Skeptical legislators threaten to undo rule changes

By Kate Northrop

Colorado lottery players will soon be able to purchase lottery tickets online and pay for tickets using credit cards after the Colorado Lottery approved rule changes in a commission meeting this week.

On Wednesday, the Colorado Lottery approved rule changes that will allow players to purchase lottery tickets online and use a credit card despite some state legislators expressing concern.

Retailer advocates also submitted comments to the Colorado Lottery Commission voicing worries that permitting online sales will negatively impact brick-and-mortar stores that rely on selling lottery tickets for revenue. However, states that have adopted online sales have repeatedly demonstrated that physical stores have only seen an increase in sales in states where selling tickets online is authorized.

For example, Lottery Sales Director Thomas Campbell noted, Michigan retail sales increased by 8% the year that direct electronic sales were introduced to the state, while retailers in New Hampshire and Kentucky saw a 7% increase.

State Senator Jeff Bridges, alongside several other state senators and representatives, also presented a letter to the commission on Nov. 14 that "expressed concerns that credit card sales and online sales of lottery tickets could encourage problem gambling," Campbell relayed in the commission meeting. "They also questioned the division's legal authority to allow credit card sales and online sales."

In response, the Lottery reviewed state law and consulted with legal counsel, studied examples of similar rules in other states, and found that the agency is within its rights to exert its proposals. To address the concern to do with players spending beyond their means, Campbell said that the Lottery has increased its protective messaging to encourage players to make informed decisions.

"Essentially, this is about consumer choice and how they decide to make consumer goods purchases," he added.

Selling tickets online directly to players through the Internet would allow players to make lottery purchases via electronic devices such as mobile phones and computers.

"The purpose of this change is to offer a convenient and modern digital platform to purchase lottery tickets online," Campbell explained regarding the rule change. "This will increase revenue to the Lottery to help meet its obligations to its proceeds recipients. It will also give the Lottery access to the data to understand consumer behavior and give us direct interaction as it relates to player behavior to minimize harm."

Since direct online sales would make buying lottery tickets much more accessible, Lottery Commissioner Christian Reece advocated for the Lottery to enact "some kind of pain threshold" to force players in danger of spending beyond their means "to stop and pause, but Lottery Director Tom Seaver assured her that the Lottery has done the appropriate research to ensure that the agency formulates the proper framework before receiving official approval from legislation.

"You have my personal assurance that we will not go on sale for any digital lottery without creating the framework and safeguards and the guardrails that go with the responsibility of selling digitally to our public," Seaver affirmed.

Launching an online lottery might not happen at least until the end of next year, Commissioner Bill Clayton supposed, but it's something he is strongly in favor of. The motion to approve the rule change allowing direct online sales passed unanimously.

In the meantime, Colorado does allow online sales via lottery courier services. The Related Links section of this story has links to a courier service approved by the state for purchases by Colorado residents.

The second major rule proposal, which Lottery Commissioner Christian Reece said received the most public comment, is allowing non-cash purchases for lottery products, namely credit cards. While an additional payment option would make it significantly easier to buy lottery tickets in a world where cash might no longer be king, credit for gambling is "typically treated as a cash advance." According to Experian, Reece continued, the charge incurs interest immediately. There are also fees associated with cash advances, typically between 3.5% and 5% or $10, whichever is greater, something that most credit card users may not be aware of when they make a gambling-related purchase on credit.

"So, a $20 lottery ticket purchase would actually cost you $30 if you purchase it on credit," Reece said. "The Consumer Financial Protection Bureau also found that, after legalizing the use of credit cards, debt went up significantly," Reece explained. "So, it's for those reasons and many of the comments in the public comment that we received that I have very grave concerns about the Lottery allowing the use of credit cards for gambling purposes."

The potential problem compounds when considering that most players favoring cashless payments may likely be younger, and in a commission meeting in 2023, the Lottery noted that "the rates of problem gambling amongst younger populations is two to three times higher in college age and younger gamblers."

"Many of those are first-time credit card holders that may or may not understand the implications of taking out cash advances versus making retail purchases on credit," Reece clarified.

Campbell made the counterargument that "limiting credit for lottery purchases doesn't stop somebody from going and getting a cash advance on their credit card at an ATM. They still do have access to their credit funds through another means."

Commissioner Bill Clayton acknowledged both sides of the coin but came to the conclusion that credit card purchases would ultimately allow the Lottery to appeal to the younger, upcoming generation of players.

"Younger people don't carry cash," Clayton said. "They just don't, and I think it's a group of people that we're missing out on the opportunity to have them buy lottery products."

The rule change to allow the use of credit cards to purchase lottery tickets passed by a vote of 4-1. Under this new rule, retailers are not required to allow credit card payments, rather the choice to offer them is up to the discretion of each individual merchant.

The next legislative session will take place in February, which will offer state lawmakers the chance to review — and possibly alter or repeal — the changes that the Lottery implemented. However, any challenges by legislators may turn up futile since Governor Jared Polis has voiced his support for changes in favor of lottery modernization.

The governor is "supportive of increasing consumer convenience," including ways to "ensure customers don't need to fumble through several cards to buy what they want," a spokesperson told 9News on behalf of Polis.

Still, the rule changes have opponents in the Senate, with Senator Bridges contending that it's "a fight [he] will be picking."

"I will be doing everything I can to keep this from happening," Bridges vowed.