A review of secondary lotteries

Transcription

1 A review of secondary lotteries Sally Gainsbury June 30, 2017 Report submitted to Gambling Research Exchange Ontario Please address correspondence to: Dr. Sally Gainsbury

2 Table of Contents Executive summary... 4 Terms of reference... 5 Context for secondary lotteries... 5 Lotteries... 5 Internet gambling... 6 Online lotteries... 7 What are secondary lotteries?... 8 Messenger model... 9 Insurance model... 9 Affiliate operators... 9 Secondary lotteries available in Canada Potential for harm Relationship between lottery and gambling problems Income Youth Player understanding, rational thought, and motivation Frequency Jackpots Gambling opportunities Electronic expenditure and accounts Disreputable sites Regulation Expressed concerns United Kingdom Europe Australia Considerations Disruption Competition with existing operators Consumer protection Suggestions for research Conclusions References

3 Appendix Examples of secondary lottery operators Lottoland WinTrillions LottoDay TheLotter

4 Executive summary Most jurisdictions have a single provider of lotteries. Although many lotteries have online sites, apps, and potentially the ability to purchase tickets online, the lack of competition has resulted in low levels of innovation and sophistication in consumer offerings. Secondary lotteries allow consumers to participate in a lottery through a third-party provider, including lotteries from jurisdictions they would not typically be eligible to win. Messenger lotteries purchase tickets in an existing lottery draw on behalf of customers and send scanned copies. Winnings are claimed by the operator on behalf of the customer, or the customer is flown to the relevant jurisdiction to claim their prize. Insurance lotteries are betting/wagering rather than lottery activities. Customers bet on whether a set of specific numbers will be drawn in an existing lottery and operators pay out jackpots through an insurance scheme. Bets may be made on various outcomes of lottery draws, making a broad array of betting options available. Fourteen of the top twenty most popular English-language online gambling sites accepting play from Canada offer secondary lotteries, including five offering the Canadian 649 Lottery. There is little research on the impacts of secondary lotteries for consumers or existing lottery operators and few regulators have taken specific actions regarding these. Secondary lotteries have features that pose the risk of harm for some consumers: o Secondary lottery sites may have poor consumer protection standards, including age-verification, and protection from scams and fraud. o Consumers may not understand the mechanics behind secondary lotteries, challenging the validity of informed choice. o Multiple lotteries and draws offered may increase gambling frequency. o Large jackpots may induce individuals experiencing financial difficulties, including gamblers experiencing problems, to participate in draws, exacerbating problems. o Customers may migrate to additional forms of gambling through sites that offer multiple draws and betting options. Operators of messenger lotteries may not have a lottery license as these are resellers of tickets. Insurance model lotteries generally require a betting license. Many secondary lotteries operate in jurisdictions without appropriate licenses. Several jurisdictions have taken actions against secondary lotteries, including the UK, which is holding an inquiry into these practices. Italy, Greece, Estonia, Bulgaria, Romania, and the Czech Republic have all taken action to block various secondary lottery sites. Secondary lottery sites represent a disruption to the lottery industry and a new form of online gambling. Secondary lotteries may compete with existing lottery providers, offering products that regulated lotteries are not able to provide and use branding of lottery operators without permission. The extent to which consumers understand these products, how outcomes are determined, and their links (or lack thereof) with existing operators is unknown. Secondary lotteries may reduce revenues to governments and contributions to worthy causes related to lottery proceeds. Levels of consumer protection offered by secondary lottery sites are not well established. Further research is recommended to guide responses from regulators, including to protect consumers from harm. 4

5 Terms of reference The aim of this review is to examine the current state of the field with regards to secondary lotteries. This includes consideration of current sites, operators, and licensing jurisdictions, as well as international policies on these sites and apps. Specific consideration will also be focused on implications for consumer protection and responsible gambling. Context for secondary lotteries Lotteries Lotteries have an extremely low chance of winning and a low pay-out ratio compared to other forms of gambling. However, lottery mechanisms are relatively simple to understand; these are highly visual with balls being drawn from a barrel with full transparency, minimising concern about fraud. Lottery purchases are typically discrete, albeit regular, and outcomes typically occur at least one hour, if not several days after the purchase. The frequency of lottery draws is typically low, generally once or twice per week. Unlike most gambling products, lottery tickets can typically be purchased from a variety of retail outlets, including standalone kiosks as well as grocery and convenience stores. Despite the low probability of winning, lottery is a high-volume activity and typically the most popular form of gambling. According to the 2013/14 Canadian Gambling Digest, the most common gambling activities in Canada are ticket lotteries, charities, and scratch/instant win tickets, with lotteries entered by 60.6%-81.6% of Canadians annually 1. In Ontario, 61.4% of adults are estimated to purchase lottery tickets, with notably higher participation than other gambling activities. The global lottery market is expected to grow at a compound annual growth rate of 9.44% during the period of 2017 to In the six months to June 2016, Ontario Lottery and Gaming Corporation had the best performance of Canadian lotteries, reporting an increase in sales of 6.6%, as against the corresponding revenue period of In Ontario, 18% of adults purchase tickets weekly from one of 9,105 retailer terminals 4. In , total lottery ticket revenue in Ontario exceeded total casino revenue, and net revenue after prizes and expenses resulted in 6 times more funds for the government. Although these figures are not current, they are indicative of the importance of lottery sales to gambling in the province. Lotteries are often provided by a single operator under a monopoly license. In some jurisdictions lottery products are owned by the state and funds from lotteries are specified for good causes such as education, hospital, culture, sports, or arts. This can lend a social credence toward participation. Where there is a single provider of lottery, this lack of competition reduces the need for aggressive advertising and promotions. Some lotteries, or jackpots are pooled across jurisdictions, allowing for larger jackpots, due to a greater number of participants. Typically, only individuals who reside in the jurisdiction offering the lottery are eligible to win prizes. 1 Responsible Gambling Council and others, Canadian Gambling Digest Lottery 2017 Global Market Expected to Grow at CAGR 9.44% and Forecast to World Lottery Association, Global Growth up 4.5% Half-Year on Half-Year; Sales Underpinned by North America. 4 Ontario Lottery & Gaming Corporation, Lottery_player_statistics_fact_sheet.pdf. 5

6 For many consumers, lottery is not perceived to be a form of gambling, particularly for nonfrequent participation 5. Lottery is distinct from many other forms of gambling that require specific knowledge, or travel to and entry into licensed gambling venues. Players can be informed of outcomes from their own home, as these were traditionally televised. Although standalone shows focusing on lottery draws are decreasing, results are often included in news bulletins or featured during televised shows and in the media, including newspapers 6. For some, lottery is a social activity, for example, entering regular numbers as a group or syndicate. Lottery winners are often featured in media stories. The lottery may be perceived as achievable, albeit unlikely, and possible for anyone, regardless of background or circumstances, to experience a life altering win. Subsequently, lottery players are not typically characterised as being from specific demographic segments, as a wide variety of people engage in this activity. However, some jurisdictions have reported declining lottery participation by younger age cohorts. For example, Ontario reported that only 7% of adults under 35 years of age play lottery at least once a week, compared to 45% of all adults 7. Attempts are being made to make lottery more attractive to younger generations, including the launch of a new OLG app, allowing consumers to check their tickets online, and set reminders to purchase tickets 8. Internet gambling New technologies are constantly being developed and Internet technology is being used by companies and users in novel and innovative ways. Internet gambling companies are using Internet technology to reach a wide range of users, including the increasing proportion of the population who access the Internet through mobile devices. Internet gambling is expanding internationally; the global online gambling market is estimated to reach USD$66.59 billion by 2020, more than doubling since Casino games and sports betting make up the largest share of the online gambling market 10. As of April 2017, there were an estimated 3,621 online gambling sites, including 1,444 casino sites, 832 sports and racebooks, 523 bingo sites, 251 poker sites, 215 lottery sites, 130 binary options sites, 109 forex sites, 27 fantasy sports sites, 16 spread betting sites, and 10 betting exchanges. 5 Lange, Brief Communication. 6 Stradbrooke, Lottoland CEO Slams Camelot s antiquated offering. 7 The Canadian Press, Lottery Companies Joining Forces to Get Millenials to Buy Tickets. 8 OLG, Introducing the New OLG Lottery App: Convenient, Free and Easy to Use! 9 PRNewswire, Global $35.97 Billion Online Gambling Market Growth at CAGR of 10.81%, Market to Reach $66.59 Billion with Growth Very Geography Specific - Research and Markets. 10 tax, Global Online Gambling Industry Size

