Vermont Legislature SmartTranscripts:

[Chair Matthew Birong]: Sounds like a sounds like a one. Alright, everyone. Welcome back from lunch. It is 01:05 on Wednesday, February 4, and we are doing an introduction, walkthrough, and witness testimony on h six 6 nine, which is in fact relating to Internet lottery sales. And we're gonna start off with the Bill sponsor, chair Marcotte. How are you, sir?

[Rep. Michael Marcotte]: Pretty good, mister chair. And yourself?

[Chair Matthew Birong]: Doing just fine. Thank you.

[Rep. Michael Marcotte]: Thank you for inviting me to go over H 669689 with you. For the record, I'm representative Michael Markoff from Coventry, chair of House Commerce and Economic Development. I'm also, a store owner. For the last forty two years, I've been selling lottery tickets and part of the lottery, a number of years ago, probably thirty years ago anyway, there was an agent advisory board that was established at the lottery. I was on that that agent advisory board. I think that's the point where the lottery started to really take off because the agency, the department was listening to the agent, how we could sell tickets and the need for more tickets. I think we might have been selling one or two tickets on the scratch side, and this is before Mega Bucks. So I've had a lot of experience with the lottery as far as sales of lottery. I've I have noticed myself personally in my business, the the sales of tickets has been dropping. And when commissioner Knight brought this, idea to me, I thought it may be a good idea to start thinking about it, to keep our sales at an even keel. I think we're losing some we're losing customers because the younger people now more apt to use their devices than than to come to the stores and purchase. One thing that I was worried about, and that we were going to shore our retailers, They're they've been the backbone to the to the lottery all these years, and I was worried about that. But, you know, in the bill, in talking with commissioner Knight, that's been taken care of as well that the retailers will still make some profit off off of those Internet sales as well.

[Chair Matthew Birong]: I had a hand up for Rutland Waters Evans.

[Rep. Chea Waters Evans]: Thank you. Hi. Hi. I'm wondering, I've heard other folks express concern about the retail sales as far as going in to buy a lottery ticket and also buy milk or Coca Cola in a packet number or something like that. And do you have any idea how it might have an impact that way on the retailers? Is there data from somewhere else or is it too soon to tell?

[Rep. Michael Marcotte]: I that I don't know. I think commissioner might be able to fill you in on some of that from experiences from other jurisdictions that

[Rep. Chea Waters Evans]: Yeah.

[Rep. Michael Marcotte]: Put that in. But, I think that, you know, people are may be able to come into the stores and cash their their winnings, get their cash that way, and, of course, that would still keep traffic in the stores. So I I just see it as an evolution. Hopefully, it's you know, I I think stores have been using the lottery. It's a kind of a lost leader. We don't make a whole lot of money on on selling tickets, but we bring that it brings customers into the store. So that that is something that that we really need to think about, making sure that we're not we're not leading the number of people that are coming in. But I I think more we're going to capture more people playing the lottery that wouldn't wouldn't have come to the store anyway, right? So, without seeing data on it, I really don't know.

[Rep. Chea Waters Evans]: Your perspective as a store owner is valuable. Thank you.

[Rep. Robert Hooper]: Hooper of Burlington. Thank you, mister chair. Representative. You could send something that has me to go like this is a ubiquitous sort of thing these days, can do just about anything on it. How many times or experience as the storekeeper? People who are underage or trying to play or buy, and what impact or recourse will we have to keep kids from accessing the lottery to get a phone sort of based thing? I don't

[Rep. Michael Marcotte]: I mean, myself, personally, I don't have very many people trying young people trying to buy lottery tickets, if any. I'm trying to remember the last time I turned somebody away. It's generally, you know, people that are 18 that are more apt to buy tickets. I I I believe that there are ways and algorithms that the the companies that produce the platforms for these have ways of knowing how old people are, and that comes more from my experience on house commerce when we're talking about data privacy bills. I mean, they can, they know where you are, there's geolocation, and that's how they'll be able to make sure that it stays in Vermont, and I think they know pretty much how old people are too. You did that

[Rep. Robert Hooper]: with sports betting too thing. Yeah. That's my tendency to

[Chair Matthew Birong]: As far

[Rep. Robert Hooper]: as an adult goes, you can put your money on whatever I understand. From a legal and a social responsibility perspective. The kids 16 to 14, That's a concern.

