Paul's Wall April 9

Paul's Wall April 9

Indicative of the enlightened Canadian view towards regulation of gambling, Manitoba is the third province to expand into online casino-style gambling. As explained by the CEO's of two of the Canadian provincial lotteries in detailed interviews with PGRI, the mission of the lottery is to channel the demand for gambling away from illegal, unlicensed, and untaxed operators over to the government controlled operator. In fact, the mission is much less about generating funds for worthy causes than it is about protecting the consumer. As a matter of public policy, the mission isn't to grow the industry, it is to meet existing demand. The entire industry, including land-based casino gambling and internet gambling as well as all lottery, is all owned and managed by the government. No multiple operators competing for the business, driving down margins to gain market share with the result that the market expands and follows the trajectory of every other industry in a dynamic capitalist environment. The underground (i.e. illegal and untaxed) Internet gambling market has been closely monitored by the governments of all the provinces for the past decade. BCLC (British Columbia) and Loto-Quebec determined that demand warranted a safe and secure alternative to the illegals and launched their internet gambling programs two years ago. Manitoba is next to launch, and Ontario is likely to follow soon. Manitoba will rely on BCLC for support services and the two provinces will also pool their consumer populations for the games that require scale. BCLC and Loto-Quebec already collaborate on those online games that require scale.

As an industry, we often look towards Scandinavia as being the leaders in internet gaming. For the U.S., we really do not need to look any further than our neighbors to the north for a model that is most consistent with all the public policy and fiscal objectives that most states would want to adopt: Protect the player, enforce the laws against illegal operators, and channel the financial benefits of the industry back to the public. U.S. states are in a position similar to that of Manitoba, except that Manitoba is not being threatened by the possibility that the national government may take away the states' rights to regulate and tax the industry. U.S. states could make the same decision that Manitoba, BCLC, and Loto-Quebec did to implement internet gaming for the protection of the consumer and channel the economic benefits back to the public. And they have additional incentive to do that because it is only a matter of time before Congress will be presented with another bill to federalize the i-gaming industry. Even a cursory look at how the industry operates around the world would reveal the folly of imposing a nationalized regulatory framework on all the states. The Big Casino industry, as represented by the lobbyists of the American Gaming Association and Poker Players Alliance, are promoting a federal framework that would not only be disastrous for states from a financial point of view; it would be quite contrary to the fundamental public policy as embraced by Canada and also as it is evidenced in the U.S.: protect the player and channel the economic benefits away from the illegal operators and over to serve worthy causes. Just like Canada, the public policy objective for U.S. states has never been to create the conventional capitalist cycle of relying on free-market competition to drive down margins in order to deliver a better value to the consumer, expand the market by getting more consumers to gamble more, and enrich private shareholders at the expense of causes that benefit the general public. Just like Canada, U.S. states should act now to take control of the industry and implement a regulatory and taxation framework for internet gaming.

The Illinois Lottery is off to a fabulous start by distributing two lottery games online. This is a hugely important step for the U.S. lottery industry that will hopefully be replicated soon by many other U.S. lotteries. Everyone benefits - lottery players, lottery operator, the land-based retailers, the lottery owner (which is the government), and all lottery stakeholders.

Lottery is getting more and more attention from the general mass-media news. In addition to the issue of internet gaming, there is also the issue of owner-management structures. Insofar as the Illinois Lottery model of outsourcing the lion's share of management responsibility to a private operator (Northstar Lottery Group) produces the desired results, we can expect to see other states explore the possibility of implementing something similar. The governor of Pennsylvania is the most recent to express an interest in analyzing the pros and cons of innovative owner-management structures. The other driver for this mass-media focus on lottery is the recent run-up of Mega Millions to $656 million. With both Powerball and Mega Millions now being sold in 42 U.S. states, we can hope that we will see a more frequent spike in the jackpot sizes, garnering more and more attention from the general media. One result of all this attention is that I am getting more calls than ever from reporters from the A/P, the Wall Street Journal, and other mass media. Media attention can be a two-edged sword. We all know that it is easy to take quotes out of context to support a negative spin that a biased reporter wants to put on lottery. It is my belief that we want and even need this mass-media attention and so therefore I am as forthcoming as possible with them and thank them for giving attention to our industry. So far, I have found them to be quite receptive and willing to tell the positive story of Lottery. In fact, it seems that they find it refreshing to hear our point of view because they have for so long been bombarded with the PR machine of our adversaries with an anti-lottery agenda. I don't know that I am a good spokesperson for our industry, and do not doubt that I will be misquoted or otherwise have my comments be used against us at some point. But I figure that we need this mass media attention and that if someone needs to get shot down, better it be me than our industry leaders who we rely on to do the real heavy lifting. So I'm volunteering to be the expendable 'forward scout'.

Thank you all for your input and support. We very much appreciate it and are dedicated to working hard to earn it. Please feel free to e-mail me at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .