Published: May 21, 2023

Massachusetts retailer are up in arms about inclusion of an online lottery

LOCALLY OWNED retail stores are rightfully up in arms about inclusion of an online lottery in the House fiscal 2024 budget. As demonstrated through testimony before the Legislature’s  Joint Committee on Consumer Protection and Professional Licensure, an online lottery system in competition against stores is not needed. The expansion of the lottery online will harm brick-and-mortar retail stores that rely on lottery sales to attract walk-in customers. Indeed, no testimony or data at the hearing objectively proved that stores will not lose in-person traffic. None.

The rationale for an online lottery is that the legislative decision allowing for sports betting in Massachusetts may result in diminished lottery sales. This has not happened. To the contrary, Massachusetts continues to be the best revenue producing lottery in the United States, and second best in the world.

Six of the last eight years have produced record-breaking profits from a lottery format that has historically partnered with brick-and-mortar stores. It is a model based upon a public-private partnership that has been financially lucrative, while being safe and secure for over four decades. This year looks to be another record-breaking year for the lottery.

The real problem is that proponents of expanding the lottery online have not been completely transparent to the Legislature about the impacts to stores. In their testimony before the legislative committee, they relied on “control state” data. Not disclosing that the information was derived from control states is a substantial omission that consequently misrepresented the impacts to privately owned stores.

In a control state, the state itself sells lottery tickets, alcohol, and tobacco products, so the state is mostly competing against itself by expanding the lottery online. That is how it works in New Hampshire, Virginia, Michigan, and Pennsylvania. Data from proponents of an online lottery relied on these four states as evidence of no impact to retail stores. This is not the case.

Unlike New Hampshire, Massachusetts is an “open state” retail system, meaing the outlets that sell lottery tickets are all  privately run. An online lottery run by the state will compete directly against these privately owned stores. The state will also advertise the online lottery using public funds. Stores will be negatively impacted.

No one is contesting that Massachusetts has the power to compete against local stores, but that does not make it right. Stores cannot absorb another government-induced revenue hit. Past hits include a statewide ban of flavored tobacco and local prohibitions on the sale of miniature alcohol bottles.  Competition against recreational cannabis is also siphoning off retail revenues from package stores. So is illegal online purchasing of alcohol products, and the ever-growing cross border sales in New Hampshire. New Hampshire gloats that about 30 percent of its alcohol sales are by Massachusetts residents. Consequently, package and convenience stores heavily rely on in-person lottery sales to boost in-store traffic.

The harm to stores cannot be cavalierly ignored. Main Street landscape is already changing in a manner that is not good for Massachusetts. Since 2018, approximately one-third of the stores selling alcohol beverages have transferred their license to new owners. Last year, 200 retail stores transferred their off-premises alcohol licenses. A transfer means the business is now owned by another corporation or individual.  These were multi-generation businesses that are now gone.

Expansion of the lottery online is not needed but and will exacerbate the Main Street retail crisis. The better solution is to support local retail while continuing to buy lottery tickets at locally owned stores. This allows the state, cities and towns, and local retail to win together and not against one another in a competition that may not end so well for Main Street Massachusetts.

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