ALEXANDRIA, Va. -- NACS blasted the U.S. Department of Justice's recent ruling that removes obstacles for state lotteries to offer online lottery tickets, and the association is "strongly" advocating that the ruling be overturned, it said in a news update.
"The ruling is not only bad for convenience stores and the communities that they serve, it is potentially bad for the states that are seeking any means necessary to fill budget gaps," NACS director of government relations Corey Fitze told NACS Daily. "Not to mention that we have concerns that DOJ actually ignored existing law."
New York and Illinois officials have already indicated that they intend to move quickly to set up online lottery games, pending federal approval.
NACS said DOJ did not take into account existing law. It did not analyze the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA), which blocks payment for any gambling on the Internet--including lotteries. Congress' intent in passing UIGEA was, based on the department's decades-long positions, to keep any lottery games on the Internet illegal. DOJ also failed to analyze the provisions of the law separate from the Wire Act (such as 18 U.S.C. 1301), specifically making the interstate communication of lottery chances illegal.
It said that neighborhood convenience stores will be hurt. C-stores, 62% of which are small, single-store businesses, depend upon the foot traffic created by lottery sales to get customers into their stores.
The group said that customers at brick-and-mortar stores were, and still are, prohibited from purchasing tickets with a debit or credit card. Yet online lotteries will rely upon debit and credit card transactions. If the reasons preventing retailers from accepting credit and debit cards for payment are still valid, NACS asked, why are they not applied online? Also, sales at brick-and-mortar retailers provide a face-to-face interaction that could determine age and sobriety.
"Online lottery opens a 'Pandora's box' of possibilities for underage sales and problem gamblers," it said.
NACS added that while there may be filters in place to prevent state residents from playing games in other states on desktop computers, this is not the case with tablets and smart phones.
C-store retailers see price sensitivity to gasoline prices--consumers will go somewhere else to get a better deal on fuel. "We expect the same thing will happen with state lotteries," said the report. "Lottery players will go where the best deal is, and a few states will attract the bulk of customers, while the others will likely see significant drops in sales."
The association added that states will get less income per sale. As states compete to offer the best deal on lotteries, they will be forced to sweeten deals and likely reduce the funds that go into scholarship programs. Further, the new credit and debit card swipe fees that will be incurred will significantly add to operating costs.
NACS concluded that DOJ needs to work with Congress "to clean up the mess it has created." The first step, it said, would be for it to publicly recognize that Internet lotteries remain illegal under federal law--no matter how it views the Wire Act. The next step would be for it to advocate for new legislation clarifying that Internet gaming is illegal, just as it has claimed for decades. Without these actions, there could be serious ramifications for small neighborhood businesses and the communities that they serve, said the report.
Alexandria, Va.-based NACS, founded in 1961 as the National Association of Convenience Stores, is the international association for convenience and fuel retailing. It has 2,100 retail and 1,600 supplier member companies.
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