by: Javier Hasse, Benzinga Staff Writer
In an era where every startup claims to be disruptive, it’s unusual to come across a successful tech platform that asserts exactly the opposite. However, this is the case of Lottery.com, a lottery technology company that is managing to reimagine the lottery industry without alienating the current industry incumbents and government agencies benefiting from it.
In 2016, U.S. lotteries generated $80 billion in revenue. So, it’s pretty safe to say this is a business that works. The thing is, millennials, people aged between 20 and 35, are not playing as much as their parents and grandparents. In fact, only one in three millennials nationwide bought a ticket last year. Some state lotteries are seeing even lower sales among that age group. This means that as older generations age out or become economically inactive, the lottery industry could find itself in quite a pickle.
Responding to the industry’s need to reach millennials, Lottery.com came up with a way to get traditional lotteries into smartphones, allowing users to play state-sanctioned games though their app. But, this is not an easy mission. Lottery.com is the first app that actually seeks permission from state lottery commissions and state governments. In addition, there’s a regulatory issue: Each jurisdiction has its own little quirks and regulations that require controls that must be built into the app.
Despite the difficulties, Lottery.com has already managed to convince several U.S. states to allow the app, and it is on the way to getting a slate of 10–15 states by the end of this year — reaching 30–40 percent of the addressable market.
"Our perspective on the lottery industry is that it's one that cannot be disrupted," co-founder and CEO Tony DiMatteo told Benzinga. “So, we are not here to disrupt the industry, but rather to help advance it.”
The way to do this, he explained, is to be fully cooperative with every state Lottery.com enters. “We align all of the interests of the stakeholders: states, retailers and everybody that could be affected by our technology. We try to make this a win for everyone, meaning we can increase foot traffic into retail locations, while increasing the Millennial user base.”
But, how can a mobile app aimed at people purchasing tickets through their phones drive foot traffic? The upcoming version of the Lottery.com app will include promotions and discounts at retail locations every time someone buys a ticket through the app.
Beyond the technology, Benzinga was particularly interested in the company’s large financial backing. The Series A raised reached $17 million and included big names like Fortress Investment Group LLC FIG, iHeartMedia Inc IHRT and GateHouse Media, Inc.OTCGHSEQ, as well as early supporters of Uber, Twitter Inc TWTR, Tesla Inc TSLA, Facebook Inc FB, Paypal Holdings Inc PYPL, and other very successful tech startups. No venture capital money has been taken to date.
Funding is earmarked for national and international expansion. DiMatteo expects to see three to five more countries enter the platform this year. “Our long-term goal is to create a sort of global lottery,” he said.
Tighter Regulatory Controls And Addiction Prevention
Finally, Benzinga asked about addiction prevention policies and the ways in which digitizing the lottery actually arms states with tighter regulatory controls. With age verification and geo-location, the app cuts down dramatically on issues that have plagued the industry such as ticket-cashing fraud, lost tickets and unclaimed winnings, as well as the ability to spot problem behaviors. According to DiMatteo, only 2 percent of lottery players develop an addiction; however, this is still a big problem because the issue tends to affect those who can’t afford this kind of habit.
“Most addicts are drawn to scratchers, because lower turnaround times tend to generate a larger rush,” he said. “So, we don’t allow anybody to buy more than 20 tickets per draw.”
Additionally, Lottery.com has developed software that can detect addictive behavior and even flag people using relatives’ credit cards and identities to continue to play after they are banned from the app. The final piece is the company will open-source its addicts database for any other company operating in the space to get that information and help fight gaming addiction in multiple industries. “It has always been our intention to provide a fun and interactive way to play the lottery on your phone and do it in such a way that we maintain the integrity of the industry for both regulators and users,” DiMatteo added. “When we increase sales that then support education, senior and veteran support, as well as other state initiatives, everyone wins.”
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