Iowa Lottery looks to future after big year

Industry developing new ways to play online, at the pump

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Lottery sales in Iowa have been through the roof. Proceeds in the current budget year are up more than 10 percent over the same period last year and 27 percent over the year before that.

So while there are no immediate plans to change how and where residents can play the lottery in Iowa, officials expect there will be in the near future.

States across the nation, including neighboring Illinois and Minnesota, are rolling out new lottery features and promotions — including options to play online, via smartphone or at the gas pump.

“Technology today is opening up amazing avenues for us to do business in different and new ways,” said Mary Neubauer, vice president of external relations for the Iowa Lottery. “But you don’t have to rush into things.”

Strong sales have given Iowa Lottery officials the ability to take their time before implementing new technologies and gaming methods, Neubauer said. But they’re carefully watching the states that have rolled out online gaming and pay-at-the-pump options.

Neubauer said the Iowa Lottery doesn’t need legislators to change the Iowa Code to enable online gaming or sales at the pump.

“We do have the authority to do so if we choose to,” she said.

Fight for state rights

But Iowa Lottery officials have been fighting to keep that authority.

Senate Majority leader Harry Reid, D-Nev., and Sen. John Kyl, R-Ariz, recently advocated legislation that would limit online gambling by banning most Internet gaming, except for licensed online poker, off-track horse wagers and lottery games with just one drawing a day.

Iowa Lottery CEO Terry Rich told legislators that that proposed legislation effectively limits participation in the online marketplace to only those operations in Nevada. That would mean casinos in Nevada could get online business from Iowans when the Iowa Lottery couldn’t.

“It’s a states’ rights issue,” Rich told The Gazette. “We believe that states have regulated lotteries on what they can do and whether they should go online, and we should be allowed to continue to do that.”

Rich and Neubauer traveled to Washington, D.C., last month to meet with legislators on the topic, and Rich said those efforts seemed so far to have worked. The bill is dead for now, Rich said, but it could be brought up again in the future.

If the bill does pass at some point, Rich said, Iowa Lottery could see a 10 percent to 20 percent loss in revenue over time.

“And 60 percent of the money we raise goes to education in Iowa,” he said.

Pushing back

States like Illinois, Georgia and now Michigan have rolled out online lottery sales, and many more are considering doing so. Minnesota has started selling tickets at the gas pump.

There are safeguards to ensure only of-age customers can buy and that tickets are purchased within a state’s borders. Geotagging technology in smartphones, for example, makes it possible to prohibit cellular sales from another state, and asks players to register by entering Social Security numbers, dates of birth, names and addresses.

In Minnesota, residents can buy tickets at gas pumps and ATMS with a debit card, driver’s license and cellphone number.  The Star Tribune in late November reported that about $5,260 worth of Powerball tickets had been sold that way since October.

But there is pushback from convenience store owners concerned that sales online and at the pump will keep customers from walking through their doors and making ancillary food and beverage purchases.

The National Association of Convenience Stores, in fact, has started an online initiative asking members of the public to contact their legislators in support of the bill banning most online gaming.

Locally, some gas station owners have expressed concern about what the changes might mean for their bottom line. Randy Walter, co-owner of RJ’z Express station in Iowa City, said the option to pay at the pump already keeps customers out of the store, and the looming lottery changes are just one more thing that could cut into sales.

“With the margins on gas at zero, you have to be able to survive,” he said.

About 80 percent of his customers pay at the pump, Walter said, but the lottery gives them a reason to come inside.

“When they come in, for the most part, they will grab something else while they’re in there,” Walter said. “But if you add another thing that’s done outside, I wouldn’t think that would be a great thing for us.”

Lottery CEO Rich said he’s been looking at ways to keep people in convenience stores.

“We will work closely with retailers to make sure they continue to have growth,” he said.

Chad Nierling, 40, of North Liberty, said he probably wouldn’t try the newer play options because he likes to grab a snack or beverage in the store. And, he said, online instant-win tickets seem pointless to him.

“If I buy a scratch ticket, I want to go through the fun of actually scratching it,” Nierling said.

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