Illinois Shouldn’t Blame Expanded Indiana Gaming For Its Lottery Downturn

Posted on January 17, 2020 - Last Updated on January 21, 2020

If new forms of legalized gambling destroy lottery sales numbers, then the latest figures for the lottery in Indiana must be fabricated. The record sales in the Hoosier State act as further proof that fears of lottery cannibalization are unfounded.

IGT Indiana, which operates the state lottery in Indiana, projects record sales for the current fiscal year. During that time period, Indiana legalized both online and retail sports betting and several riverboat casinos moved inland.

Illinois claims Indiana gaming hurting the IL Lottery

The Hoosier Lottery expects to sell $1.33 billion in tickets from July 1 of last year to June 30 of this year. That would be a new record for Indiana.

The state’s cut of that revenue would also be a record. IGT projects the tax cut to be as much as $309 million.

Not all states have a lottery as robust as Indiana’s however. Just across the border in Illinois, the lottery operator hasn’t seen as much green.

CBS 2 out of Chicago reports that lottery sales fell by 18% from 2018 to 2019. The difference in revenue was $64 million.

Analysts attribute part of the difference to an abnormally large Mega Millions jackpot that inflated sales in 2018. The situation is more complicated than that, however. What’s clear is that legalizing other forms of gambling doesn’t create a problem for state lotteries.

Comparing apples to orangutans in terms of products

Although technically both forms of gambling, state lotteries, and table games, for example, couldn’t be much more different. The population demographics both types of gaming appeal to are vastly different.

A 2016 study found that lottery ticket buyers tend to be younger in age and that such gaming dropped off with age. By contrast, a Market Realist report found that the most dependable age demographic for paying visits to casinos was 50-64 years of age.

The theory that sports betting detracts from lottery ticket sales has an even bigger flaw. Buying a lottery ticket is a game of pure chance and involves zero skill. Successful wagering on a sporting event, on the other hand, is generally perceived as being at least partially because of the bettors’ knowledge about the event.

To further bolster the reality that other forms of legal gambling don’t cannibalize the lottery, consider a state that doesn’t share a border with Indiana: Massachusetts is very similar to Illinois in two major ways.

Massachusetts confirms the jackpot wow effect for states

Just like Illinois, the Massachusetts Lottery has seen a downturn in sales over the past fiscal year. Like Illinois, Massachusetts has commercial casinos.

Massachusetts Lottery Execute Director Michael Sweeney identifies the correct source of the downturn. He points to the same large Mega Millions and Powerball jackpots that drove sales late in 2018. Sweeney says that aside from those two games, lottery ticket sales have actually gone up.

“If you could remove Mega Millions and Powerball, or at least neutralize them to a normal year, we’d probably be on pace for a record year and a record profit year.”

The lottery in Massachusetts has seen that pace despite the fact that the state’s third casino, Encore Boston Harbor, also opened during the same time period. So much for other forms of gambling killing lotteries.

The reality is that these downturns are the products of inflated jackpots that caused a temporary craze. They are the ebbs and flows of the business. These lotteries are more the victims of their own success than casinos or sportsbooks.

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Derek Helling

Derek Helling is a lead writer for PlayUSA and the manager of BetHer. He is a 2013 graduate of the University of Iowa and covers the intersections of sports with business and the law.

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