7 Fantasy sports Forex Binary options Lottery Poker Bingo Wagering Casino Figure 1 Number of online gambling sites worldwide - April 2017, Source: onlinecasinocity.com More than 80 nations have legalised online gambling, although in many jurisdictions legislation is not clearly defined and there remains a large offshore market, which includes grey market sites and sites operating illegally. In Canada, provincial governments can offer gambling, any several offer online gambling sites. Although there are restrictions on marketing for gambling in most jurisdictions, it is difficult to enforce these restrictions online, and many offshore gambling sites can market directly to consumers across jurisdictions. The benefits of legalising and regulating online gambling is that stringent consumer protection measures can be provided, including responsible gambling 11. This is important as research suggests that for some users, online gambling poses specific risks and can contribute to the experience of gambling problems 12. Risks of gambling problems and consumer protection are usually cited in arguments both for and against legalised online gambling. Consequentially, the relative risk related to online gambling products and how this can be minimised is usually considered as part of policy discussions. Online lotteries The rapid increase in the use of Internet-connected mobile devices allow people to access the Internet more easily. Subsequently, recent years have seen increasing overlap between types of gambling, particularly online where gambling mechanisms underlying games are not always understood by consumers. Internet gambling has impacted lotteries, with many jurisdictions now permitting the sale of lottery tickets online, although this is generally restricted to residents of specific jurisdictions. Lotteries lend themselves to the online channels; the simple mechanisms, 11 Gainsbury and Wood, Internet Gambling Policy in Critical Comparative Perspective. 12 Gainsbury, Online Gambling Addiction. 7

8 repeated, regular play, and high popularity make online lotteries a relatively simple form of e- commerce. The online lottery market is not as competitive as for other types of online gambling. There is less drive for innovation as there is has traditionally been limited consumer choice. Subsequently, many online lottery sites have not evolved to be as sophisticated as other types of online gambling. Many official online gambling sites, and mobile apps if these are available, are not particularly welldesigned, and do not focus on improving the consumer experience beyond basic utilitarian functions. One 2014 digital lottery white paper estimated that 21% of lotteries use apps to engage players on mobile devices 13. Only 20% of lotteries with mobile apps were using Facebook fan pages to promote these and only 58% promoted apps via their websites, indicating a lack of cross-promotion and effort to drive consumer engagement with various channels. Apps typically offer passive content, such as the ability to check draw numbers, locate retail stores, and access news. On average, lottery apps were viewed positively by approximately 15% of users based on analysis of user sentiment. This report included no mention of secondary lotteries, including in interviews with representatives from leading lottery brands who discussed efforts undertaken to understand the market and customer preferences, indicating the lack of awareness among existing operators of potential competitors and market disruption. A similar study in Australia found that lottery operators were less active on Facebook than other types of gambling operators 14, and in interviews, lottery operators were cautious to engage in social media and uncertain of whether their target audience were social media users 15. These results suggest that traditional lottery operators may not be meeting the needs and expectations of online gamblers. The lack of innovation in the online lottery market has created a potentially attractive market for online gambling providers. There is less competition, and cost, to acquire new consumers, including existing lottery players of licensed providers. For example, online advertising for relevant keywords are less expensive for this type of gambling, due to the lack of competition. Lottery is the most popular form of gambling, representing a potentially large consumer base, including consumers who gamble on this form regularly. Furthermore, lotteries can be offered in addition to other forms of online gambling as a complementary product. The traditional mechanics of lotteries may have reduced interest in this market to offshore gambling operators. Traditional jackpots are offered based on ticket sales, meaning that a large consumer base is necessary to offer jackpots that are of sufficient interest to drive sales. Subsequently, for operators, the risk reward ratio has been of limited interest. The innovative mechanics of secondary lotteries has changed this product, making it more appealing to operators, and consumers. What are secondary lotteries? There are two types of secondary lotteries; 1) an insurance model and 2) a messenger model. 13 Karma Gaming, The State of Digital & Lottery: White Paper. 14 Gainsbury et al., An Exploratory Study of Gambling Operators Use of Social Media and the Latent Messages Conveyed. 15 Gainsbury et al., Social Media Marketing and Gambling. 8

9 Messenger model The messenger model involves operators purchasing lottery tickets in a draw and reselling these by scanning and sending them to consumers online. The messenger model is less disruptive as gambling operators are still purchasing tickets from an existing lottery operator. However, this model allows secondary lotteries to market products provided by other lottery operators, recruit consumers to their websites and mobile apps, and allow consumers to become familiar with purchasing lottery tickets from secondary providers. In this model, the existing lottery loses control of the marketing and messaging to players as well as other important consumer protection measures. The messenger surmounts the typical requirement that winners are residents of the jurisdiction by maintaining possession of the ticket and redeeming any winnings, which are then transferred to the consumer. As messenger model operators are not technically providing a gambling service, but merely providing access to an existing gambling operator, they may not need to be licensed or regulated. However, these claims may not be accurate in all jurisdictions and have not been broadly tested. Some gambling regulatory authorities now provide licenses for messenger model secondary lottery sites, as discussed below. Insurance model The insurance model involves allowing consumers to bet on the outcome of a lottery draw, using insurance to enable a payout should a consumer have an exact winning bet (i.e., betting on the correct combination of numbers). Jackpots are not based on ticket sales, rather insurance companies cover the payout in return for a premium. Subsequently, lottery operators do not need to sell a certain volume of tickets to match or exceed official jackpots. This model is often in direct competition with existing lotteries within a jurisdiction, as well as allowing consumers to bet on lotteries in jurisdictions they would not typically be able to purchase tickets in. This allows lottery draws to be offered with much greater frequency than traditional lottery operators. This model is likely to be classified as gambling as it is essentially betting on the outcome of the event, a lottery draw, and secondary lottery operators can be licensed under a betting license. The insurance model also allows innovative betting products that move away from simple lottery draws. For example, players can bet on a range of numbers, the first number of the draw, whether the second number will be above or below a certain level, or side betting odds, similar to roulette (e.g., evens and odds).for example, Lottoland has launched a product called WorldMillions, which is described as the world s first global lottery ; this is a twice-weekly content (with prizes up to 100 million) in which consumers select an eight-digit number, which can only be selected once, meaning that jackpots are not shared. Consumers can also stake fractions, that is, one-tenth of a line bet to win one-tenth of the jackpot. The outcome for this draw is based on the numbers from two lottery draws combined, thus allowing it to still be considered event betting. Some secondary lottery operators can use a random number generator to provide independent lottery draws, not based on any official lottery draw. However, this is likely to be classified as a casino gambling activity. Affiliate operators Several companies provide B2B (business-to-business) products that enable operators to expend their gambling products to secondary lottery betting. These companies provide software, draw details, and insurance for jackpot coverage to allow online gambling companies to offer secondary 9

