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Massachusetts reconsiders online lottery as sales drop, threatening Brockton’s $22 million in aid

BROCKTON — The Massachusetts Lottery faces “a significant threat of becoming somewhat obsolete” as the COVID-19 pandemic accelerates industrywide shifts toward online and cashless interactions, Lottery Executive Director Michael Sweeney said during a recent Lottery Commission meeting that raised concerns about a key source of municipal funding.

Neighboring states, including New Hampshire and Rhode Island, have allowed portions or all of their lottery business to shift online during the business shutdowns ordered by governors during the coronavirus pandemic, but Massachusetts continues to run its state-run lottery exclusively through in-person cash sales.

While many liquor and convenience stores that sell lottery products remained open during April, overall sales tumbled that month by $22.5 million compared to last year’s numbers, Sweeney told the Lottery Commission.

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Before the virus hit Massachusetts, the lottery had been on track for a strong year, lagging last year’s record profits of $1.09 billion by a slim margin, according to data Sweeney presented. Profits could decrease by over $100 million this fiscal year compared to 2019, according to Sweeney.

It’s a mix of social distancing protocols, financial hardships and disturbances to the lottery’s delivery system that have cut into lottery sales in Brockton, according to interviews with several store owners and managers.

At Brockton’s R&K Food Mart on Legion Parkway, owner M.D. Hosain said he used to have a consistent crowd of customers that sat in his store playing lottery games for parts of the day.

“It was busy at the beginning when everyone got their stimulus check but that was it,” Hosain said. “I’m selling less than half the tickets I used to.”

Other lottery retailers in Brockton like Sam’s Food Store and M&M Seafood reported that the lottery’s once-weekly deliveries have slowed to once every two weeks, meaning tickets sometimes run out before business owners can restock.

For Brockton, the significant drop in sales statewide could take a sizable chunk out of the $22 million the lottery sent as unrestricted government aid to City Hall during the most recent fiscal year. Aid from the lottery accounts for about 5 percent of Brockton’s municipal budget.

Massachusetts State Treasurer Deborah Goldberg, who has urged lawmakers to authorize online and cashless lottery operations, said Tuesday that lawmakers could make an “immediate impact” to mitigate losses — and generate additional revenue to support a strained state budget — by bringing the system in Massachusetts more in line with its peers.

“Everyone is looking for: Where are we going to get revenue from?” she said. “We have to note, and I said it in the last meeting but it’s only continued, that the states that do have an online lottery have had incredible increases in sales. One day in March in Michigan had not a $1 million gross, but a $1 million net.”

Rhode Island began offering instant games and Keno online this month, which Sweeney described as “the only logical business model to follow in this world.” In Massachusetts, Keno declines have been particularly sharp because restaurants and bars that host games are closed.

Even as business activity begins to resume in Massachusetts, Sweeney, the lottery’s director, said consumer behavior will probably continue to favor cashless, contactless purchases that lack COVID-19 transmission risks — a trend that could leave the lottery lagging.

“I do think we face a significant threat of becoming somewhat obsolete, particularly as other gaming opportunities continue to avail themselves of the technology that’s out there, everything from DraftKings to other areas including casinos,” Sweeney said. “We do receive what I would characterize as a significant amount of business from the states that border us, particularly New Hampshire and Rhode Island. It would only make sense that as both of those lotteries go online, there will be some level of decrease (in Massachusetts).”

Gov. Charlie Baker included language in his fiscal year 2021 budget proposal that would allow players to purchase lottery products using smartphone apps for cashless payment or with debit cards, but not online or with credit cards. Baker’s budget remains in the House Ways and Means Committee.

Goldberg’s office filed a standalone bill (H 37) in January 2019 to create an online lottery system, but lawmakers have not acted on it since holding a hearing in July where some retailer groups expressed concerns about the small-business impacts of shifting sales to the internet.

The state has continued running the lottery exclusively through in-person cash sales during the coronavirus pandemic,…

Massachusetts Lottery players will soon be able to claim prizes through its smartphone app

Beginning sometime next spring, Massachusetts Lottery players will be able to claim large prizes from their phones and have their winnings deposited directly into a bank account through an app that Lottery officials said will eliminate millions of miles of car travel and associated greenhouse gas emissions.

