US States on the Internet Lottery Path

The sale of lottery tickets over the Internet could become a reality in the United States by the end of the year, as three states are considering the option.

The state legislatures in Texas, Illinois and Georgia are considering bills to enable Internet sales, and most lottery insiders feel that it's only a matter of time before one state--and others soon thereafter--breaks through.

The backers of all three bills have made significant progress. The Georgia bill was passed in the House, but the Senate adjourned for the year before it went for a vote. The Texas bill was passed by a House committee and is expected to go before the full House in a matter of weeks.

But the state that has made the most progress up to this point is Illinois. The Senate passed a bill that would create a system of online lottery retailers, and the House Committee on Gaming voted the bill out of committee (by an 11-0 vote) on Wednesday.

Rep. Lou Lang, D-Chicago, chairman of the House Gaming Committee and the main sponsor of the House bill, is cautiously optimistic.

"We had a very good hearing on the bill and we may or may not consider some amendments to it," Lang said. "We are in no real hurry to pass the bill, but I think we have support from the Speaker of the House. I don't expect unanimous consent on the bill in the full House, but I feel pretty good about our chances of passing it."

Lang said leading Democrats could use the bill as leverage during what's expected to be a hotly contested budget process in the next month.

"We are projecting this bill to generate another $60 to $200 million for the state," he said. "We will decide on a number in between there and then probably ask the governor to include that in the budget."

The Texas bill is in the early stages of the legislative process, but it could move quickly. The measure would allow players to establish accounts through the Texas Lottery Commission that would be similar to advance deposit wagering systems adopted for race betting in a handful of U.S. states. Accounts would be funded through debit credit cards, and sums would be deducted from the cards as users buy tickets through the Internet.

The Texas bill, introduced by Rep. Carlos Uresti, D-San Antonio, was added to a larger bill Monday during House Appropriations Committee hearing. The original bill dealt with fiscal matters affecting a wide range of government entities.

The larger bill was originally written by Appropriations Committee Chairman Jim Pitts, R-Waxahachie, who said during Monday's hearing that he supports Uresti's legislation and encourages the merging of the two bills.

Texas' lottery raised $1 billion last year for the state's schools, and Pitts says legalizing Internet sales would add another $100 million a year.

Bobby Heath, a spokesman for the Texas Lottery, pointed out that in addition to bringing in new revenue, Internet sales would chip away at the $175 million (or 5 cents for every $1 ticket) paid each year to retailers.

The National Association of Convenience Stores is aware of this as well and opposes the legislation for this reason. The association stated that the retail impact would hurt storeowners who "operate on very thin margins and depend on lottery ticket sales for a portion of their revenues and to generate substantial traffic."

Lynton Allred, executive vice president for Texas Petroleum Marketers and Convenience Store Association, said online sales could mean a reduction in store profits for his members, but the association hasn't yet decided whether it will oppose the bill..

"The difference is that many times the lottery situation does not create the traffic in our stores that is productive for the store," Allred said. "We have been neutral on the issue. Lottery is not our favorite activity."

Heath said it's unclear how online sales would be implemented or whether new administrative expenses would be incurred.

Meanwhile, Rep. Myra Crownover, R-Denton, objected to the proposal, saying it would fuel gambling addictions and enable children to buy tickets online. Regarding underage gambling, Heath said the lottery would have to make sure that an adequate age verification system is in place. He also said that lawmakers must determine that the proposal isn't in violation of the Federal Wire Act of 1961. Restricting the system to only Texas residents, he said, should make the bill compliant.

Uresti believes the legislation has a 50-50 shot of becoming a law.

While Georgia's bill was passed in the full House--and even made it out of committee in the Senate with a "do pass" recommendation--the full Senate adjourned for the year before taking action on it.

The Georgia legislature is mandated by the state constitution to meet for only 40 days a year and will not be in session again unit January 2006.

Protocol for the state legislature will allow the Senate to pick up the bill where it left off during the 2005 session. The Senate Economic Development Committee will once again hold a hearing on the bill. Assuming it again receives a "do pass" recommendation, the bill would be sent to the Rules Committee to be placed on the calendar for a vote before the full Senate.

The Georgia bill calls for users to appear in person at a licensed lottery retailer to set up their account and prove they are Georgia residents of legal age.

Documents - US State Lottery Bills

Georgia: HB 346
Illinois: SB 0198
Texas: HB 3540