10 lotteries without developing this product themselves. Although some secondary lotteries are insured by reputable providers, other insurance providers are less reputable and it is possible that winnings may not be fairly paid to consumers who likely have little opportunity for recourse. If secondary lottery operators have high prize pay-outs, insurance premiums for these products may increase, making the product less viable. However, insurance models mean that unlike most gambling operators, large prize pay-outs have a relatively small impact on revenue. Secondary lotteries available in Canada Despite lotteries being restricted to provision by state-licensed authorities within Canada, there are 121 online lottery sites that accept play from Canada (92 English-language) and 22 that accept play with Canadian Dollars. Table 1 shows the top 20 most popular online lottery sites available in Canada, including secondary lottery sites (as indicated with asterisks). This includes several sites that allow customers to bet on the Canadian 649 Lottery (as indicated with double asterisks). Notably, scratch-card sites are more prevalent among the sites that accept play with Canadian Dollars. This may indicate that this form of online lottery site may target Canadian players to a greater extent than secondary lottery sites. Inclusion of the 649 Lottery in secondary lottery sites indicates that international players are interested in betting on outcomes of this Canadian lottery. Popularity ranking English-language sites accepting play from Canada English-language sites accepting play from Canada with Canadian Dollars 1 Lottery.com.uk (Malta, UK) Lottery.com.uk (Malta, UK) 2 TheLotter (Belize)** PlayOLG (Ontario) 3 Oz Lotteries (NSW) Multilotto (Curaçao)* 4 LottoDay** Video Slots Scratchcards & Games (Malta, UK) 5 PlayOLG (Ontario) Atlantic Lottery (New Brunswick) 6 World Lottery Club (Isle of Man, Prime Scratchcards (Malta, UK) UK)* 7 Wintrillions (Curaçao)** PlayEuroLotto.com (Curaçao)* 8 Multilotto (Curaçao)* Scratch2Cash (Malta, UK) 9 Video Slots Scratchcards & Games ScratchMania (Curaçao) (Malta, UK) 10 National-Lottery.com Casino MEGAscratch (Malta, UK) (Malta, UK)** 11 Atlantic Lottery (New Brunswick) Winnings.com (Malta, UK) 12 Play Huge Lottos (Curaçao)* Dragonara Lottery & Games (Curaçao, Malta, UK)* 13 LottoKings (Curaçao)** Diamond 7 Fun & Scratch (Curaçao, UK) 14 LottoSpring (Curaçao)* 7Lottos (Gibraltar)* 15 Jackpot.com (UK)* Big Money Scratch (Malta) 16 Lottosend (Slovakia)* Safari Scratch (Malta) 17 Lotto247 (Curaçao)* Scratch Stars (Malta) 18 Prime Scrachcards (Malta, UK) Scratch.co.uk (Malta) 19 Icelotto (British Virgin Islands)** SuperScratch (Malta, UK) 20 PlayEuroLotto.com (Curaçao)* Top Scratch (Malta) Table 1 Most popular online lottery sites accepting play from Canada 13-Apr-17 (Asterisks indicate sites offering secondary lotteries, double asterisks indicates sites offering tickets for Canadian 649). Sites with a Canadian license are in italics. Source: onlinecasinocity.com 10

11 Potential for harm Relationship between lottery and gambling problems Lottery products are typically viewed as less harmful than other forms of gambling. Although lottery is not the dominant form of gambling associated with harm in most jurisdictions, lottery expenditure still can play a role in excessive and disordered gambling. For example, data from the British Family Expenditure Survey a year before and a year after the introduction of the National Lottery found that there had been increases in the proportion of households that spent money on gambling (from 40% to 75%) 16. There was also an overall increase in spending (from 0.5% of income to 1.5% of income) and an increase in the proportion of households spending more than 10% of their income on gambling (from 0.4% to 1.7%). Among low-income households, the proportion gambling more than 10% of their income increased from 0.6% to 3.2%. Therefore, increase in average gambling expenditure associated with the introduction of a national lottery in the UK does appear to have led to a pronounced increase in the prevalence of excessive gambling, particularly in low-income households. A study of lottery players in Iowa found that money spent on lottery was associated with loss of control and negative gambling consequences 17. Research in Thailand has also found associations between lottery play and problems 18. Lottery has seldom been the focus of research, particularly in relation to gambling problems; however, there is some evidence that these products are related to gambling problems. Income Research suggests that low-income individual spend a higher percentage of their income on lottery tickets than wealthier individuals and a higher absolute demand for lottery tickets among lowincome populations 19. Lottery tickets can be considered a type of poverty trap a cycle of inefficient behaviour that prevents low-income individuals from improving their financial situations. Lottery jackpots are widely advertised, as are winners, making the possibility seem achievable, despite the low odds. Moreover, even smaller jackpots, which may have a negligible effect on the financial security of higher socioeconomic status groups, can have a profound impact on those from low socioeconomic status groups 20. Friedman and Savage proposed that normally risk-averse low-income individuals are motivated to play the lottery because they derive disproportionate value from jackpots 21. An experimental study tested this and suggests that low-income individuals are disproportionately motivated to purchase lottery tickets because they provide an opportunity to improve their economic status and they are one of the few opportunities available to them to provide a sudden increase in wealth 22. This impact occurs even when people are given information to make them feel less wealthy than others. Secondary lotteries may be more likely to appeal to people with low incomes and few opportunities 16 Grun and McKeigue, Prevalence of Excessive Gambling before and after Introduction of a National Lottery in the United Kingdom. 17 Hraba, Mok, and Huff, Lottery Play and Problem Gambling. 18 Ariyabuddhiphongs and Phengphol, Near Miss, Gambler s Fallacy and Entrapment. 19 Haisley, Mostafa, and Loewenstein, Subjective Relative Income and Lottery Ticket Purchases. 20 Bertrand, Mullainathan, and Shafir, A Behavioral-Economics View of Poverty. 21 Friedman and Savage, The Utility Analysis of Choices Involving Risk. 22 Haisley, Mostafa, and Loewenstein, Subjective Relative Income and Lottery Ticket Purchases. 11

12 for financial windfalls. For people with little disposable income, engagement in lottery play and betting on lotteries may contribute to financial hardship. Youth In many jurisdictions, youth can purchase lottery tickets before they are legally allowed to engage in other gambling activities. Studies suggest that youth involvement in lottery exceeds involvement in other types of gambling 23. Review of a large number of North American adolescent studies indicates that youth with serious gambling problems tend to endorse positive attitudes towards the lottery and be more engaged in lottery gambling in terms of frequency and expenditure 24. Youth with gambling problems are also more likely to state that they purchased more tickets following a win, as well as a loss, indicating chasing wins and losses in this at-risk group 25. Familiarity with the game also played a role, this was an important determinant particularly for youth with gambling problems. It has been hypothesised that lottery tickets are a gateway to other gambling and gambling problems. There is little evidence to support this, however, early onset of youth gambling has been linked to greater likelihood of gambling problems and lottery appears to be one of the first types of gambling that people engage in. In situations where lottery incorporates more risky features, and is accessible by youth, this could contribute to the development of gambling problems. As many secondary lottery sites are not required to uphold strong consumer protection measures, it is possible that youth may be able to place bets on these sites. Many sites appear to allow customers to make deposits and gamble, without any identification or age verification requirements. Age verification may not be required until customers attempt to withdraw funds, which could allow youth to gamble on these sites. Gamblers can spend considerable amounts on secondary lotteries, and potentially migrate to other forms of online gambling. This could result in negative consequences for youth, including the development of gambling problems. Player understanding, rational thought, and motivation People participate in lottery gambling for the money and challenge, as well as feeling lucky and enjoyment 26. The hope of winning the jackpot is a strong motivator for lottery participation. Social motives also play a role, with people more likely to play lottery if their friends and family do so. Some gamblers purchase lottery tickets to reduce a negative mood 27, which can be related to the development of and exacerbation of gambling problems. Providing informed choice, player information and education is difficult as lottery gamblers appear play in an irrational way. Research, particularly from an economic perspective, indicates that lottery tickets are a poor value proposition 28. It is likely that lottery gamblers do not use rationality or expected value in their decision to engage in this activity. Improvement in statistical knowledge and skills in gambling odds is not associated with changes in actual gambling behaviour. Irrational beliefs are often held by lottery gamblers. For example, the Gambler s Fallacy, that is the belief that if a number has been recently drawn it will not be drawn again, has been found to influence gambler s 23 Felsher, Derevensky, and Gupta, Lottery Participation by Youth with Gambling Problems. 24 Jacobs, A General Theory of Addictions. 25 Felsher, Derevensky, and Gupta, Lottery Participation by Youth with Gambling Problems. 26 Ariyabuddhiphongs, Lottery Gambling. 27 Burger et al., The Silver Linings of Lottery Play. 28 Ariyabuddhiphongs, Lottery Gambling. 12

