Michigan bets on Internet lottery
LANSING — Michigan will sell lottery tickets and offer games online in a year's time — after two companies were chosen Monday to run an “iLottery” billed as a way to help fund public schools and keep the lottery relevant.
The decision came five months after lottery officials indefinitely halted their plans, because lawmakers rejected Gov. Rick Snyder's funding request to launch the online lottery. Legislators, however, did not prohibit the Lottery Bureau from spending existing money in its budget to offer Internet tickets and games on computers and mobile devices.
Michigan will become the third state with an iLottery since the U.S. Justice Department released an opinion nearly two years ago, saying states can offer Internet gambling as long as it does not involve wagering on sports. Michigan's is scheduled to start in the fourth quarter of 2014.
"In today's society, more and more customers want to do business online and that includes lottery players," said Tom Weber, chief deputy commissioner of the Lottery Bureau. He said the plan will keep the lottery up to date and boost funding for schools, which receive lottery profits.
Michigan could deposit nearly $120 million more to education in the first four years with the iLottery, according to estimates. In an indicator of the potential for growth, profits could grow $360 million in the following four years.
Snyder asked for nearly $3.4 million in the current budget to promote the iLottery and hire the equivalent of 10 full-time workers. But the Republican-led Legislature refused to go along, because some legislators worried about increased gambling addiction, personal debt and a potential hit to brick-and-mortar stores participating in the lottery.
Rep. Kevin Cotter, a Mount Pleasant Republican who is pushing legislation that would explicitly prohibit an online lottery, could not be reached for comment late Monday.
Lottery officials said concerns are overblown, because players will have to verify their age and identity, adhere to daily spending limits and be allowed to set lower spending limits or exclude themselves entirely from the Internet lottery. Officials also promise to safeguard players' financial information and privacy.
Pollard Banknote Limited of Canada and NeoGames of Malta won the expected contract valued at an estimated $23 million in the first four years. Pollard, which has a lottery ticket printing plant in Ypsilanti that employs more than 200 people, pledged to open a customer call center in Michigan if awarded the contract.
How much the companies are paid will depend on Internet sales.
"They need to perform and help us make this work for our players. If they don't, they've got money at risk," lottery spokesman Jeff Holyfield said.
Two of five proposals from private vendors were disqualified. The proposal from Pollard and NeoGames scored the best overall and offered the lowest price, beating out plans submitted by GTech and Scientific Games. The competitors have five days to challenge the decision, after which the state will begin contract negotiations, before submitting a deal to a state board for final approval.
Illinois and Georgia already have iLotteries. States such as New York and Minnesota have subscription ticket sales over the Internet.