State lottery dips into Web sales

A quiet revolution in gambling is underway in Minnesota.

Without a single press release or announcement, the Minnesota State Lottery is nearly a year into an experiment to get more Minnesotans to gamble online through a subscription lottery service.

Private online gambling is illegal in Minnesota and the state's elected leaders have turned back various gambling expansion proposals and online gambling ventures.

But in the waning months of Gov. Tim Pawlenty's administration, the Minnesota State Lottery took the first steps toward what could become a massive shift to Internet lottery play. Lottery officials are looking at the Internet to boost sales as more Minnesotans reject traditional lottery tickets and become more comfortable playing games and buying goods online.

Acting Lottery Director Jenny Canfield, at a lottery seminar last year, said that "We are seeing that decline and it's happening very rapidly. We have to react quickly to grab back our players, to build up our player base again."

The move has surprised some gambling critics. Several, including legislators, said they were deeply troubled by what they see as secrecy, aggressive tactics and a bypassing of legislative approval.

"It's reprehensible," said Assistant Senate Majority Leader David Hann, an Eden Prairie Republican who tried to abolish the lottery six years ago.

Hann said he wants to explore whether the state lottery has the legal authority to sell tickets online. "To me it seems like they are exercising some latitude they might not have," he said.

Gov. Mark Dayton's administration learned about the online ticket-buying service only late last week. Dayton spokesman Bob Hume said the practice started before Dayton took office and that they have not looked into it.

State Rep. Ryan Winkler, DFL-Golden Valley, said it should "absolutely" be reviewed by legislators.

"I certainly want to find out if they have the authority to do it," said Winkler, who sits on committees that review gambling issues. "It look likes they are trying to avoid public attention."

Lottery officials say they don't need legislative approval. They liken their online subscription service, which allows players to gamble no more than $50 a week, to electronic commerce, not Internet gambling. "It's within our guidelines," Canfield said.

The Minnesota attorney general was never asked to review the idea, said office spokesman Ben Wogsland. "No one has requested it and no one has given any advice from our office," he said.

Laura Sweeney, spokesperson for the U.S. Department of Justice, declined to comment on the legality of online ticket sales. The department has shut down numerous online gambling operations around the country.

Lottery officials say there was nothing secretive about the subscription service. They intentionally staged a "soft launch" because they anticipated only a fraction of Minnesotans would use the system and they didn't want to spook retailers who make a commission selling lottery tickets.

"We had to be sensitive," Canfield said.

Right now, 7,599 Minnesotans are signed up for the online service. Subscription sales made up $607,000 of the $500 million businesses. There is no advertising campaign for the service, which can be found by clicking Buy Online on the lottery's home page.

The online subscription service allows Minnesotans to buy tickets for most lottery games around the clock.

Players can select a subscription from six weeks to a year for a half-dozen lottery games, playing $2 to a maximum of $50 per week. Once an online purchase is made, the same numbers must be played for the duration of the subscription. Customers can not change the numbers or cancel a subscription before the subscription runs out. The lottery can suspend a subscription if the customer's bank account runs out of money, but penalties will be assessed. The lottery does not accept credit cards and requires that subscriptions be paid by direct access to a checking or savings account.

Numbers dropping

Minnesota's Internet lottery ticket sales are one component in a bolder long-term online strategy. Lottery officials have come to realize that consumer habits have changed in the 23 years since Minnesotans changed the state Constitution to allow lottery gambling -- especially among young adults.

In 1998, 73 percent of Minnesotans aged 18 to 24 played the lottery at least once a year. Canfield said that by 2010, that number had plunged to 38 percent. Meanwhile, computer games are increasingly popular and online purchasing has soared to $171 billion a year.

Canfield has urged an aggressive approach, such as subscription packages, reaching out through social media and establishing "a strategy to slowly introduce interactive Internet games."

She said political tides surrounding gambling are shifting rapidly and things that are forbidden now could soon be legal.

"If that times comes, I want to be ready," she said.

Even in a bad economy, the Minnesota State Lottery set a fourth consecutive sales record in fiscal year 2011, bringing in $504.4 million. Of the gambling proceeds, about $121.9 million went for environmental programs and the state's general fund.

The growth, Canfield said, "has helped us to meet our important mission of raising revenue for the state of Minnesota."