Like land-based casinos, lotteries don't need to worry about cannibalization from iGaming
Online Poker Report

Key Massachusetts Official Fears Online Gambling Would Cut Into Potential Online Lottery Sales

Massachusetts online gambling and lottery
Massachusetts‘ quest to join the states with legal online gambling has seen progress this year.

However, it was doused with a bucket of cold water when State Treasurer Deb Goldberg fired a few shots across the bow at the Massachusetts Special Commission On Online Gaming, Fantasy Sports Gaming And Daily Fantasy Sports.

She is advocating for the state to authorize online lottery sales. Goldberg also made the case that online lottery needs to happen first.

The lottery vs. online gambling

The lottery commission, which Goldberg’s office oversees, and the Special Commission both met on the same day in late March. Following the meetings, Goldberg sounded troubled with the idea that online gambling might become legal before online lottery sales.

“It’s interesting: you’re hearing about the Gaming Commission saying they want online gambling, and then the comment that I read in the paper was that there are only so many entertainment dollars,” Goldberg told the local press. “So literally … if they get online gambling and we do not get iLottery, they would be trying to capture our money that goes to cities and towns for the profit of a profitable entity, like Wynn or MGM.”

Of note, the Special Commission is forbidden from discussing online lottery. That could be a nod to the idea that online lottery legalization could occur before the Special Commission presents its findings and recommendations to the state legislature. That will happen at the end of July.

Had online lottery been included, the legislature would have waited until the commission submitted its reports before giving online lottery authorization a real look.

Goldberg’s comments might be all for naught. The state Senate passed a bill that would have authorized online lottery sales last year. A similar bill surfaced this year. An online gambling bill is also alive in the Senate. But by any measure, online lottery legalization is ahead of online gambling legalization.

Cannibalization shouldn’t be a worry

However, even if a scenario where online gaming was legalized and online lottery did not came to pass, there’s little reason for concern. Much like the differences between online and land-based customers, there is only minimal overlap between online lottery players and online poker and casino players. That’s to say, cannibalization seems highly unlikely.

There are many counterintuitive aspects of gambling habits. For years, the land-based gaming industry believed online gambling was cannibalistic. But when Black Friday hit in 2011, and fewer people were playing poker online, US card rooms noticed their numbers dropped too. This was the first real indication that online gambling fueled land-based visitation.

More recently in New Jersey, casinos involved in online gambling have discovered that far from being cannibalistic, online gambling is beneficial to their land-based properties. The customer base largely consists of hitherto unknown players.

On the surface, the concerns Goldberg expressed seem reasonable. People have a certain amount of money they spend on gambling. Once it’s used up, that’s the end of their participation. And if we give people the option to play at home, they’ll stop coming to the casino or buying lottery tickets. If we offer them multiple types of online gambling, they’ll have to pick and choose or divide up their money.

How people actually spend gambling dollars

However, this is simply not how most people make these decisions. Observers need only look at the impact on lottery sales when other forms of gambling are available.

As research shows, the opening of Plainridge Park Casino has had zero impact on lottery sales in the state or locally.

In New Jersey, we can basically put these cannibalization fears to bed.

Lottery sales have increased every year since the introduction of legal online gambling in the state (in late November 2013).

 

2012 2013 2014 2015 2016
Online Revenue N/A $8.4 million $123 million $149 million $197 million
Lottery Sales $2.7 billion $2.8 billion $2.9 billion $3 billion $3.29 billion

Gambling is not gambling. Just like people don’t count the $20 per week they spend on coffee as part of their food budget, the $20 spent on the lottery every week isn’t part of a person’s gambling budget; that’s their lottery budget.

The outlook in Massachusetts could change if the cannibalization concerns get put to rest.

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Steve Ruddock
- Steve covers nearly every angle of online poker in his job as a full-time freelance poker writer. His primary focus for OPR is the developing legal and legislative picture for regulated US online poker and gambling.