The Lottery plans to roll out the new functionality of its mobile app in two phases, starting with giving Lottery players the ability to scan a ticket into the app to find out if it is a winner. The second phase, which is expected to be available by early spring, would allow Lottery players to claim prizes between $601 and $5,000 through the app rather than going to a Lottery claims center. The money would be wired directly to a bank account on file after the Lottery withholds any unpaid child support or tax obligations.

“If you live on the Cape, you have to drive to New Bedford or Dorchester or Braintree. If you live in Western Mass., in Williamstown or North Adams, you have to drive down to Springfield. These are not convenient trips for anyone,” Lottery Executive Director Michael Sweeney said.

Sweeney plans to detail the plan for the Lottery Commission when it meets Tuesday morning. The plan does not require a vote of the commission and is fully within the Lottery’s current authority, he said.

Lottery players have been asking for the ability to scan their own tickets to find out what or if they’ve won for years, Sweeney said. It will give players added privacy and will make things more convenient for them, he said. But the ability to cash tickets from a mobile device, Sweeney said, will have the greater impact.

“Besides doing all the obvious things like meeting our customers where they already are, meeting the modern-day technology expectations of people, it potentially has a huge impact on the environment,” Sweeney said.

Using 2019 prize claim data as a benchmark and assuming a 50-percent adoption rate for the new mobile cashing app, the Lottery calculated that the new way of claiming prizes could eliminate more than 78,000 prize claim trips to Lottery locations for a total reduction of 2.78 million miles traveled. That could save more than 110,000 gallons of gasoline and could avoid 983.1 metric tons of greenhouse gas emissions each year, the Lottery said.

“The great thing about this is that it’s continuous. That benefit goes on every single year without additional costs,” Sweeney said. He added, “I think our customers share a general concern about the environment too and . if you are somebody now who is a frequent Lottery player who has in the past had to drive to one of our physical locations, this is an opportunity to both make things more convenient for you but also to do a solid for the environment at the same time.”

Mobile cashing will only be available for prizes greater than $600, prizes that currently can only be claimed at Lottery headquarters or one of the agency’s regional claims centers. Convenience stores that rely on foot traffic from Lottery players would continue to process claims for prizes of $600 or less and would not lose Lottery traffic to mobile scanning or cashing.

The Lottery plans to use technology built by Gambyt and Trifecta Consulting Group when it rolls out mobile ticket scanning and cashing.

The Ohio Lottery launched mobile cashing through its app on April 20, processed more than 3,500 claims in the first week and had processed 7,750 claims worth a combined $6.2 million by May 8, according to a press release. In Ohio, players can use the app to scan and cash prizes of $50 to $5,000.

Sweeney said the Ohio Lottery was a big help as he and his team began formulating a plan for mobile ticket scanning and cashing in Massachusetts.

For Massachusetts, the introduction of mobile cashing marks the latest step toward modernizing the Lottery. Though the Legislature has resisted calls from Treasurer Deborah Goldberg and Sweeney to allow the Lottery to sell its products via the internet and a mobile app, the Lottery has in recent years replaced antiquated equipment, updated its data operation and bolstered its social media presence.

Goldberg and Lottery officials have argued for years that the Lottery needs the ability to sell its products online in order to compete with casinos, daily fantasy sports and, possibly soon, sports betting, and still generate north of $900 million a year for local aid.

During the Lottery’s three worst months of the pandemic, the ability to sell Lottery products online would have generated between $70 million and $80 million in revenue, Goldberg told lawmakers this summer. Despite sales that collapsed in March and April as the pandemic closed many businesses and changed consumer habits, the Massachusetts Lottery had its third-best year in terms of revenue in fiscal year 2020 and generated a net profit of $986.9 million for the state to use as local aid.

But Sweeney has cautioned before that the Lottery’s current financial picture doesn’t tell the whole story.

“We have been doing very well, but what I like to remind people is that the night before the Titanic hit the iceberg, it was setting a new record for crossing the Atlantic Ocean,” he said last year.

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Massachusetts Lottery players will soon be able to claim prizes through its smartphone app Beginning sometime next spring, Massachusetts Lottery players will be able to claim large prizes from