Lottoland pledges to fight on after domestic ban

Lottoland, which was barred this week from taking bets on domestic Australian lotteries, vows to press on with its international business in the country and warned that the growing online operations of the incumbents pose a greater threat than it does to agents and ticket sellers.

Lottoland.com.au takes wagers on a smorgasbord of more than 30 lotteries from across the world – everything from super-sized Powerball and MegaMillions in the US to the UK’s Lotto and Spain’s El Gordo. The company, which is licensed in Australia’s Northern Territory and insured by Lloyd’s against players winning the huge jackpots, has amassed 650,000 registered players in Australia since launching around 18 months ago.

Yet there has been growing pressure for states to prohibit what are dubbed ‘fake’, ‘pretend’ or ‘synthetic’ lotteries offered by the likes of Lottoland. Opponents accuse Lottoland of depriving states of taxes for public services (official lotteries paid $1.1 billion in tax last year from ticket sales) and money for good causes, as well as hurting lottery ticket sellers’ earnings. In Western Australia, sales revenues at Lotterywest, which has run the lottery in the state since 1933, slumped by more than AUD$60 million in the last financial year. The state believes Lottoland is partly to blame and Premier Mark McGowan has vowed to ban the operator, saying that “organisations like Lottoland give nothing back. That’s not acceptable to me.”

Northern Territory Attorney-General Natasha Fyles on Tuesday said the ban was in response to concerns Lottoland’s “synthetic business practice” had “undercut” Territory businesses and newsagents.

“The Territory Labor Government takes online gambling regulation very seriously and we aim to provide a strong regulatory framework for the sports bookmaking industry,” she said. “Concerns have been raised across the country about how this synthetic betting practice has undercut hardworking small businesses, including many newsagencies in the Northern Territory.

South Australia has already made it an offence for the Gibraltar-headquartered betting company to accept bets from its residents. Meanwhile, the industry body representing newsagents and lottery agents, the Australian Lottery and Newsagents’ Association (ALNA), has headed up a $5 million campaign bankrolled by lottery giant Tatts Group to get Lottoland outlawed. With the blunt slogan ‘Lottoland’s Gotta Go!’, the campaign includes television and newspaper adverts, and posters in newsagents. Furthermore, their professional-looking website, RealLotteries.com.au, suggests 4,000 small businesses could lose more than 50 percent of their revenue, while 15,796 jobs are at risk.

Adam Joy, CEO of the ALNA, says: “One of the reasons that many want to see all synthetic lotteries like the Lottoland product banned is because they threaten the significant state tax revenue generated by real lotteries to pay for schools, hospitals, roads and charitable causes.” He adds: “They lack the consumer protections and regulations that official lotteries have, yet they want to operate in the lottery space. Lottoland, in particular, uses the language and imagery of lotteries, and allows people to be misled into thinking it is a lottery provider. Consumers need to know the difference between buying official pool-based lottery tickets, and using a wagering website that sends bets overseas.”

In response, Lottoland Australia CEO Luke Brill dismisses the notion that taxes are in jeopardy, pointing out that the bookmaker occupies a miniscule slice of the lottery sector. “The suggestion that Lottoland is eating into tax revenue doesn’t add up. Our business is 1 percent of the Australian market. We are growing rapidly, but we simply don’t have the numbers to make a tangible impact on the success of Australian lotteries. Nonetheless, we appreciate that taxes raised from lotteries have played an important part in community building, and we are willing to do our part too.” Lottoland is calling for the roll out a nationwide point-of-consumption (PoC) tax. A betting levy of 15 percent on net wagering revenue is set to be introduced in Western Australia from 2019. “We want to pay the tax, but as it stands there is no infrastructure to do this,” Brill states.

However, the ALNA argues that a PoC tax on synthetic lotteries would be a “token gesture” compared to the negative impact on state revenues and small businesses. Furthermore, Joy says Lottoland’s contributions would be dwarfed by official lotteries, which are taxed at approximately 25 percent of all sales. “Lottoland anticipates paying $50 million in point-of-consumption tax spread across every state over the next five years,” he explains. “This compares to the $1.35 billion nationally paid in just one year by official lotteries. Over five years that would be approximately $6 billion to $7 billion, so by Lottoland’s calculations they would be contributing less than 1 percent compared to official lotteries.”

Facing mounting opposition in Australia, Lottoland offered newsagents an olive branch in October with a “world-first” revenue-share arrangement. The proposal would allow Lottoland players to nominate a newsagent and that outlet would become a Lottoland affiliate and receive 10 percent of the player’s future wagers. This offer was not affected by this week’s ruling.

“It’s important to remember that Tatts’ don’t give newsagents a single cent of their online business,” Brill says. “Behind Tatts’ smear campaign there are plenty of concerned newsagents who understand their real competitor is thelott.com.au.”

As part of this partnership model, newsagents would need to promote Lottoland’s overseas lotteries with posters and flags. However, no newsagent would be required to advertise betting on lotteries that they sell tickets for in-store. Yet the ALNA quickly dismissed the proposal as a “disingenuous idea”, adding that it was further proof that Lottoland is “trying to siphon newsagents’ customers and community goodwill.”

However Brill says: “Newsagents do not benefit from lottery tickets purchased via their online option, theLott.com, and it’s a reality that they too are moving more and more of their services online. In fact, just last week the winners of Australia’s $16.4 million Powerball jackpot [on October 19th] purchased their tickets online at theLott.com.” Almost 15 percent of tickets for Tatts’ lotteries are bought online, while digital customers rose 21 percent to 1.7 million in the last financial year. Tatts – the only government-licensed lottery operator in Australia – created 253 millionaires and paid out over $2.4 billion in prize money in 2016.

By comparison, Lottoland paid out $16 million in 2016, while it took until July 2017 for the first Australian millionaire (a 56-year-old grandmother from Melbourne won $1.3 million from a $5 bet on MegaMillions). As well as Lottoland being a small – but growing – player in Australia’s $2 billion lottery market, Brill argues that its online product is attracting a new breed of lottery player that seldom buys lottery tickets from a store. “Many of these customers are not traditional lottery players, but online-only punters who have been drawn to our service by the lure of large, international jackpots.”

Clearly, the Australian lottery industry, newsagents and others are rattled by this young upstart. The $5 million campaign clearly reflects their concerns and nervousness, though Lottoland has actually seen a spike in new customers since its critics launched their multi-pronged offensive. Lottoland, which has six million players worldwide, spent $11.4 million on marketing in Australia in its first year and has been fighting back against its critics, including a ‘Myths & Truths about Lottoland’ section on its website. And there is the aforementioned revenue-share offer on the table for newsagents. For now, though, it doesn’t look like ALNA members will accept the deal and the war of words is set to rumble on, while Lottoland has no intention of going away quietly.