13 frequency and amounts of lottery purchases 29. Lottery players are less likely to select numbers that have recently been drawn, demonstrating a misunderstanding of the independence of chance events. Lottery players also feel invested in successive draws, despite there being no relation between these. That is, lottery players often believe that they have already invested in the outcomes when they have not won, and if they were to not play in a draw, they are losing the money already played 30. This has been referred to as entrapment and has been shown to influence the frequency and amount bet on the lottery 31. These irrational beliefs can all contribute to excessive expenditure and the development of gambling problems. Secondary lottery sites are often presented as lottery sites and it has been alleged that consumers may think that they are buying a lottery ticket 32. If secondary lottery sites do not provide appropriate player information, this could be considered a deceptive practice. Unlike regulated lottery sites, secondary lotteries may have few requirements to provide accurate and comprehensible player information. In some jurisdictions (such as the UK), secondary lottery sites allow players to enter a lotter draw for a cheaper price than purchasing a ticket from an authorised retailer. This has the potential to undermine existing lotteries and suggests a lack of consumer understanding about the product, or disregard for the mechanics of the gambling activity. Although player information is seldom sufficient to reduce risks associated with gambling products, it is necessary and important to avoid misleading consumers and enabling informed choice. Frequency Traditional lotteries typically offer infrequent draws; however, secondary lotteries greatly increase the frequency of lottery draws. By offering entry into draws across multiple jurisdictions, it is possible for consumers to purchase entries into multiple draws, held more frequently. Short-interval lottery games can also be offered, allowing consumers to have outcomes more quickly. For example, Lottoland Australia reportedly allows customer to access in-play betting, whereby they can bet on live changing odds during a lottery draw 33. The increased frequency of lottery draws and outcomes reduces the time between purchases and potentially increases expenditure. Increased frequency of lottery participation enabled by secondary lotteries increases the risk related to the irrational beliefs described above. This can lead to ongoing and excessive expenditure if gamblers feel compelled to continually bet on draws, which include multiple options for betting, in addition to the traditional selection of numbers. Greater involvement in online gambling has repeatedly been found to be related to problem gambling severity 34. A 2017 report from Massachusetts found that people who were at-risk and problem/pathological gamblers were more likely to play daily lottery games and gamble online than recreational gamblers 35. The 29 Ariyabuddhiphongs and Phengphol, Near Miss, Gambler s Fallacy and Entrapment. 30 Ariyabuddhiphongs, Lottery Gambling. 31 Ariyabuddhiphongs and Phengphol, Near Miss, Gambler s Fallacy and Entrapment. 32 Macadam, German Jackpot Sparks Lottoland Confrontation. 33 Gambling on Gambling. 34 Philander and MacKay, Online Gambling Participation and Problem Gambling Severity ; LaPlante, Nelson, and Gray, Breadth and Depth Involvement ; Gainsbury et al., Greater Involvement and Diversity of Internet Gambling as a Risk Factor for Problem Gambling. 35 Williams, R. et al., Gambling and Problem Gambling in Massachusetts: In-Depth Analysis of Predictors. 13

14 authors concluded that daily lottery games and online gambling may pose elevated risks of harm, although no causal conclusions can be drawn from this research. Jackpots One of the major advantages of secondary lotteries as compared to traditional lotteries, is the ability to bet on large jackpots from multiple jurisdictions. The mere presence of jackpots has been theorized to stimulate gambling consumption 36. Upcoming large jackpots often receive media coverage internationally, and large jackpots are known to be related to an increase in sales of lottery tickets, including beyond regular lottery gamblers. Secondary lotteries allow players to have the opportunity to win large jackpots, in some cases larger than those offered by their local lotteries. For example, in markets fragmented by many small lotteries, such as Germany, the jackpots do not reach a large size, making the ability to bet on a large single jackpot more attractive. As they are based on insurance models rather than actual lottery draws, secondary lotteries can also offer jackpots larger than actual draws, as is the case of Lottoland Australia. Lottoland Australia launched several months ahead of schedule to take advantage of a well-publicised US Powerball jackpot of US$1.5 billion. Australians were not able to buy a ticket in the US draw, but through the secondary lottery site they could pay $10.50 to bet that the numbers they would have selected, had they been able to enter, would be picked. The site launched on a Tuesday with no consumers or marketing plan and by the draw two days later they had 35,000 clients. This occurred through little advertising due to the media coverage surrounding the site launch and the jackpot draw. Being able to bet on many different jackpots may be appealing to gamblers, particularly those with problems controlling their gambling and those experiencing financial difficulties. This feature makes secondary lotteries a riskier product than traditional lotteries with a single jackpot. Gambling opportunities Unlike traditional lotteries in which consumers purchase a ticket (or multiple tickets as is the case in many modern lotteries), secondary lotteries allow a multitude of different bets. Similar to roulette where players can pick a number to bet on, secondary lotteries allow gamblers to bet on alternative bets with different odds, such as whether the first number will be odd or even, and so forth. This creates a large number of betting options and had the potential to increase bet size, as well as the potential for chasing losses. Some secondary lottery sites also offer, or advertise, additional gambling opportunities, such as casino games, or other types of betting. This may facilitate movement from lottery to other forms of gambling, with associated consequences related to further gambling expenditure. Once a consumer is actively gambling online, there is a potential for them to migrate to other forms of online gambling. This creates a risk for players as greater involvement in gambling is associated with greater gambling expenditure as well as the experience of gambling problems 37. There is insufficient research on migration between online gambling activities to enable firm conclusions to be drawn, 36 Rockloff and Hing, The Impact of Jackpots on EGM Gambling Behavior. 37 Williams, R. et al., Gambling and Problem Gambling in Massachusetts: In-Depth Analysis of Predictors ; Philander and MacKay, Online Gambling Participation and Problem Gambling Severity ; Gainsbury et al., Greater Involvement and Diversity of Internet Gambling as a Risk Factor for Problem Gambling ; LaPlante, Nelson, and Gray, Breadth and Depth Involvement. 14

