Pennsylvania Lottery beats casinos in online gambling turf fight

The Pennsylvania Lottery scored a big court victory over its commercial gambling business cousins this week. A state judge ruled that the Lottery’s new Internet-based games do not infringe on the online games market that the state’s casino operators just paid $10 million each to enter over the past several years. But even before the casinos were able to launch their new online offerings in 2019, they were alarmed by online game designs from the Lottery that they said threatened to seriously cannibalize the market. Seven casino operators filed suit, including all five of the state’s racetrack casinos and the operator of Live! Casino Philadelphia, the city’s new stand-alone casino. In asking the court to eliminate or impose new limits on some of the Lottery’s offerings, they noted, among other things:

  • At least nine iLottery games have the same titles and/or themes as popular slot machines offered on Pennsylvania casino floors, or online casinos in other states.
  • iLottery games have an average payout ranging from 81.6 percent to 89.1 percent, a level much closer to the 85 percent minimum payout percentages required for Pennsylvania’s traditional slot machines than the typical payout for the Lottery’s instant games, which testimony showed range from 61 percent to 77 percent.

The casino operators also alleged the state Department of Revenue, which oversees the Lottery, required that its game supplier agree not to sell the same games to Pennsylvania casinos. The casinos said that was effectively an admission that the iLottery games are, in fact, casino games that would otherwise be sold to and offered by casino operators. But in her finding, Judge Renee Cohn Jubelirer said that the similarities are more a function of an evolving entertainment market and technological innovation than any intentional franchise violation.

Jubelirer wrote, in part: “The features of iLottery games challenged by petitioners are not signature, iconic, or key features particular to casino slot machines. “Rather, they are features that: relate to technological advances in online gaming; are based on online entertainment and gaming, as well as existing entertainment sources like television and board games which have indisputably inspired both iLottery game and slot machines game designers; or existed in the same or similar fashion in traditional lottery products that were translated into a new online medium.”

In dismissing the case, the judge concluded it was never the Legislature’s intent “to preclude either one of these newly authorized online games - iLottery or interactive gaming - from taking advantage of technological advances, changes in gaming and entertainment, or features that are found in existing popular entertainment.”

A spokesman for the casinos, who have traditionally tried to issue joint statements in this case, had no comment on the ruling Thursday, but said appeal options are under review.

Pennsylvania Lottery Executive Director Drew Svitko hailed the result, saying in a statement released Thursday it’s a big win for the Lottery’s mission to fund programs and services for the oldest Pennsylvanians. The initial goal of the iLottery provision in the 2017 act was to give the Lottery a way for it to stay on an even competitive footing as other gambling options - new casinos, sports betting, online games - exploded all around it. “Because the Lottery’s online games have been an incredible success — generating more than $170 million in profit since their launch in May 2018 — we have another popular product in our portfolio that helps us responsibly generate funds for programs that benefit older Pennsylvanians,” Svitko said.

While the casino operators lost the suit, it does appear both the state-sanctioned games and the private sector companies are making bank with their online products.

The 10 commercial casino operators that have opened Internet channels in Pennsylvania to date have seen total interactive gaming revenues soar from $240.9 million in fiscal 2019-20 (July through June), to $707.1 million for the first 10 months of 2020-21.

https://www.pennlive.com/news/2021/05/pennsylvania-lottery-beats-casinos-in-online-gambling-turf-fight.html