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California to explore online sales of lottery tickets

The California State Lottery review was prompted by a Justice Department ruling last week that states would not violate federal law by selling lottery tickets over the Internet. Other states may offer poker and other types of online gambling.

December 28, 2011|By Jim Puzzanghera, Los Angeles Times

Reporting from Washington — The inexorable push to sell almost everything online could soon include lottery tickets.

Officials at the California State Lottery said they will explore selling tickets over the Internet after the Justice Department determined that such sales would not violate federal law.

"It does open up a major potential channel for lottery sales in California, but right now it's just a potential channel," Robert O'Neill, who was named last week to head the state lottery, said Tuesday.

State lottery officials will review the Justice Department's legal opinion, which allows states to sell lottery tickets over the Internet and possibly to offer poker and other types of online gambling. The opinion clarified that a 40-year-old law, known as the Federal Wire Act, applies only to sports betting, not to other online gambling that states may permit.

O'Neill said that the California lottery would not consider online poker at this point. "Internet poker's a whole other discussion," he said.

He didn't say when the lottery would make a decision.

The Justice Department's latest interpretation of federal law could be a boon for states looking to expand their lotteries as a way to help close large budget deficits, said I. Nelson Rose, a professor at Whittier Law School and author of the blog Gambling and the Law.

He predicted that most states would be offering online gambling within a decade.

"It undoes the single obstacle that was preventing the states from authorizing all forms of Internet gambling," Rose said of the new legal opinion, which appears only to rule out sports betting. "I think we're going to see an explosion in the next couple of years."

Assistant U.S. Atty. Gen. Virginia A. Seitz said in a 13-page legal opinion quietly released last week that proposals from state lotteries in Illinois and New York to sell online tickets to adult residents would not violate the 1961 Federal Wire Act.

State-run online lotteries also would not violate a controversial 2006 law, the Unlawful Internet Gambling Enforcement Act, which has been used to crack down on foreign online poker sites. That law seeks to prevent people from circumventing existing state or federal anti-gambling laws, but it allows Internet gambling within a state if it is legal there.

The law helped pave the way for the Justice Department opinion because it specifically said that online bets could be routed through servers or transaction processors in other states as long as the person making the wager was in the state where gambling was allowed.

The Wire Act prohibits interstate transmission of gambling-related communications. But Seitz determined that Congress passed that act 40 years ago to stop sports gambling, and the transmission of other types of gambling wagers would be legal.

"This is a perfect ... progression for any lottery because it's adapting to new consumer buying habits and new technologies," said Michael Jones, superintendent of the Illinois Lottery.

Many more people would buy tickets if they could do so online shortly before the drawing for large jackpots, such as the multistate Mega Millions or Powerball lotteries, Jones said.

From 8% to 12% of adults play the lottery in Illinois at least once a week, but 80% of adults said they were in favor of the lottery, he said. The number of players could be expanded by 200,000 to 400,000 if online ticket sales were allowed, generating more than $100 million a year in additional revenue for Illinois.

"The whole idea of a lottery is to get a lot of people to play a little, not a few people to play a lot," Jones said. "There is this enormous potential marketplace."

Illinois enacted a law two years ago mandating the lottery undertake a three- to four-year pilot program testing online sales of tickets to existing state lottery games. As part of the law, the Illinois Legislature required state officials to seek a legal opinion from the Justice Department.

The New York Lottery, which also wants to offer online ticket sales, made a similar request.

The Nevada State Gaming Control Board, which has been studying online gambling, last week approved regulations to allow Internet poker. The District of Columbia Lottery also is moving ahead with plans to offer Internet poker.

California State Lottery's O'Neill said the security of online ticket sales is the main concern.

"Before we even step into any venture like that, we'd have to be very certain about the integrity of the system to perform," he said.

Jones said the Internet offers the ability to limit how much money someone spends on the lottery.

"Right now, I can't stop someone from going down to a brick-and-mortar retailer and spending $1,000 on Mega Millions tonight," he said.

But online registration and credit card tracking would allow the Illinois Lottery to intervene if somebody did that over the Internet, Jones said.

He expects Illinois to start selling online lottery tickets this spring.

jim.puzzanghera@latimes.com

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