at the DMV — pleasant and chubby civil servants there to collect the money, thanks. They were secure in their local gambling monopolies and had no idea that some outfit in the Channel Islands could steal their customers with a game of online poker. The state troopers would handle that problem, they thought, dimly.
I suggested fighting fire with fire — that the states promote their lotteries internationally, expanding their territories and making even more money. They looked at me like I had two heads.
Since then Internet gambling and Indian casinos have taken twin bites out of the lottery business. But last week the DoJ ruled that state lotteries don’t violate the Wire Act if they are conducted in accordance with their charters, that is entirely within state boundaries and not involving wagers on sporting events.
So now California is thinking of selling its lottery tickets online, which is exactly what I suggested 14 years ago.
Once one state does it most of the rest will follow. The customer base of the lottery business will expand and the margins for the states ought to grow higher, too, because by dealing direct the lottery can grab some of that margin currently going to lottery retailers. Of course those retailers will hate that so even more lawyers will shortly be involved.
But the writing is on the wall and this has real technological significance for both the gambling and Internet industries. Location services will become even more important as lotteries are required to verify that their customers are indeed within state boundaries. I see, too, a whole new class of geographical proxies used to defeat these new services. Where once it was the hope of anonymous web surfing or watching the BBC iPlayer from outside the UK that drove these location spoofing services, soon it will be proving you are in Portland, Oregon, not Vancouver, Washington.
There are wonderful nuances to this, too. If I am a resident of a state but happen to be traveling outside the state, can I still legally order lottery tickets even though I am not home? I don’t think that one has been answered. Certainly if I am a visitor to a lottery state I ought to be able to order tickets even though my credit card issuer is in Canada or Tanzania, right? So an effective local proxy could allow international gambling, which is in the interest of the states to allow, however thinly veiled.
And what about the PowerBall and other multi-state lotteries? Where do they fit in this new system?
Will there even be physical tickets involved? Why should there be? And what’s the possible role of high frequency gambling — you know, the equivalent of high frequency stock trading?
If millions of tickets have been sold for a huge lottery jackpot with no winner yet identified, would it be possible for a syndicate or maybe a huge corporation to simply say “I’ll take all the remaining tickets, please,” reducing the odds to a certainty through one huge electronic buy?
Internet gambling is about to enter its own Wild West.
Kind of makes one long for the old days and those pleasant chubby people from the DMV.