State Treasurer Steven Grossman severely restricted yesterday the number of Cash WinFall lottery tickets any store can sell in a day, closing a loophole that has allowed a handful of high-stakes gamblers to win most of the prizes.
Just three gambling companies collected 1,105 of the 1,605 Cash WinFall prizes statewide after a May drawing, each following a strategy that involved buying hundreds of thousands of dollars worth of the $2 tickets at selected stores over a few days.
Under the new rules, no store will be allowed to sell more than $5,000 worth of Cash WinFall tickets in a single day, making it much harder for the gamblers to continue their high-volume purchases.
Grossman also said that Cash WinFall, which has seen declining sales since it was introduced in 2004, will be phased out next spring as part of the normal rotation of games.
“We want to do everything we can to make sure the integrity of the lottery is not questioned in any way, shape, or form,’’ he said, adding that restricting sales at each store will level the playing field among players.
I’ve suspected right along that this type of betting was occurring. Trust me, small-time players always need divine intervention!Cash Winfall player Peter McPhail
Grossman was reacting to a Sunday Globe story that said that sophisticated gamblers had found a quirk in Cash WinFall’s rules that virtually guarantees they will make a large profit if they buy more than $100,000 worth of tickets at certain times of the year when prizes are four to 10 times larger than normal.
Those times, called “rolldown weeks,’’ take place when the Cash WinFall jackpot grows to roughly $2 million and no ticket wins the jackpot by matching six randomly chosen numbers. The jackpot money is then distributed among the secondary prize-winning tickets, increasing the payoff. For instance, the payoff for matching five numbers rises from $4,000 to a range from $17,500 to as much as $134,767, depending on how many winning tickets are sold.
Several groups - two of them led by highly trained computer scientists from MIT and Northeastern University - formed gambling companies and began pouring hundreds of thousands of dollars into Cash WinFall, a phenomenon lottery officials first noticed in 2005.
The top five groups and individuals playing Cash WinFall collectively win back the cost of their tickets plus $1 million to $6 million in profits each year during rolldowns, without ever winning the jackpot, according to Mohan Srivastava, a Canadian statistician who found a flaw in a Canadian instant game that allowed him to detect winning tickets without scratching them.
News of the quirk in Cash WinFall brought immediate accusations that the game gave an unfair advantage to well- financed players. Overall, the lottery makes a profit from the game, but lottery officials admitted the big payouts made during rolldown weeks are, in effect, subsidized by people who bet at other times when the payoff for winning is far less favorable.
“I’ve suspected right along that this type of betting was occurring,’’ said Cash Winfall player Peter McPhail, who has urged the Lottery to change the game’s rules. “Trust me, small-time players always need divine intervention!’’
After a day of defending Cash WinFall to the media, Grossman intevened late yesterday afternoon by making it harder for the big-time gamblers to obtain enough tickets to virtually guarantee a profit.
For several days leading up to a rolldown, the bettors monopolize lottery machines at about a dozen stores, buying as many tickets as time allows. In the tiny towns of Sunderland and South Deerfield, Gerald and Marjorie Selbee of Evart, Mich., who run GS Investment Strategies, bought more than $600,000 in tickets in three days in July.
In all, the lottery said that six stores statewide received permission to sell at least $100,000 worth of Cash WinFall tickets daily during the July rolldown while another five got permission to sell $36,000 to $75,000.
Under Grossman’s new rules, big-time gamblers would have a tough time maintaining their current level of play. The Selbees, for example, would have to visit 20 stores daily for three days to purchase the tickets, instead of just two stores.
They would have to find lottery agents willing to run their machines to the $5,000 limit for a much smaller commission - $750, rather than the $18,000 the owners of Billy’s Beer & Wine in Sunderland and Jerry’s Place in South Deerfield received on the Selbees’ last buying spree.
Lottery field agents discovered that many of the stores catering to high rollers were breaking lottery rules, sometimes opening the store solely for the benefit of the Cash WinFall players. A Globe reporter saw Marjorie Selbee apparently operating the lottery machine herself at Billy’s, which, along with Jerry’s, has been suspended from selling lottery tickets.
Grossman insisted yesterday that every player had an equal chance to bet and win, but also said that the lottery’s reputation is sacrosanct and that he wanted to reduce chances there will be a “concentration of buying from a small number of agents which allows some people to buy massive amounts of tickets.’’
Legislative leaders yesterday praised Grossman for acting quickly to dispel any perception that the lottery is operating a game for the benefit of a handful of sophisticated gamblers.
“Speaker DeLeo spoke to the treasurer and believes this is a good step,’’ said Seth Gitell, House Speaker Robert A. DeLeo’s spokesman. “He looks forward to having a further conversation with the treasurer in this matter.’’
Senate Ways and Means Committee chairman Stephen Brewer, Democrat of Barre, said protecting the lottery‘s reputation is crucial since cities and towns rely on the lottery for aid.
“The integrity of the games is hugely important,’’ he said. “It’s very very important, especially with the potentiality of [casino] gaming to make sure whatever we do, we do no harm.’’
Brewer said he is confident Grossman will protect the lottery, calling him “a very positive force.’’