15 furthermore, this is a very dynamic occurrence, changing with different age cohorts and gambling products available. Electronic expenditure and accounts One of the potentially harmful features of online gambling as compared to land-based gambling is the use of electronic funds and gambling accounts. Expenditure using electronic funds has been stated to lead to excessive expenditure due to the reduced salience of money 38. One social theory of money holds that money is treated differently depending on the context 39. As such, money in a gambling account is not seen as neutral, but is perceived to be tied to gambling, and is more likely to be re-gambled. This is similar to receiving lottery winnings in the form of more lottery tickets and may make consumers less likely to withdraw winnings from online gambling accounts. However, regular entries can be automated through online accounts, reducing impulsive increases in lottery ticket purchases. The impact of electronic expenditure for lottery play has not been specifically investigated. Disreputable sites Some secondary lottery sites are not licensed in reputable jurisdictions and may represent risks for consumers of fraud, deception, and lack of security around their funds, and personal information. Rates of cybercrime are increasing internationally as users share increasing levels of personal information online. Many prevalent online scams are related to lottery draws and purported wins and extort funds and personal information from victims 40. Use of unregulated and illegal secondary lottery sites may create risks for users that cannot be addressed by local law enforcement 41. Although some sites are insured by reputable providers, it is possible that some insured sites may not pay out winnings as advertised. It is also possible that messenger lottery sites could fail to pass winnings onto customers, with likely little recourse for customers. Regulation Regulation on secondary lotteries is ambiguous in many jurisdictions, leading to operators offering products in jurisdiction where it is not expressly prohibited to do so. In some jurisdictions, lotteries are regulated separately to other forms of gambling, including online gambling, which can lead to slower reactions to these new offerings. Secondary lotteries using a messenger model are often unregulated and do not have a specific license to offer gambling products and services. 38 Gainsbury et al., How Risky Is Internet Gambling? ; Gainsbury et al., A Digital Revolution. 39 Zelizer, The Social Meaning of Money. 40 Government of Canada, Beware of Lottery/Beneficiary Scams. 41 Gainsbury and Wood, Internet Gambling Policy in Critical Comparative Perspective. 15

16 Some gambling regulators have granted secondary lottery licenses: The Government of Gibraltar Licensing Authority issued Lottoland a license for lottery messenger services in January This is the first license from this jurisdiction which will allow the gambling company to resell official tickets for international lottery products. The Isle of Man also licenses companies that operate messenger lotteries. The Isle of Man Gambling Supervision Commission has stated that it has a specific requirement when considering whether an operator s proposed operations are legal and that operators need to seek legal advice to demonstrate that the proposed activity is legal 1. Nonetheless, one of these licensees, WorldLotteryClub, is blacklisted in Greece and Italy. The Malta Gaming Authority also licenses secondary lotteries under the insurance model, including Jackpot.com. In most jurisdictions, gambling regulators have power to limit secondary lotteries. Some secondary lotteries have begun competing directly, or indirectly, with existing local lottery operators. As secondary lotteries are often regulated by a wagering license, approaches may be complex with regard to competition with lottery operators. From a regulatory standpoint, an important issue is to consider consumer expectations and understanding of the products that is, are consumers aware that they are placing a bet with a wagering operator, rather than purchasing a lottery ticket, or entering a chance to win a lottery draw. For secondary lottery operators, regulation should be an important concern. The lottery industry is a highly regulated market with often very restrictive or unclear compliance requirements. The wagering market is often regulated separately. In recognition of the potential for regulatory limitations, some operators have begun limiting branding from lotteries and including more consumer information. This may represent a move by the secondary lottery industry to becoming legitimate and attracting consumers based on large jackpots, without relying on being associated with branded lottery jackpots. Expressed concerns Concerns about secondary lotteries have been reported by stakeholders in several international jurisdictions. Some licensed lottery providers did not initially raise concerns about messenger models as they were still receiving the ticket money. However, secondary lotteries are increasingly advertising in new markets and potentially taking consumers away from existing lottery operators, leading existing operators to campaign against these and lobby governments to take action. United Kingdom Betting on lottery outcomes represents a reported 2% of UK betting operator s gross gambling yield. UK National Lottery operator Camelot experienced a decline in sales of over 6% in 2016, despite gains in mobile sales, which CEO attributed to secondary lotteries 42. Camelot CEO stated that the 42 Stradbrooke, Lottoland CEO Slams Camelot s antiquated offering. 16

17 decline in sales was related to direct, often aggressive, competition from bet-on-lottery firms purporting to offer the same products as the National Lottery. This competition intensified in 2016 when Lottoland continued to sell tickets for the EuroMillions for 2 after Camelot increased the price to Camelot has expressed concerns that secondary lotteries are resulting in consumer confusion. Research conducted by Camelot claimed that only 14% of respondents understood that it was a betting product while 61% thought it was a way of participating in the EuroMillions Lottery. Camelot previously expressed concerns in an inquiry into UK lotteries in In response, the Culture, Media and Sport Select Committee recommended that the government look at three measures: 1) Prohibiting betting on lotteries either in betting shops or online; 2) Re-defining all bets on lotteries as pure lotteries; and 3) Improving the clarity of marking to reduce consumer confusion. However, at the time, the Department for Culture, Media, & Sport (DCMS) said it would be disproportionate to either ban or reclassify these bets, which offer increased consumer choice and furthermore, lottery operators were the only stakeholders to raise concerns about secondary lotteries. In 2017, DCMS opened a consultation to consider restrictions on secondary lotteries. Sports Minister Tracy Crouch referred to these bets as contrary to the spirit and intention of UK rules against betting on National Lottery results 43. The DCMS have stated intentions to take forward measures to introduce a prohibition on betting on non-uk EuroMillions games to bring this into line with the existing prohibition on all other elements of the National Lottery. The UK Gambling Commission is limited to being able to require operators to be transparent with consumers about the nature of the product. However, the Gambling Commission has indicated that it is difficult to educate consumers about the technicalities regarding secondary lotteries. The Gambling Commission consider that there is a risk that consumer spend may be diverted from existing lottery products. As such, contributions made to good causes by the National Lottery and EuroMillions will reduce. No evidence has been presented to support the claim that secondary lotteries currently harms returns to good causes, however, little research has been conducted to allow any conclusions about the impact of secondary lotteries. Results from the consultation were expected to be released in June In June 2017, the UK Gambling Commission announced that Lottoland would be required to make a 150,000 contribution to socially responsible causes after determining that the operator did not make it clear to consumers that they were betting on the outcome of a lottery draw and not actually taking part in a lottery. 44 This occurred in response to a complaint from 1 February, 2017, to the Advertising Standards Authority about a radio advertisement broadcast on behalf of Lottoland. Richard Watson, Gambling Commission Programme Director for Enforcement and Intelligence, said: In this case the operator used ambiguous terminology in their marketing and advertising, which was misleading. This outcome is similar to the UKGC s ongoing efforts to ensure that advertisements provide customer with clear information about products and promotions. 43 Department for Culture Media & Sport, Consultation on Prohibiting Third Party Betting on the Outcome of Non-UK EuroMillions. 44 Gambling Commission, Lottoland to Pay 150,000 for Advertising Failings. 17

18 Europe In Germany, operators of several lotteries (including state-owned lotteries) have publicly warned consumers that secondary lottery sites (specifically Lottoland) may be breaking the law and face tax liabilities due to the illegality of these sites 45. However, secondary lotteries are currently unregulated in Germany and Germany s gambling regulations are under scrutiny by the EU. Furthermore, German citizens are not required to pay tax on lottery winnings and participation in lotteries is not a criminal act, suggesting that claims from existing lotteries may not be substantiated. Lottoland chief executive Nigel Birrell stated in 2016 that Germany was one of the site s biggest markets 46. Several secondary lottery providers have been added to blacklists in Italy, Greece, and Estonia (e.g., playeuromillions.com, eurolotto.com, Lottoland, tipp24, lotto24.de). In 2016, Greece updated its blacklist of online gambling sites, it included 27 lottery providers. Estonia added seven sites and Italy added 30 websites, which offer gambling on other lotteries to its blacklist in Bulgaria and Romania also have blocked access to one of the most popular messenger lotteries, TheLotter.com 48. The Czech Republic has initiated legal actions against secondary lottery operator, Lottoland. Lottoland was launched in October 2014, and commenced advertising at an event organised by SAZKA, Czech Republic s largest licensed lottery operator 49. Internet gambling is prohibited in the Czech Republic, including for licensed lottery operators, who are not allowed to offer Eurojackpot tickets online. Lottoland initially introduced a website lottoland.cz, indicating that it was legal as licensed in Gibraltar. The Ministry of Finance issued a public statement that Lottoland was unlawful and players may face legal actions, and the domain name was blocked. The website then moved to the.com domain and registered a new domain sportka.org, taking the name from the most popular lottery game. SAZKA filed a petition against Lottoland for violation of trademark rights and successfully had the domain transferred to their ownership. Criminal prosecution of Lottoland was suspended, primarily as Lottoland had no property in the Czech Republic, nor any physical presence there, and cooperation with Gibraltar s authority was, according to Czech police, fruitless and complicated. A Czech Gambling Act was introduced in January 2017, which allows for UP and payment blocking to offshore gambling sites. This Act was confirmed by the European Commission as in compliance with European law, however, the main argument forwarded by Lottoland was the that the Czech license was inconsistent with EU laws. Thus, whether secondary lotteries apply for licenses to operate legally remains to be determined. Australia The Australian Lottery and Newsagents Association has called on the government to take urgent action by prohibiting the insurance business model. ALNA claims that Lottoland has mislead consumers into believing that betting with Lottoland provided state and local governments with the same benefits provided by traditional Australian lotteries. Some politicians and ministers have also called for restrictions on secondary lotteries, expressing concerns that these are misleading consumers and may increase rates of gambling problems. Recent advertisements for Lottoland within Australia have included the disclaimer that the service provides the option to bet on lottery 45 Macadam, German Jackpot Sparks Lottoland Confrontation. 46 Ibid. 47 Sennevall, Secondary Lotteries On European Regulators Radars. 48 Ibid. 49 Chudoba, Secondary Lotteries. 18

