Last year, scratch-off tickets and number games brought in more than $330 million in revenue to the stores that sell them across Massachusetts. Then there were all the other purchases — a quart of ice cream here, a half-gallon of milk there — that people picked up along with their lottery tickets. They’re tougher to tally, but probably even more important.
Add it all up, and the state lottery means megabucks for many retailers. Now, they worry this cash cow is under threat.
After years of talk on Beacon Hill, Massachusetts seems poised to move the lottery online. House leaders included legislation to do so in its latest state budget proposal, set to be debated Monday. The goal: bring in an extra $200 million a year by pursuing a younger audience, one more likely to play games on their phones than to buy scratch tickets at the corner store. That money would go toward badly needed subsidies for child care centers.
But the merchants aren’t giving in without a fight.
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The Retailers Association of Massachusetts and the Massachusetts Package Stores Association just launched separate lobbying efforts against the move to digital lottery sales. Their fear is simple. They’ve seen everything from news to groceries to beer move online. A digital lottery would be one more hit.
The groups submitted testimony in opposition last week to the Legislature’s committee on consumer protection and professional licensure, which held a hearing to discuss lottery bills on Thursday. The real fight will take place in the budget debate, because House leaders already put this language into their version of the must-pass annual spending bill.
RAM asked its members on Wednesday to write to their state lawmakers and oppose the online lottery legislation and a separate budget provision that would allow for lottery sales — which are currently cash-only — via debit card (causing merchants to pay an interchange fee, increasing their costs). The retailers association argues one of the biggest reasons that Massachusetts has the most successful lottery in the country is its network of roughly 7,500 brick-and-mortar sellers — which get 5-percent commissions and 1-percent winning ticket bonuses, not to mention all that crucial foot traffic, from lottery sales.
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The state should be reinvesting in these businesses, RAM says, rather than hurting them.
Meanwhile, MassPack executive director Rob Mellion rattled off several “government advocated hits” on liquor stores, in his testimony: a state ban on sales of flavored tobacco products, legalization of recreational cannabis, allowing restaurants to continue serving “cocktails to go.” Even if online sales lead to net growth in revenue at the Lottery, whose profits are distributed to cities and towns via local aid, the shift will “take another bite out of brick-and-mortar retail,” Mellion wrote.
Momentum for online lottery in Massachusetts has been growing in recent years. Lottery officials, led by state Treasurer Deb Goldberg, have long made the case that digital sales are necessary to evolve into the 21st century and attract younger players. The House included online lottery in its economic development bill last year. But time ran out, and legislators ended up passing a pared-down version stripped of controversial policy changes like that one.
Now, the Legislature’s approval of mobile sports betting has added another motivation: the fear that sports betting apps will eat into lottery sales, which set a record of $5.9 billion in the last fiscal year.
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Online lottery advocates point to a 2022 Spectrum Gaming report, commissioned by NeoPollard Interactive, that shows no significant cannibalization of brick-and-mortar sales in states where online lottery sales were introduced. (NeoPollard is among the three main companies that provide digital lottery technology to states and have been lobbying in Massachusetts, along with IGT and Scientific Games.) For example, traditional lottery sales continued to rise in Pennsylvania and in Michigan after those states launched “iLottery” games in the 2010s. At some point, all consumer-facing industries need a digital presence, Spectrum contends, and that time has come for state lotteries.
Through a spokeswoman, House Speaker Ron Mariano said the House proposal will ensure the lottery can attract new customers and remain competitive with the online sports betting industry, while supporting affordable early education and child care across the state.
The money would go to a popular program. Aaron Michlewitz, Mariano’s budget chief, said this new revenue source will support the C3 grant program that costs nearly $500 million a year. State officials started this program with federal pandemic assistance funds. As the money from Washington runs out, the Legislature wants to continue using it to stabilize the state’s early-education system. Because lottery profits already support local education budgets, Michlewitz said, this use of online lottery proceeds is a natural extension.
The House’s budget writers did suggest some safeguards for retailers. The budget language requires promotional activities to help drive traffic in brick-and-mortar stores, such as the sale of prepaid gift cards. It would also create an independent board that would meet monthly to advise the state lottery commission on the digital expansion; RAM would get a seat on this board, as well as other trade groups representing convenience stores and restaurants.
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To president Jon Hurst and his colleagues at RAM, though, these steps aren’t enough. They say the nine states with online lotteries have not seen significant per-capita spending growth after starting them. If Massachusetts remains the country’s top performing lottery, based on per-capita sales, why change things?
RAM didn’t seek a budget amendment to strike the House language. That seemed like it would be a wasted effort, though the group is planning on expressing its concerns in an email to House members on Monday. Hurst said RAM will focus more on the Senate, which will put out its own spending plan later this spring before coming up with a final budget through negotiations with the House. Governor Maura Healey recently indicated she would support the online lottery legislation if it reaches her desk.
Disruption may seem inevitable when you run a brick-and-mortar shop in a digital age. Proponents of this latest ecommerce shift are betting there will be few, if any, losers as a result. The retailers who are fighting back, though, don’t think that is a safe bet at all.
Jon Chesto can be reached at jon.chesto@globe.com. Follow him @jonchesto.