New Minnesota online lottery offerings bring hope, renewed scrutiny

Forget that drive to a convenience store for a scratch-off lottery ticket.

The Minnesota State Lottery soon will give consumers the same chance at a jackpot from the comfort of home, allowing them to scratch off tickets with a mouse and a cursor, not a coin.

Undeterred by earlier criticisms, lottery official are making a bold play to reach the next generation of lottery players by going beyond its current Powerball-like games online and delving into the lucrative scratch-off market.

"I fully understand the fear, that the Internet is the boogeyman and all that," said Ed Van Petten, executive director of the Minnesota State Lottery. "Online sales are a very minuscule portion of our business. I don't expect it to be a great sales generator for us; I just expect it to be a great marketing tool."

Gambling critics are blasting the plan as a stealthy, state-backed expansion that will prey on addicts and create new ones, all in the service of puffing up the state budget. They have watched with growing apprehension as lottery officials have expanded sales to ATMs and even gas pumps.

"It's horrifying," said state Rep. Greg Davids, R-Preston. "We have the lottery gone wild. I am very concerned about where this lottery is heading."

Online gambling made up a tiny fraction, less than 1 percent, of the state's $560 million lottery business last year. But lottery officials are on a roll, having increased overall revenue for each of the last six years, even during the Great Recession. About 45,000 Minnesotans have signed up for online accounts, a number lottery officials expect to grow as consumers become more comfortable playing games and spending money online.

Lottery afficionados soon will have their choice of a host of online scratch-off lottery games, digital replicas of the actual paper lottery tickets they now buy at retailers. Online players can bet up to $50 a week, and problem gamblers can block themselves from the site. The lottery site also has a "cooling-off period," which delays a request for a limit increase to discourage consumers from betting excessively. The lottery has multiple ways of ensuring customers are old enough to play and geo-locators to make sure the player is in Minnesota.

Convenience store operators remain deeply skeptical. They feel undercut by the state after investing heavily in the equipment and personnel needed to run reputable lottery outlets.

"This is a very big step, and I don't think we need to do this," said Mark Ogren, owner of Croix Oil Co., which owns numerous convenience stores around the metro area. "The lottery is already readily available for anybody who wants to play, and they don't need to go online."

Van Petten said that research in countries offering similar online games shows that the online gambling sites actually increase sales at retail stores.

Once customers start playing online, he said, they are more likely to buy paper tickets in conveniences stores.

"We are not going to hurt them, and I don't want to hurt them," Van Petten said. "We will help each other."

Online gambling is a tricky issue in Minnesota and around the nation. Private online gambling remains illegal in Minnesota, and officials have rejected countless private industry proposals to expand gambling. That has given government, tribal casinos and charitable organizations a viselike grip on the state's gambling industry.

The push into online gambling began in the closing months of Republican Gov. Tim Pawlenty's administration, and the effort shows no signs of slowing under DFL Gov. Mark Dayton.

At this point, legislators can do little to stop the move into online lottery sales. Lottery officials notify lawmakers about their new activities but say they do not need legislative approval.

"It's certainly a firestorm." said Rep. Dan Schoen, DFL-St. Paul Park. "We've got to fix something."

Van Petten said the State Lottery always operates within the law and he is more than happy to share details about its evolving enterprise.

"We have no intention of hiding anything we are doing from anybody," he said.

Lottery officials do, however, feel a strong sense of urgency to expand online offerings in case the federal government cracks down on new Internet gambling activities by states.

Officials do not envision online gambling going away, no matter how determined regulators are to snuff it out. Companies overseas already serve a thriving subculture of online gambling.

"That horse has left the barn, and that horse left a long time ago," said Don Feeney, research and planning director for the lottery.

Lottery officials are racing against changing demographics, too.

In 2003, 52 percent of Minnesotans ages 18 to 24 years played the lottery. A decade later, just 29 percent of those in that same age group do so.

"The lottery is just not on their radar," Van Petten said.

In a digitally driven culture, lottery officials say they must go where the customers are.

Taxpayers have a lot at stake in the lottery's online push. A fourth of all lottery proceeds fund environmental efforts in Minnesota and the state's general fund, which pays for schools, health care, public safety and other essentials.

Some legislators say money alone should not be the bottom line, that moral concerns must be a factor.

"To do something this major and drastic, in the darkness of night, without any kind of oversight is just wrong," said Rep. Kathy Lohmer, R-Stillwater.

She is most concerned about the effect on small businesses and the targeting of new, younger customers.

"It's an addiction for some people, and the earlier you get into it, the more likely that addiction is going to happen," she said. "It just seems like in government, we are always trying to find ways to raise more money."

Baird Helgeson • 651-925-5044