Opponents of online sports betting have several issues with their respective states allowing people to bet online. Among those issues is one that the state of Michigan recently faced before online sportsbooks launched on January 22, 2021.
Could online gambling cause problems for state lotteries?
Governor Gretchen Whitmer had refused to sign off on early legislation for fear that online sports betting would negatively impact lottery profits. Michigan lottery revenue contributes to the Michigan School Aid Fund, and she did not want to be the governor who allowed school funding to decrease.
Revenue from the Michigan Lottery contributed over $1 billion to the Fund in the 2019 fiscal year. The 2020 fiscal year was a little better at $1.179 billion. With lottery revenue growing every year since 2015, it is not hard to understand why Governor Whitmer’s concerns.
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Michigan Lottery Revenue
- FY20: $1.179 billion
- FY19: $1.070 billion
- FY18: $941.28 million
- FY17: $924.11 million
- FY16: $888.91 million
- FY15: $795.50 million
But Michigan State Representative Brandt Iden tried to assure her that online betting would not impact the lottery. If some of the early numbers are any indication, it appears that he was right.
| Online Sports Betting | Lottery | |||
|---|---|---|---|---|
| Handle | Revenue | Sales (in millions) | Revenue (in millions) | |
| January 2021 | $150.8 | $17.4 | $506.8 | $146.6 |
| February 2021 | $325.6 | $9.4 | $705.0 | $90.0 |
In the short time that Michigan has embraced online sports betting, there is no evidence that online sports betting has negatively impacted the lottery. Of course, it is hard to draw a definitive conclusion with only a couple of months of data to reference.
But in a recent interview, Johnny Avello from DraftKings gave a good explanation as to why that trend will likely continue (via WLNS.com):
“It’s a whole different type of wagering. [The lottery] has core players and continues to have its core players. We bring something new to the state.”
Is Michigan An Outlier?
Those who continue to oppose the idea of online sports betting will likely say that online sports betting and the lottery coexisting as they are in Michigan is not the norm. They will say the lottery’s continued success in Michigan is not the norm.
In some states, that may appear to be true– but that is not the case.
West Virginia saw lottery revenue drop from $90.5 million in November 2020 to $87.5 million in December (down $6.63 million from December 2019). But that was not due to online sports betting. It was more because racetrack video lottery revenue dipped nearly $29 million (a 28 % decrease) for the month.
A spike in Covid-19 cases caused business at the state’s four racetrack casinos to plummet, causing revenue to suffer (Herald-Dispatch).
As another state (like Michigan and West Virginia) where the state lottery regulates the online sports betting industry, it will be interesting to see how the number looks in Tennessee. Tennessee is the only state in the country with just online sports betting (which launched in November 2020).
However, while sports betting revenue numbers are available, the numbers for the lottery are not.
Many states saw an initial dip in lottery sales when stay-at-home orders became the norm in every state in March 2020 due to the coronavirus. In most cases, sales rebounded to respectable numbers; some even saw revenue increase over 2019.
In many cases, states saw a dip in lottery revenue from the year before. But there is no reason to think online sports betting is the cause. Before we can definitely say one way or the other, more data is needed. So, only time will tell if sports betting will impact state lotteries. But for now, it does look like we can blame the Coronavirus for any dip in sales last year.
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