19 draws. This indicates an attempt by the operator to provide transparency and accurate player information. Lottoland Australia also appears to have reduced the extent of branding from other lottery operators, referring to Mon & Wed Lotto and so on, rather than naming specific Australian state lotteries. This may be in response to an alleged letter sent by the major lottery operator, Tatts, questioning the legal and intellectual property rights of the operator 50. South Australia is the only jurisdiction within Australia to take action and prevent secondary lottery sites to allow residents to gamble. SA gambling laws specifically do not allow betting on lottery outcomes. The New South Wales Office of Liquor, Gaming and Racing stated in 2016 that there are no laws preventing wagering operators from offering bets on events that occur in the state, including public lotteries 51. Considerations Disruption Secondary lotteries appear to be a disruption innovation, likened to Uber and AirBnB. These sites offer betting products that are challenging and competing with lottery products, representing a challenge that was unlikely expected by lottery operators who hold an ongoing monopoly in most jurisdictions. This is one of many recent examples of new market entries disrupting traditional business models and providing consumers with a new way to engage in a traditional activity. Secondary lotteries are potentially appealing as a product as almost the entire population are familiar with lottery products. As such, it is relevant across ages and population cohorts. There is often less stigma associated with lottery as compared to other online gambling products, potentially assisting consumer acquisition. As most jurisdictions have a single or limited number of lotteries on offer, there is typically not extensive advertising for these products. This is useful for a new market entrant who is able to compete with incumbent operators due to the relatively small competitive market. As secondary lottery operators generally do not operate under a lottery license, they can offer different products and promotions, while still competing with lottery providers. Secondary lotteries may change consumer behavior. In many jurisdictions, a secondary lottery will be the first time that consumers have had the opportunity to use a different provider for lottery products. Once consumers have become used to purchasing lottery tickets with a new provider, this could undermine the existing lottery operator. Once consumers become sufficiently comfortable betting with secondary lotteries, there will be less need to rely on the branding provided by lottery operators, and products can be offered based on a wide variety of events that can be used to generate a jackpot prize. Consumer choice can be positive as it can drive companies to offer more competitive products and a better player experience. Given the lack of competition, existing lotteries may have poorly developed online options, including websites and mobile apps. Secondary lotteries may offer userfriendly sites and apps and other features to represent a competitive new market offering. Secondary lotteries can offer innovative betting options that may fulfil consumer demand. Other 50 Williams, Tatts Fights Back on Lotteries Raid. 51 Ibid. 19

20 potential benefits from secondary lotteries include employment, sponsorship of sporting teams and events, and contribution to charities and worthy causes. Several secondary lottery operators have indicated a willingness to market competitively, expand into new markets, acquire new customers, re-activate dormant customers, and increasing customer participation in the full range of products offered 52. There are notable risks for secondary lottery operators including regulatory changes and requirements that would limit their access to markets, and products offered. Counterintuitively, a decline in participation in existing lotteries would also have negative outcomes, as this would represent a decreased interest in lottery products. Reduced marketing by lottery operators, news stories about lottery wins, and provision of large jackpots would also likely have a detrimental impact on secondary lottery operators. A prolonged period without jackpot pay-outs, for lotteries, and the secondary lottery site, may deter customer interest and participation. The impact of more secondary lottery operators entering the market is unclear, and may depend on the size of the potential market, consumer appetite for these products, and competitive marketing and promotions. Competition with existing operators Secondary lotteries may present unfair competition to licensed lottery providers as they allow consumers to participate in lottery draws that licensed operators are not able to provide. Secondary lotteries may provide the option to participate in a lottery at a cheaper price than offered by a licensed lottery provider. Secondary lotteries may market jackpots and lottery draws from a licensed lottery provider without permission and without any guidance on appropriate marketing strategies and messages. In some cases, the use of branding and details of licensed lottery providers by unlicensed providers may indicate trademark infringements. Secondary lotteries may also be able to offer inducements and promotions not permitted by lottery operators under a wagering license. For example, welcome bonus bets, special bonus prizes, referral bonuses, and other promotions that the licensed lottery operator cannot provide to attract and retain customers. Secondary lotteries may provide inappropriate links to existing lotteries and mislead consumers into perceiving there to be connections with official lottery brands. Lottery brands may seek to protect the copyright in their results, if they are able to establish that they have a unique and original method of producing the results 53. This may lead to secondary lotteries breaching copyright if they use or reproduce these. It could also lead to fees being involved for the right to publish/use results. Competition with licensed domestic lotteries may reduce revenue to the operator and subsequent revenue in the form of taxation, levies, or direct income to governments. This would reduce the ability to provide funds to good causes often based on lottery revenue. In some jurisdictions, for example, the UK, secondary lotteries offer consumers the ability to participate in a lottery at a cheaper price than the national lottery. However, in others, such as Australia, participation in national draws is more expensive than offered by the official lotteries 54. This is likely related to the costs of insurance to cover jackpots, although in Australia, jackpots can also be higher than offered by the official providers. As such, it may be expected that customers are more likely to bet on 52 ZEAL Network SE, Create a Better World of Lottery: Annual Report Gambling on Gambling. 54 Williams, Lottoland Targets Tatts in Uber-Style Betting Shake-Up. 20

21 international draws they cannot otherwise access. Nonetheless, the extent to which secondary lottery customers also participate in official local lotteries is unknown. Consumer protection Secondary lotteries not licensed in a specific jurisdiction may not be held accountable for their actions. One risk of secondary lotteries is that they will not be able to cover payouts of large jackpots. Although there are reputable insurers behind some products, other insurance providers may provide less assurance for regulators, operators, and consumers that payouts will be made. If winnings are not paid fairly to consumers, there is little action that can be taken against these sites by consumers or local law authorities. Secondary lotteries may provide few consumer protection policies and resources for consumers. This may create the risk of players spending excessively and experiencing negative consequences of their gambling. Secondary lotteries may provide inaccurate player information, or misleading information such that players are not aware of the mechanics of the gambling activity. Player information and terms and conditions may not be prominently displayed or communicated in an easily comprehensible manner. This has already been demonstrated in the UK, with one secondary lottery operator fined for failing to provide accurate information about the product for customers in advertising that could be classified as misleading. Some features of secondary lotteries may make these a potentially risky activity individuals vulnerable to experiencing gambling problems. Secondary lotteries may provide additional betting options, beyond simply picking numbers in a traditional draw. This may increase the frequency of gambling and gambling expenditure. Large jackpots may also encourage gambling, particularly for those seeking potentially life-changing wins, including those with existing financial difficulties. Secondary lotteries may enable youth to participate in gambling activities, without appropriate age verification. Suggestions for research Given the lack of knowledge about secondary lotteries, further research is recommended. This may include: Understanding participation in secondary lotteries, and how gamblers using secondary lotteries compare to those who participate in official lotteries Examining the impact of secondary lotteries on participation in gambling activities within a jurisdiction, including official lotteries. Examining levels of gambling problems among gamblers who use secondary lotteries and the extent to which these contribute to, or exacerbate problems. Conclusions Secondary lotteries are disrupting the existing lottery market as a new innovative form of online gambling. Strict regulations and monopoly licenses have resulted in a relatively stagnant lottery market in many jurisdictions. Lottery operators have been relatively slow to offer ticket sales online, engage with customers via social media, and provide sophisticated websites and apps meeting increasing consumer demand for online options. Lottery gambling has the highest participation rates, creating a large potential market for operators of new lottery-style products. Secondary 21

