Published: July 7, 2018

State-Sponsored Lotteries Gain Market Edge Over Commercial Gambling Interests

Big news this week as state-sponsored lotteries take regulatory bites out of traditional live and online gambling markets. Officials rule in favor of government-run entities over commercial casino interests.

Two key regulatory showdowns — one in Italy and the other in Pennsylvania — have made headlines this week as government-run lotteries obtain market exclusivity provisions through regulation.

According to SportsProMedia, Italian officials have approved an outright ban on ALL gambling advertisements effective January 1st, 2019.

The ban will apply to all gambling-related products and services across all media platforms – including television, websites and radio – and sports clubs will also be prohibited from carrying sponsors from the industry,” wrote SPM contributor Elena Holmes.

Heavy fines are being introduced for non-compliance, at a minimum of €50,000, with the fines being donated to the fund against pathological gambling.”

The measure, defined by government regulators as a crackdown on advertisements that target problem gamblers, is expected to have a significant negative impact on Italian [football/soccer] clubs, and could result in a loss of €700 million in tax revenue for Italy, according to a spokesperson for the Serie A football league.

Curiously, the Italian Lottery (SuperEnalotto) will be exempt from the restrictions. As a result, the country’s lottery will be positioned as the only gambling product allowed to advertise via any media outlet in Italy.

State-Sponsored Lotteries and Pennsylvania

October 2017 online gambling regulation in the Keystone State sparked a wave of enthusiasm for online poker players in Pennsylvania who are anxiously awaiting the arrival of real money internet games.

However, the licensed iGaming industry continues to face regulatory headwinds after the PA Department of Revenue ruled against prospective online gambling license holders this week.

PA Casino Operators Fail to Suspend iLottery Games (Jan Murphy – Penn Live – Jul 3, 2018)

A July 2nd article by PlayPennsylvania reporter J.R. Duren explains how all existing PA land-based casinos petitioned the state to suspend its iLottery products because they believe certain games possess traits that will overlap too closely with traditional internet slot offerings.

The state has denied that request, with the rapid ruling demonstrating regulatory muscle for state-sponsored lotteries. In effect, the decision creates a clear market wedge between commercial casino products (age 21 and over) and real money Lottery games in Pennsylvania (age 18 and over).

The fear among iGaming stakeholders is that the Pennsylvania online lottery will cannibalize an unknown portion of incoming online slot games. This is due to the similar products it offers, which can be marketed to the 18-20 age group of young adults, while licensed casinos will continue to be strictly prohibited from doing the same with their games.

If these same individuals tried to play the same games at our casinos… the players would be prosecuted and placed on the Pennsylvania Gaming Control Board’s exclusion list, while we would face tens of thousands of dollars in PGCB-imposed fines,” the casinos explained in their letter to the Department of Revenue.”

The PA Online Lottery recently launched for both residents and tourists in the Keystone State, but zero land-based casinos have applied for regulated PA iGaming permits as of mid-June.

State-Sponsored Lotteries and Regulations (Analysis)

The natural regulatory in-roads that state-sponsored lotteries possess over commercial gambling interests point toward future market concessions in favor of such products in several jurisdictions around the world.

The statewide U.S. iGaming market could face similar regulatory difficulties if/when online gambling is authorized in places such as Michigan, where the Great Lakes State currently offers licensed iLottery games. Michigan also hosts nearly two dozen tribal casinos that also market to customers between the ages of 18-20 years old.

In summary, higher margin state-sponsored lotteries are showing a tendency to extract market edgesover regulated gambling services, despite the robust operational control along with exorbitant fees and taxes that some commercial casino interests are relinquishing to obtain formal licensure.

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