Retailers Fear Loss of Lottery Income to Online Sales and Delay in Debit App

Ron Marsico | February 10, 2020 | More Issues
No regulations yet for law that Gov. Phil Murphy signed in July to let lottery players buy tickets in stores via a debit phone app
Credit: NJ State Lottery
Mega Millions is one of the games authorized for online sales.

Thousands of New Jersey retail outlets selling lottery tickets may be missing out on income they previously took for granted.

Retailers are upset that a law signed in July to let lottery players buy tickets in stores via a debit phone app has not taken effect while the New Jersey Lottery in December announced that tickets now can be purchased anywhere in the state on mobile phones.

Jaimin Shah, administrator of the Asian American Retailers Association that represents roughly 2,000 convenience, gas station and liquor stores in the state, said he fears the new ability of players to buy lottery tickets online will hurt his members financially.

“If they’re not coming to the store … they’re not buying anything,’’ said Shah, noting most of his membership sell lottery tickets and face a double whammy of lost commissions and merchandise sales. “I don’t know how the retailers will survive.”

Shah said the phone debit app could help retailers offset part of that anticipated loss of revenue, noting the likely propensity of some to spend more in the stores on merchandise and lottery tickets if they are using a debit app rather than cash. Use of credit cards to buy lottery tickets is prohibited.

Proponents say the phone debit app would work for lottery tickets similar to the scanning of phones that allows individuals to buy coffee and a pastry in a shop. These systems work by allowing electronic fund transfers via an automated network that debits an individual’s checking account to cover tabs.

While the legislation (A-5608) on the debit app called for the measure to take effect Oct. 1, 2019 after Gov. Phil Murphy signed it in early July, there was a stipulation “except that the state Lottery Commission may take any anticipatory administrative action in advance as shall be necessary for implementation of this act.’’

Income of about $25,000 a year from Lottery sales

Mary Ann Rivell, a Lottery spokeswoman, said in an email response the Lottery is still drafting regulations to allow for the law’s implementation.

“In addition, Lottery reached out to our sales and marketing vendors, Northstar New Jersey Lottery, and confirmed that IGT (International Game Technology) has been in touch with the company that offers the decoupled debit product for lotteries,’’ said Rivell in the email. “IGT is trying to evaluate a cost-effective business decision for integrating with a decoupled debit provider.’’

Rivell did not provide an updated timeframe for the law to be implemented.

Advocates for retailers say nearly 7,500 establishments sell lottery tickets throughout New Jersey.

Retailers make an average of roughly $25,000 annually — with some earning far more — in commissions from lottery sales, but stand to see that amount reduced by thousands of dollars by online purchases, their advocates say. Lottery commissions are particularly important to many small mom-and-pop stores, whose businesses could be jeopardized if online sales take away 25% or more of their take, contend retailers and their advocates.

They want the delay in activating phone debit purchases for lottery tickets at stores resolved quickly.

“The sooner we can get something implemented, the better,’’ said Shep Doniger, a public relations’ retailer representative. “They went to the trouble of passing the law. Why have it sit there and not implement it.”

Record sales

The New Jersey Lottery posted a record $3.3 billion in sales in fiscal year 2018, paying out nearly $2 billion in prize money and more than $188 million in commissions to retailers, according to a May 2019 Lottery release. Proceeds help support the state’s pension system for public employees.

In December, Lottery officials announced a company, Jackpocket, had become the “first regulated courier service’’ in the state registered to sell lottery tickets online, under a 2016 law authorizing the practice.

Four games — Mega Millions, Powerball, CASH4LIFE and Pick-6 — were authorized for online sale.

“In New Jersey, 5.5 million adults actively use their smart phones to make daily purchases for everything from food to music,’’ said James Carey, the Lottery’s acting executive director, in a statement accompanying the announcement. “Now online players can use their smart phones to access a more convenient way to participate in the Lottery within state borders.”

Jackpocket says it offers “consumer protections, such as daily deposit and spend limits’’ to safeguard players.

Tushar Patel, vice chairman of the American Asian Retailers Association who owns multiple Xpress Mart convenience stores in South Jersey, expects the small impact thus far on his businesses to significantly increase as online lottery sales become more familiar and prevalent.

“It’s convenient for them to do it online,’’ said Patel. “That is a loss for us.’’