22 lotteries have identified regulatory gaps and moved to offer new products to existing and new lottery customers. Secondary lotteries are primarily offering consumers the ability to participate in international jackpots. This reflects the increasing globalisation in consumer activity and reduction of boundaries between jurisdictions, particularly in terms of online commerce. Although largely a grey, offshore market, secondary lottery sites are gaining legitimacy through licensing. Sites appear to be meeting consumer demand with few claims of fraud or disreputable conduct. Nonetheless, the levels of consumer protection are unknown and it is not clear whether customers understand the mechanics behind the activity that they are engaging in. As with all forms of gambling, secondary lotteries may contribute to gambling-related harms and the development of, or exacerbation of gambling problems. They greatly increase the frequency of lottery draws, and potentially expenditure due to the greater number of betting options. Large jackpots and the ability to bet online may cause excessive expenditure, including among those who can least afford this. The extent to which youth are preventing from gambling and responsible gambling tools and policies are applied is unknown. As with other disruptive products, secondary lotteries are expected to impact existing lotteries, as well as associated revenue for governments. Some jurisdictions have taken action to block secondary lotteries, including where these have infringed on trademarks and posed unfair competition to existing, licensed, lottery providers. The competition may benefit consumers, who can now potentially access large jackpots. Further, existing lottery companies may develop their own products and offerings in response to the competition. Further research is needed to understand consumer engagement with secondary lotteries and the impact of these on consumers, gambling problems, and existing gambling operators. Regulators and operators need to respond to these products, as secondary lotteries are already available to consumers and participation in these is likely to grow. 22

23 References Amsel, Peter. Lottoland Launch WorldMillions Product, Fight Aussie Newsagents. CalvinAyre.com, April 8, William Hill Shut Tel Aviv Office, Shift Operations to Europe. CalvinAyre.com, June 26, Ariyabuddhiphongs, V. Lottery Gambling: A Review. Journal of Gambling Studies 27, no. 1 (March 1, 2011): doi: /s Ariyabuddhiphongs, Vanchai, and Varich Phengphol. Near Miss, Gambler s Fallacy and Entrapment: Their Influence on Lottery Gamblers in Thailand. Journal of Gambling Studies 24, no. 3 (September 1, 2008): doi: /s Bertrand, Marianne, Sendhil Mullainathan, and Eldar Shafir. A Behavioral-Economics View of Poverty. The American Economic Review 94, no. 2 (2004): Burger, M. J., M. Hendriks, E. Pleeging, and P. W. van der Zwan. The Silver Linings of Lottery Play: Motivation and Subjective Well-Being of British Lottery Participants. Applied Economics Letters 23, no. 18 (December 11, 2016): doi: / Chudoba, Jan. Secondary Lotteries: The Experience in the Czech Republic. EL Magazine, November Department for Culture Media & Sport. Consultation on Prohibiting Third Party Betting on the Outcome of Non-UK EuroMillions. London: Department for Media Culture & Sport, March Felsher, Jennifer, Jeffrey Derevensky, and Rina Gupta. Lottery Participation by Youth with Gambling Problems: Are Lottery Tickets a Gateway to Other Gambling Venues? International Gambling Studies 4, no. 2 (November 2004): doi: / Friedman, Milton, and L. J. Savage. The Utility Analysis of Choices Involving Risk. Journal of Political Economy 56, no. 4 (1948): Gainsbury, Sally M. Online Gambling Addiction: The Relationship Between Internet Gambling and Disordered Gambling. Current Addiction Reports 2, no. 2 (June 1, 2015): doi: /s Gainsbury, Sally M., Paul Delfabbro, Daniel L. King, and Nerilee Hing. An Exploratory Study of Gambling Operators Use of Social Media and the Latent Messages Conveyed. Journal of Gambling Studies 32, no. 1 (March 2016): doi: /s Gainsbury, Sally M., Daniel L. King, Nerilee Hing, and Paul Delfabbro. Social Media Marketing and Gambling: An Interview Study of Gambling Operators in Australia. International Gambling Studies 15, no. 3 (September 2, 2015): doi: / Gainsbury, Sally M., Alex Russell, Alex Blaszczynski, and Nerilee Hing. Greater Involvement and Diversity of Internet Gambling as a Risk Factor for Problem Gambling. The European Journal of Public Health 25, no. 4 (August 2015): doi: /eurpub/ckv006. Gainsbury, Sally, Alex Russell, Robert Wood, Nerilee Hing, and Alex Blaszczynski. How Risky Is Internet Gambling? A Comparison of Subgroups of Internet Gamblers Based on Problem Gambling Status. New Media & Society 17, no. 6 (June 1, 2015): doi: / Gainsbury, Sally, and Robert Wood. Internet Gambling Policy in Critical Comparative Perspective: The Effectiveness of Existing Regulatory Frameworks. International Gambling Studies 11, no. 3 (December 1, 2011): doi: / Gainsbury, Sally, Robert Wood, Alex Russell, Nerilee Hing, and Alex Blaszczynski. A Digital Revolution: Comparison of Demographic Profiles, Attitudes and Gambling Behavior of Internet and Non-Internet Gamblers. Computers in Human Behavior 28, no. 4 (July 2012): doi: /j.chb

24 Gambling Commission. Lottoland to Pay 150,000 for Advertising Failings, June 27, Gambling on Gambling: Lotto-Lands in Australia. LawPath, January 14, Government of Canada, Royal Canadian Mounted Police. Beware of Lottery/Beneficiary Scams, March 19, Grun, Lucia, and Paul McKeigue. Prevalence of Excessive Gambling before and after Introduction of a National Lottery in the United Kingdom: Another Example of the Single Distribution Theory. Addiction 95, no. 6 (June 1, 2000): doi: /j x. Haisley, Emily, Romel Mostafa, and George Loewenstein. Subjective Relative Income and Lottery Ticket Purchases. Journal of Behavioral Decision Making 21, no. 3 (July 2008): doi: /bdm.588. Hraba, Joseph, Waiman Mok, and David Huff. Lottery Play and Problem Gambling. Journal of Gambling Studies 6, no. 4 (1990): Jacobs, Durand F. A General Theory of Addictions: A New Theoretical Model. Journal of Gambling Behavior 2, no. 1 (1986): Jasmine Solana. Lottoland Secures Gibraltar s First Lottery Messenger License. CalvinAyre.com, January 11, Karma Gaming. The State of Digital & Lottery: White Paper. Karma Gaming, Lange, Mark A. Brief communication: If You Do Not Gamble, Check This Box : Perceptions of Gambling Behaviors. Journal of Gambling Studies 17, no. 3 (2001): LaPlante, Debi A., Sarah E. Nelson, and Heather M. Gray. Breadth and Depth Involvement: Understanding Internet Gambling Involvement and Its Relationship to Gambling Problems. Psychology of Addictive Behaviors 28, no. 2 (2014): doi: /a Lottery 2017 Global Market Expected to Grow at CAGR 9.44% and Forecast to Accessed March 24, Macadam, Daniel. German Jackpot Sparks Lottoland Confrontation. Gambling Compliance. Accessed March 24, content/uploads/2016/09/gamblingcompliance_- _German_Jackpot_Sparks_Lottoland_Confrontation_-_ pdf. OLG. Introducing the New OLG Lottery App: Convenient, Free and Easy to Use!, January 6, Ontario Lottery & Gaming Corporation. Lottery_player_statistics_fact_sheet.pdf, January Philander, Kahlil S., and Terri-Lynn MacKay. Online Gambling Participation and Problem Gambling Severity: Is There a Causal Relationship? International Gambling Studies 14, no. 2 (May 4, 2014): doi: / PRNewswire. Global $35.97 Billion Online Gambling Market Growth at CAGR of 10.81%, Market to Reach $66.59 Billion with Growth Very Geography Specific - Research and Markets. Accessed March 24, billion-online-gambling-market-growth-at-cagr-of market-to-reach billion-with-growth-very-geography-specific---research-and-markets html. Responsible Gambling Council, and others. Canadian Gambling Digest Canadian Partnership for Responsible Gambling (CPRG),

