- Associated Press - Friday, March 14, 2014

ST. PAUL, Minn. (AP) - A month after instant “scratch-off” Minnesota Lottery ticket sales went live on the Internet, the pioneering venture faces a high-powered threat at the Capitol.

The Senate leaders of both parties and tax committee heads in both chambers are seeking a one-sentence change in state law to permanently turn off the new portal for gambling. Among other issues, lawmakers are upset that lottery officials introduced the games without seeking their approval through explicit legislation allowing it.

A bill forcing the change gets an initial committee hearing next week, and Senate Majority Leader Tom Bakk predicted there are sufficient votes in the full Senate to pass it.

Lottery Director Ed Van Petten told The Associated Press this week he has been meeting with lawmakers in an attempt to allay concerns and has kept Gov. Mark Dayton’s office apprised of developments. Dayton hasn’t evaluated the legislative proposal, his spokesman said.

“We’re taking it seriously,” Van Petten said of the threat.

The backlash comes from several quarters. Some lawmakers, particularly Republicans, have raised moral and philosophical objections to state-sponsored gambling and view the Internet option as especially troublesome. Others pushing for restrictions worry the online sales hurting traditional ticket retailers. And some hail from districts with American Indian casinos, though they deny competitive concerns voiced by a significant tribal community donor base being the prime motivating factor.

Bakk, a Democrat who has two casinos in his northern Minnesota district, said allowing betting with a few clicks on a home computer or smartphone could easily lead to problems with addiction.

“Gambling should be a destination event,” he said. “It shouldn’t be something that is spontaneous.”

Minnesota’s lottery is among a few nationwide testing the online waters, though it’s the first to give the scratch-off franchise a virtual bent. Delaware’s lottery has gone the furthest, with its fall launch of online slots, roulette and blackjack games. All but five states have a lottery of some kind.

The Minnesota Lottery was established after voters passed a 1988 constitutional amendment to set it up and dictate that at least 40 percent of net proceeds are deposited in a natural resources trust fund. It now generates more than $500 million per year in total revenue - about 60 percent of which goes back via prizes. In fiscal year 2012, $124 million went to various state programs.

Van Petten has said the online offerings - “Spicy 7s,” ”Fa$t Buck” and “Double Your Money” among them - are a way for the lottery to adapt and make games attractive to next-generation players.

But lawmakers from both parties are upset that the lottery pushed ahead with the games without legislative consent.

“It really pushes the boundaries of what the law allows,” said Senate Minority Leader David Hann, a Republican co-sponsoring the bill banning online sales. “There needs to be some restraint brought to this. I don’t want to have a guy in the lottery office over there wondering how much more he can get away with.”

Van Petten counters that the e-scratch games match what customers can already buy in other forms, and he stresses safeguards are in place to combat compulsive gambling and to keep minors from playing. Weekly electronic purchases are capped at $50 per player, age verification software is used and winnings or losses are tied to a user’s pre-registered bank account. Buyers must be located within Minnesota.

Van Petten said the first month of electronic sales have been tepid, generating $1,000 to $3,000 a day. By comparison, about $1 million in tickets per day are sold on average at gas stations, corner markets and other brick-and-mortar locations.

“I do firmly believe that when people this intelligent see the truth about how this thing operates and not just hearing the fears people have, I think it will become less of an issue,” Van Petten said. “There are people who just don’t like gaming.”

John McCarthy, executive director of the Minnesota Indian Gaming Association, said he’s keeping tabs on the legislative efforts to rein in the lottery. His group represents nine tribes that operate a combined 14 casinos. He said every dollar players put into Internet tickets is one that could have been spent in a casino.

“Our concern is not exactly what they’re doing right now, it’s what they’re planning to do,” McCarthy said. “One thing leads to another.”

Lottery officials maintain their electronic games aren’t in direct competition with casinos and they aren’t pursuing casino-style games. They said the e-scratch offerings might actually help boost ticket sales at traditional outlets. They cite research in Europe that showed three countries that saw retail store sales boom after the Internet versions were introduced. Online lottery games build brand awareness, supporters contend.

That doesn’t give comfort to lawmakers like Bakk, whose co-sponsorship of the prohibition bill gives it more heft.

“I don’t believe anyone ever though that on their phone they could buy a lottery ticket,” Bakk said. “I don’t think that’s what voters voted for.”


Follow Brian Bakst on Twitter at https://twitter.com/Stowydad

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