Metro

Online lottery could yield windfall for private companies

Lottery revenue has dropped by 16 percent between 2008 and 2015, accounting for inflation. In an increasingly cashless society, officials say, fewer people are likely to have money on hand to buy lottery tickets at convenience and liquor stores.

Jessica Rinaldi/Globe Staff/File

Lottery revenue has dropped by 16 percent between 2008 and 2015, accounting for inflation. In an increasingly cashless society, officials say, fewer people are likely to have money on hand to buy lottery tickets at convenience and liquor stores.

If the state lottery moves online, the easy lure will probably mean more losses for many gamblers. But a handful of technology companies, armed with well-connected lobbyists, could reap a windfall.

State Treasurer Deborah Goldberg, whose office oversees the lottery, has pushed lawmakers to legalize Internet sales, seeking to bring scratch-ticket transactions into the digital age. She and other proponents say the move is necessary to boost stagnant sales, but there has been virtually no public discussion about its cost, which specialists say could run to the tens of millions of dollars.

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With state lawmakers slated to debate the proposal, private companies are stepping up their lobbying efforts, putting themselves in position to receive lucrative lottery contracts if the legislation passes.

Camelot Group, an international technology company that won a $140 million contract to bring the United Kingdom’s national lottery online 15 years ago, recently ran a $5,000 advertisement with the State House News Service, a digital news service widely read on Beacon Hill.

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“New players are needed urgently,” the ad read. “This means reaching players where they live: in the digital world.”

The public lobbying effort underscores the stakes involved — one of the most lucrative contracts from the treasurer’s office in years — and competition will probably prove intense.

“It would be an enormous prize to get that contract,” said Michael J. Pollock, managing director of Spectrum Gaming Group, the New Jersey-based consultant that has advised the treasurer on online lotteries. “Not only for the dollar value of the contract, but also as a calling card for additional work for other states.”

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When lawmakers debated an online lottery last year, 20 companies expressed interest in developing the technology. One of them, International Game Technology, has hired lobbyists with close ties to the treasurer’s office: CK Strategies, operated by Chris Keohan, who helped manage Goldberg’s successful campaign for treasurer in 2014, and Northwind Strategies, whose founding partner, Doug Rubin, was a campaign consultant for Goldberg’s predecessor, Steve Grossman.

International Game Technology is already working for the lottery, having landed an $18 million contract last year to modernize its computer systems.

A competitor, Scientific Games, is represented by lobbyists Robert Travaglini, the former state Senate president, and Michael J. McCormack, a former Boston city councilor. Camelot Group, which declined to comment on its recent advertisement, has hired O’Neill and Associates, a top Boston lobbying firm.

The treasurer’s office said it had nothing to do with the Camelot Group’s ad.

Pam Wilmot, director of Common Cause Massachusetts, a government watchdog group, said companies have every right to lobby for their interests.

“Private companies and public agencies sometimes have a common interest,” she said.

Critics say an online lottery, which would let players buy tickets through a website or mobile app, would prey on the poor and create more gambling addiction.

Only a few states have adopted online lotteries, and Massachusetts legislators have been reluctant.

Last year, the proposal advanced further than ever before, passing the Senate before failing to gain a vote in the House.

Lottery revenue has dropped by 16 percent between 2008 and 2015, accounting for inflation. In an increasingly cashless society, fewer people are likely to have money on hand to buy lottery tickets at convenience and liquor stores.

The state is also facing a budget shortfall. In December, Governor Charlie Baker reduced state spending by almost $100 million, and bolstering lottery revenue could help ease the crunch.

That will require a substantial state investment, however. In British Columbia, capital spending approached $100 million in the first 10 years, according to a Spectrum Gaming report. Michigan agreed to pay its technology provider $23 million over four years.

“Implementing online products will come at a substantial cost,” the report found. “International lotteries that have successfully entered this market have approached it as a startup venture and spent heavily to launch product sales.”

Chandra Allard, a spokeswoman for Goldberg, said the lottery has not placed an estimate on the cost of an online lottery.

“We know this will be an investment, but right now we are merely looking for the authority to go online,” Allard said.

Joanne Mendes, executive director of the New England Convenience Store and Energy Marketers Association, which represents convenience stores, said lawmakers should leave the lottery as it is.

“There are just too many ‘what ifs’ out there,” she said. “We just don’t see any reason to rush into anything.”

The state’s 7,500 lottery agents rely heavily on lottery sales, both for the 5 percent commission they receive, but also to spur foot traffic into their stores for other purchases.

But momentum for online sales has been building since 2012, when a treasurer’s task force, noting the rapid expansion of online retail, warned that “maintaining the status quo is not an option.”

Pollock echoed that finding, saying online lotteries are the future.

“You just can’t expect to get younger players without going online,” he said.

Sean P. Murphy can be reached at smurphy@globe.com. Follow him on Twitter @spmurphyboston.
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