KY Lottery to sell keno and lottery tickets over internet

The Kentucky Lottery Corporation’s board of directors today moved to take steps to offer Keno as well as Internet-based sales of lottery tickets.

Specifically, Kentucky State Treasurer Todd Hollenbach (a voting board member) moved to “direct the staff of the Lottery to undertake all necessary measures required to offer Keno as a new game and Internet-based sales as a new sales medium as expeditiously as reasonably possible.” The motion passed on a unanimous board vote.

In the 13 states where Keno is offered, the game involves players picking from 1 to 10 numbers, with the lottery drawing 20 numbers every four to five minutes from a field of 80. Players can win anywhere from $1 to $100,000 on a $1 play. Nationally, the majority of Keno retailers tend to be in the hospitality business such as restaurants, bars, bowling alleys, and fraternal organizations. Current retailers could have the option of offering Keno. It is anticipated sales would begin as early as January 2014, and the lottery could start with about 450 retailers at launch.

In late 2011, the U.S. Department of Justice issued an opinion clarifying that Internet wagering within the borders of a state is not prohibited under current Federal law, so long as it is legal within the state and the wager is not on a sporting event. Illinois was the first state to offer sales via the Internet in March 2012. Georgia followed suite in late 2012, and several other states have taken steps to begin sales via the Internet in the near future. “I anticipate we will start slowly and deliberately down this path, with draw games such as Powerball and Mega Millions,” said KLC President and CEO Arch Gleason. “We would then gradually move to include simulated scratch and instant win games.”

“Based on the experiences in Europe, particularly Great Britain, it’s been demonstrated that this growth in revenues has not been at the expense of the traditional brick and mortar retailers. These traditional location sales have been able to grow at the same time.”

It is projected that Keno could raise an additional $15 million for the Commonwealth in FY14, and could more than double to $31 million by FY19. Internet lottery sales, which the KLC wouldn’t anticipate fully implementing until FY15, could raise an additional $4.5 million for the state in its first full year, growing to an estimated $31 million by FY20.

The board also heard lottery sales for the fiscal year remain strong. Vice President of Finance Rick Kelley reported sales from July through February were $551.7 million, which was $24.5 million more than last year but $9.6 million less than budgeted. Income before transfer of dividends was $147.1 million, which was $7 million more than last year but $1.5 million less than budgeted.

In other business, the board approved contracts with:

• Delehanty Consulting for a third party security assessment;
• Blue and Company for draw audit and related services;
• Gaming Laboratories International for lottery ball calibrations and random number generator certifications;
• Smartplay International for drawing machine maintenance and repair services;
• Garron Lottery Products for draw machines, ball sets and related services;
• J.P. Morgan Chase Bank for banking services;
• Fifth Third Bank for securities custodian services, and;
• Goldberg Simpson LLC and Valenti Handley & Robinson for legal services.

The board also approved rules and regulations for six scratch-off tickets, amendments to the Mega Millions rules, and amendments to the retailer administrative regulations. The next meeting of the KLC’s board of directors will be May 31. The meeting will begin at 9:30 AM EST, and will be held at the KLC headquarters at 1011 West Main Street in Louisville. Committee meetings will begin at 8:30 AM EST.

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