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  • Writer's pictureSean O'Hagan CEO Tap 5050

Minnesota Online Lottery Gambling Takes a Step Back

Please note this is not my article.  It was written by Paul Hastings LLP and can be found here:

Sometimes it seems as though just about anything can be purchased online these days.  Books.  Clothes.  Shoes.  Medicines.  Alcohol.  Movies, music  and other forms of entertainment.

For most commodities and pastimes, there often is no need to leave home.

Yet one industry consistently has lagged behind in the move toward mobile and electronic commerce: regulated gambling.  The reason for that is largely political.  Only three states have statutorily authorized online gambling - Delaware, Nevada and New Jersey (at time of writing) - and some in Congress want to roll back even that.

Although much attention and vitriol have been directed to casino and poker gambling, comparatively little has focused on another, far more common species of gambling - state lotteries.  Over the past couple of years, a few have started to explore online ticket sales and three - Georgia, Michigan and Minnesota - even enable online play.

Because in many states lotteries may undertake online play without the need for legislative authorization, the launch of games in those states has proceeded relatively unimpeded  - until now.

Last week, the Minnesota legislature passed a bill that will require the Minnesota Lottery to stop offering online games within four months.  Minnesota Governor Mark Dayton, who  vetoed a similar bill last year, allowed this year's version to take effect without his signature just today.

The Lottery has been selling "e-scratch" tickets for about 10 months, reportedly generating close to $1 million in sales during that period.  By forcing a halt to the activity, the legislature is exposing the Lottery to potential early termination fees or breach of contract claims from the Lottery's suppliers.

Sponsors of the bill complained that the Lottery had overstepped its authority in launching online play, but at least some reports point to social conservatives, certain religious groups, tribal gaming interests, charitable gaming associations and retail stores (which derive substantial income from the sales of paper lottery tickets) as among those who opposed the "e-scratch" games.

Ultimately, the Minnesota decision is another example of the convoluted politics of gambling - an industry that is more heavily scrutinized, taxed and regulated than just about any other in America today.

What impact will this have on efforts to push forward online gambling in other states?  California, New York and Pennsylvania are just a few states seriously considering legalization of online poker or casino gambling, and several other states are considering moving their lottery games online.

Each state is different, and each is likely to remain relatively unaffected by the Minnesota action.  However, until a critical mass of states have launched online gambling - until we reach a collective "tipping point" as a nation - the future of online gambling in any form remains unclear.  For that reason, internet gambling advocates should regard the North Star State's decision as distinctly unhelpful.

In the meantime, Minnesota lottery players will need to get their fix the old-fashioned way - at their neighborhood 7-11.

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