Scratch-off lottery sales soar

It’s a rare bright spot for state budgets, since most states’ tax revenue has dropped

WASHINGTON — At a time when cooped-up Americans are looking for entertainment and hoping for a windfall more than ever, scratch-off lottery ticket sales have skyrocketed.

It’s a rare bright spot for state budgets, since most states’ tax revenue has dropped and spending is up because of the coronavirus.

For example, in Oklahoma, total lottery sales were just over $7.7 million for the week ending April 25, up about 75 percent compared with the same time last year, driven almost entirely by scratch-offs. That included nearly $5.9 million in scratch-off sales, up from $2.5 million last year.

“The numbers are extraordinary,” said Jay Finks, marketing director for the Oklahoma Lottery. He attributed the surge to the introduction in December of a new $20 scratch-off ticket, the expansion in February of lottery sales into 7-Eleven stores, and a “demand for gaming because people are looking for things to do.

People can’t gamble on sports, can’t watch sports, can’t go to casinos, can’t go to movies.”

“I think you are seeing the discretionary income go to what’s available,” he said in a phone interview.

At the same time, the multistate Mega Millions and Powerball games are seeing significant drops in players and jackpots. People are not getting out of the house as much and when they do, they are reluctant to take the time to pick numbers and hand cash to attendants.

With fewer players, the jackpots diminish - a vicious cycle since lower jackpots usually mean less interest, and even fewer players. That has made total state lottery revenue decline in most states.

But scratch-off tickets, with their more immediate gratification, have brought states good luck.

Lottery sales in Texas for the week ending May 2 totaled $146 million, one of the highest weekly sales totals since January 2016, when a Powerball jackpot of over $1.6 billion led to a nationwide frenzy that lifted all states’ sales. The May 2 total was driven by the highest-ever sales of scratch-off tickets, a 24 percent increase over last year. Draw game sales were down 3.5 percent from the same week last year.

Gary Grief, the state lottery’s executive director, said pent-up demand for entertainment and casino closures in surrounding states have contributed to the increase in scratch-off ticket sales in late April and early May.

Lottery critics say the uptick in April sales coincided with Americans’ receipt of federal stimulus payments of $1,200 and argue that states shouldn’t be cashing in on aid to people in need.

“People play state lotteries when they are financially desperate,” said Les Bernal, national director for Stop Predatory Gambling, an anti-lottery organization. “We have 30 million people who are unemployed.”

The U.S. Labor Department reported last week that more than 33 million Americans have filed for initial jobless claims since the coronavirus pandemic tore up the economy.

Bernal’s organization sent a letter to governors of the 45 states with a lottery, calling on them to shut the games down during the pandemic.

“Federal tax dollars are being sent to American families in order to put food on the table, make rent or mortgage payments, or provide for other daily necessities - not to subsidize state lotteries,” the group said in the letter.

But no state has shut down its lottery. On the contrary, Grief in Texas said the lottery is striving to boost scratch-off sales even more.

“As these sales provide critically needed revenue for public schools and veterans’ services in Texas, the agency is doing all we can to ensure our retailers are provided with the necessary support and scratch ticket inventory to continue this trend,” he said in his email.

To be sure, lottery revenue makes up a small part of state budgets, most of the time less than 2 percent. In West Virginia, the state that derives the greatest percentage of its revenue from lotteries, the lottery brought in about 3 percent of state revenue.

But every dollar is proving significant as states face budget shortfalls caused by the pandemic. Each state dedicates lottery revenue differently, though many reserve the money for education or infrastructure.

Powerball and Mega Millions ticket sales have declined so much that the two games are reducing their jackpots for the first time in memory. The new jackpots will be determined by game sales and interest rates.

Powerball and Mega Millions tickets are $2 a play. Tickets for both games are sold in 45 states and the District of Columbia, and winning numbers are drawn twice a week.

“More states and cities have asked their residents to stay at home, which has affected normal consumer behaviors and Powerball game sales,” Gregg Mineo, Powerball Product Group chairman and Maine Lottery director, said in an April 2 statement. “In response to the public health crisis, interest rates have declined.”

But the fact that many people are buying scratchoff lottery tickets during an economic downturn is not surprising, academic experts say.

“When we feel a loss, we become much more willing to take a risk to regain what we had,” said Cornell University business professor David Just, who completed a study on lottery purchases earlier this year. Scratch-off tickets, he said, give the buyer “more immediacy. It’s much more of a reinforcer, and gives you a jolt right away and that leads you toward habit formation.”

In most states, scratch-off tickets cost $5 or less. But in others, such as Texas, there are $20 and even $50 scratch-off tickets.

Rob Kohler, who worked for the Texas Lottery for 12 years and is now a private consultant on lottery issues, says lotteries “target paydays. The 1st and 15th of the month, that’s when lottery sales spike. When these checks hit, there are convenience stores that cash paychecks (and sell lottery tickets),” he said in a phone interview.

He said most impulse buyers don’t play the draw lotteries like Powerball until the jackpots get really high. But scratch-off tickets? Those are impulse buys, he said, based on getting a vicarious thrill out of dreaming about what they would do with the winnings.

“Dreaming is a healthy exercise,” he said. “But if somebody plunks down $50 bucks on a scratch ticket and wins a $50 prize and then rolls it over and buys another $50 ticket, there’s not a lot of dreaming going on there.”