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eLottery --- Gaming on the web is already a growing business, the government knows this, we know this, the states know this. What are they all going to do about it? I would suggest that most Americans currently view Internet gambling with a very skeptical eye, in my view most individuals would be much more comfortable driving to a legal established casino where they can see and feel the atmosphere and the chips as they wager bets. I also believe that lottery and gambling are at opposite ends of what people think of as gambling.

The term gambling conjures up images of slot machines, blackjack tables, wheels that spin etc... I would guess that some individuals squeeze lottery tickets into this group but for the most part I think it is viewed differently. A lottery ticket differs from gambling in some basic ways. Primarily it's a process of buying a ticket and forgetting about it till the drawing day comes, there's no heat of the moment impulse to double down or play round after round in rapid succession. I don't think many people play the lottery like they would play a slot machine, there isn't the instant gratification that comes with a bell ringing, colorful and emotion capturing environment, the "in your face" lure doesn't exist in a lottery ticket sale.

I know this all seems obvious, but still the idea that a lottery and gambling are equal forms of play does exist. eLottery also differs from the brick and mortar ticket sales established systems of playing. First the demographics are different. To buy a ticket online you need to be online (duh) but what that means is significant, The success of an online lottery would be tied to a more upscale player. We've heard the arguments that lotteries are a voluntary tax on the poor, and I agree with that reality, well, an online lottery would help shift that base of players. I can't imagine a way to lure middle-class players into a line at 7-11 because no matter what the game or the stake of the prize middle-class players have (for the most part) dismissed the opportunity to be one of many million on the odds chart to be a winner, I know I have.

States have grown to rely (as in depend) on lottery revenue to fund schools, to support elder citizen programs, and other basic citizen related programs. Since all studies confirm that it's the poor who play there is concern and in recent years confirmation that lottery sales to the poor can't grow at a rate that matches funding needs. New games have become bland, they don't spike sales anymore, a saturation point has been reached and even new advertising programs don't boost sales like they used to. It takes multimillion dollar prizes to lure new players and each bigger prize brings in fewer and fewer players, anymore a prize needs to near one hundred million before it peeks interest, and even then it's as much poor people buying more tickets as it is the well off deciding to risk a dollar.

Now we have an opportunity to target and capture the more well off among us directly and attractively (because it's so easy to click and play) that I can't imagine States developing exclusive web based games. One example I like is a web game targeting the 7 million online investors. has a demo game where you pick the closing price of the stock market, It's a game that pays every day and would attract a completely different group of players. It couldn't succeed nearly as well at the 7-11 because of (I think) obvious reasons. Online however, it would be a link on every financial site. As an exclusive game for web surfers it would be a litmus test and would be praised by all participating states as a huge success in shifting the burden from those hopeful but "poor" players who currently drive the majority of ticket sales.

No States currently sell tickets online but we know from eLottery statements that a dozen or so States are moving toward trying the concept. Once a State signs up and offers a game to web based players what we'll have is a United States approved web based gaming site. This is the kicker in my opinion. It won't be Keno or Poker or Blackjack, it won't offer slot machines or games that draw a player into compulsive gambling. What it will do is allow the USA to take a dominate position and even stem the lure of "real" gambling. The variety of lottery games that can be designed for Internet only play is less limited then non-Internet games simply because the web allows more freedom along with better controls.

I've watched the many trends that the Internet has created and fostered, The rate of growth of web based businesses, e-commerce being the glamorous one but of course many behind the scenes trends have emerged to support that glamor. Investors have identified the ones that like and driven their marketcaps up which enables them to succeed. It's not a matter of Amazon (or whoever) convincing anyone that they are better, Barnes & Noble is a good contrast. Many can't rationalize why it's this way but it's undeniable that it is. eLottery seems poised to follow an Amazon excitement curve. Will it take a contract? Or will a letter of intent be enough to spark the fire needed, giving ELOT the marketcap to make it the undisputed leader in net-based lottery ticket sales. One State is all it will take to give the concept credibility, making it the "approved" web based retailer.

I don't mean to compare Amazon or any other web business to eLottery. The point I would like to highlight is the (in The Motley Fool vernacular) "Rule Breaking" position that eLottery would obtain once they crack the market and actually sign a State lottery to sell tickets to the well-off surfers who dominate the Internet world.

The best part of eLottery is it's demographics, While they were running the National Indian Lottery (NIL) in 1998 they discovered the average player was in the $50,000 income bracket, spent hours on the site at a time, making it one of the "stickiest" sites on the web and proving that a lottery can prosper without relying on the poor citizens who currently dominate existing lottery play.

If you are against lottery because it preys on the disadvantaged you may want to consider how a web-based system would change this, or at least help shift it toward players who can better afford to pay the voluntary taxes which every State with a lottery has grown to depend on and in fact would be hard pressed to abandon.

I see eLottery as a positive use of web-based e-commerce and I think many States will end up agreeing that it's a system who's time has come and one that can only enhance the spotted reputation State run lotteries have with the vocal minority who would like to see alternative solutions to the issues that would shift the dollar base (even if just some) to a more appropriate clientele


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IMHO, lotteries are worse than casino gambling, for several reasons:

The advertising plays to people's greed, rather than appealing to their benevolence by showing how the income is used. The government should not encourage this sort of mind set or motivation. The ends do not justify the means.

The advertising builds up a grossly false impression of one's likelihood of winning. People simply can't comprehend how tiny 1/10,000,000 is. If a casino ran the same kind of advertising, it would be shut down in a trice - with good reason!

As mentioned by others, the market for lotteries tends to be the poor - people who are impressionable, and who really ought to be saving that money instead. The fact that participation is voluntary doesn't excuse the states from aggressively exploiting people's weaknesses, particularly at the expense of their savings.

The chances of significant winnings at casinos are much better, due to better odds.

The payoffs are focused on few people. No one needs millions of dollars to live "the good life". So a large part of the "donations" - by those who can least afford them - are ultimately wasted in profligate consumption producing no real benefits even to the winners.

Another significant portion of the income is wasted on pervasive advertising. If people consider the lotteries to be such wonderful things, why do the states need to do so heavy a sell job? McDonalds doesn't even seem to advertise as much.

If people want to gamble, they'd be much better off dripping their money into stocks. They'd still have the chance of winning big, the excitement of watching their stocks change moment by moment like race horses, and overall the odds would be in their favor. If, on the other hand, they view a lottery as charity, we would be much better off if ALL the money, not just half, went to good works.

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Excellent post. It should be sent to every representative in states with a lottery system. I have a hard time defending the merits of American government when I see it being used to perpetrate the worst investment scam on a series of demographics (i.e. human beings) that can least afford to be scammed. I don't feel I'm being unfair or insulting that I consider it to be a downright disgrace.

Given all this, my response to your fine review of the numbers is -- shouldn't we let the casinos run our public education system? At least the casinos know what a reasonable payout is! Think how math classes would improve across the land. You could attend the Mirage schools or the Trump schools or the Flamingo schools. I bet we could get Nevada and New Jersey onboard.

Thanks for a great note. I believe The Motley Fool will be largely responsible for bringing the state-run lottery to its knees over the next ten years.

Tom Gardner, Fool
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I believe The Motley Fool will be largely responsible for bringing the state-run lottery to its knees over the next ten years.

Oh, I certainly hope so! I consider the lottery one of the great evils of modern society.

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