25 Rockloff, Matthew J., and Nerilee Hing. The Impact of Jackpots on EGM Gambling Behavior: A Review. Journal of Gambling Studies 29, no. 4 (December 2013): doi: /s Sennevall, Lina. Secondary Lotteries On European Regulators Radars. Gambling Compliance, June 10, Stradbrooke, Steven. Lottoland CEO Slams Camelot s antiquated offering. CalvinAyre.com, November 24, tax, * All products require an annual contract Prices do not include sales. Global Online Gambling Industry Size Statista. Accessed April 17, The Canadian Press. Lottery Companies Joining Forces to Get Millenials to Buy Tickets. CBC News, October 7, Totally Gaming. 1on1: Winners Group Philip Wilson on Why 2017 Is the Year of the Lottery. TotallyGaming.com, May 9, Williams, Perry. Lottoland Targets Tatts in Uber-Style Betting Shake-Up. Financial Review, January 14, Tatts Fights Back on Lotteries Raid. Financial Review, January 15, gm5r9s. Williams, R., Zorn, M, Volberg, R, Stanek, R, Freeman, J., Maziya, N., Naveed, M., Zhang, Y., and Pekow, P. Gambling and Problem Gambling in Massachusetts: In-Depth Analysis of Predictors. University of Massachusetts School of Public Health and Health Sciences, March 23, pdf. World Lottery Association. Global Growth up 4.5% Half-Year on Half-Year; Sales Underpinned by North America., November 1, ZEAL Network SE. Create a Better World of Lottery: Annual Report London: ZEAL Network SE, Zelizer, Viviana A. Rotman. The Social Meaning of Money. Princeton University Press,

26 Appendix Examples of secondary lottery operators Lottoland Lottoland is licensed in Gibraltar to offer messenger lotteries (since 2017) as well as betting on lottery outcomes through an insurance model. The lottery operator allows customers to bet on the outcome of more than 25 lotteries around the world. Having two licenses allows Lottoland to access a broad range of markets internationally, including where lottery betting is not permitted. Lottoland chief strategy officer Elicia Bravo described the company as committed to lead through innovation 55. Established in May 2013, it reportedly has more than 5 million consumers worldwide and generated a revenue of 300 million (US$317.9 million) in The company had 820% revenue growth for the period and revenues are predicted to grow 100% in Lottoland has grown rapidly to become a world leader in the secondary lottery market. In 2017, Lottoland was named one of the leading gambling companies in the Financial Time s FT1000 list of fastest-growing companies. It was named as the 128 th fastest growing company in Europe, the 27 th highest-ranking UK-based organisation and the only company from Gibraltar. Lottoland is the only company in the lottery market to have made the FT1000 list 57. The company also holds local licenses in several international jurisdictions (UK, Ireland, Australia[Northern Territory]). Lottoland Australia is licensed by the Northern Territory, which is the main licensing body for online wagering sites in Australia. Since its launch in January 2016, the company has reportedly recruited over 500,000 Australian consumers, and captured around 1% of the $2 billion lottery market 58. It has a high degree of marketing, including purchasing naming rights for a football stadium in Sydney. One industry estimate suggested that secondary lotteries (of which Lottoland is the largest) now accounts for 3% of the lottery market 59. Figure 2 shows information for customers to explain lottery betting. The website also contains few references to brands of Australian lotteries, suggesting that there has been a purposeful reduction in any perceived connection to existing Australian brands. Lottoland has announced partnerships with major betting providers Kindred Group and William Hill Australia that will enable these wagering operators to offer the ability to bet on lotteries 60. This is based on its turnkey B2B lottery betting service, enabling existing wagering providers to enter the secondary lottery market. Figure 3 shows examples of unsolicited advertisements for Lottoland Australia received by the report author in June Jasmine Solana, Lottoland Secures Gibraltar s First Lottery Messenger License. 56 Ibid Amsel, Lottoland Launch WorldMillions Product, Fight Aussie Newsagents. 59 Totally Gaming, 1on1. 60 Amsel, William Hill Shut Tel Aviv Office, Shift Operations to Europe. 26

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29 Figure 3 Unsolicited advertisements for Lottoland Australia, June 2017 WinTrillions WinTrillions launched in November 2011 with a range of lottery products. It has an official partnership with the Mexican state lottery. WinTrillions operates a messenger lottery model, tickets are purchased on behalf of the customer, scanned and sent, with the original stored in a safe deposit box. Customers can be part of an online syndicate, thus increasing the ability to purchase multiple lottery tickets for a reduced price, with prizes divided between players. Customers are not able to purchase a single ticket, but have to subscribe to multiple draws. This means that money will be continually deducted from customer s accounts/credit cards, until the subscription is cancelled, which can only occur via , not automatically through the site. 29

30 WinTrillions purports to be the world s largest lottery website with over 480,000 customers in 118 countries since its launch in WinTrillions offers a VIP loyalty and referral program (play USA Mega Millions for free). Mobile apps are also available for Android/iOS devices. Details of how to purchase Canada 6/49 tickets and fine print regarding licensing information are provided in Figure 4. 30

31 Figure Apr-17; 22-Jun-17 LottoDay LottoDay is based in Gibraltar and its support and services operations are based in Bulgaria. It states that it operates under the license of the fully owned subsidiary of Phoenix Online Holdings Ltd, a company registered in the British Virgin Islands. LottoDay offers betting on 21 international lotteries 31

32 through a messenger model and operates in English and German languages. Lottoday claim to have 80,359 winners, have paid $1,706,790 in winnings, and sold 2,953,817 tickets. Figure 5 shows features of the LottoDay website, including testimonials from Canadian customers. During the period of this review these were updated from displaying a Canadian flag icon, to including photos of customers. 32

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34 Figure Apr-17; 22-Jun-17 TheLotter TheLotter was founded in 2002 and has reportedly paid out $32.5 million in prize money. TheLotter has over 20 local offices worldwide and uses these to purchase physical tickets from official retailers. A handling fee is included in the ticket prizes and no commission is taken from any prize money won. Over 45 different lottery draws are offered with syndicates offered for customers as well as the ability to purchase tickets individually. Bundled tickets are offered with discounts on high-volume purchases. Winners of large amounts may be required to travel to the local country to claim their prizes, with the costs of most flights covered by TheLotter. Customer identification is required before withdrawals can be made. Promotional offers include buy one, get one free, and $25 friend referral bonuses. Mobile apps are also available for Android/iOS devices. Figure 6 shows a winning Canadian customer featured on the site and instructions for purchasing Lotto

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