[Rep. Michael Marcotte]: Yeah. But I don't I again, I haven't really seen kids trying to purchase lottery tickets. Well, I probably

[Rep. Robert Hooper]: know they will give them a whack. Yeah.

[Rep. Michael Marcotte]: They're more apt to try to try to come in and get to the alcohol and tobacco than they are with lottery tickets. Any

[Chair Matthew Birong]: other questions for the bill sponsor? Seeing no, yes. Right.

[Rep. Michael Marcotte]: Thank you, Mr. Thurgood. Thank you, committee.

[Tucker Anderson, Legislative Counsel]: All right. Good afternoon. Tucker Anderson, Legislative Counsel. You have in front of you, H. Six sixty nine, which provides enabling authority for the Board of Liquor and Lottery through the Commissioner of Liquor and Lottery to conduct internet and mobile device based lottery sales. We'll start in subsection A if you are with me on page one. In section 131 BSA six sixty five, in that subsection A, the board through the commissioner, either independently or through a contractor, is authorized to sell tickets, products, and subscriptions through mobile applications. Moving on to page two, by mobile devices or over the Internet for the lottery games established and operated pursuant to this chapter. To orient you, this is in the state lottery chapter 31 VSA chapter 14, so we are talking about state lottery games. Okay. In subsection b, purchases may only take place within the state of Vermont. If you were here during the sports wagering days, you'll be familiar with some of these geolocation requirements. All lottery purchases made through mobile applications by mobile devices or over the internet shall be initiated and received within the state and can't be intentionally routed outside of the state. Incidental intermediate routing of a purchase does not determine the location where the purchase took place. Alright. We're in subsection c now, which is on line nine. First, personal financial and wager information associated with a person's purchase of tickets, products and subscriptions. Second, trade secrets, business records, financial records and related information. And finally, records relating to security, technology, facilities, or systems that are used for the sale of these lottery products. Alright. In subsection d, this removes the records exemption from the quintennial review of Public Records Act exemptions. So it will not get added to the list that is reviewed by the general assembly every five years for purposes of repeal. It's the exact same process they're undergoing now with the reports revealed. Moving on to page three. Subsection e, procedures. If you were here during sports wagering, you'll also be familiar with this. What subsection e does functionally is allows the department to adopt procedures in lieu of rules governing the operation of its internet and mobile device based lottery sales. The same authority was given to the department for purposes of sports wagering governance. The board is directed to adopt procedures pursuant to three VSA section eight thirty five, that's the procedures and guidance documents section of the Administrative Procedures Act to govern the sales authorized by this section. Subdivision one for each procedure proposed to be adopted, the board shall publish the proposed procedure on the department's website and hold not less than two public hearings. Subscriptions within the state. That's an important provision because under the standard, statutory guidelines for procedures, procedures do not have the force of law. I'll note that this procedure language, it's replicated for purposes of the lottery generally and for sports wagering. So this is some consistent administrative authority that has been granted to the board and the departments in the past. Those are the words on the page. Happy to answer any questions that you have. I did quickly look up various games. They look fun. Lots of mega power and

[Chair Matthew Birong]: fast. Mega power fast. Gotcha. Okay. It's just functionally on their own, or are they acronyms for it?

[Tucker Anderson, Legislative Counsel]: Mega millions, mega bucks, power balls, fast somethings Play. Instant fast play. Lucky four, lucky five. Am I doing it? The numbers games? Okay.

[Chair Matthew Birong]: Very good. I mean, I think I'm pretty familiar with this, so I don't have any direct questions on what the bill is proposing to do. Any questions from the table for councils? Represent me.

[Rep. VL Coffin IV]: On the Public Records Act exemptions, I was just wondering how usual that is. And is that just a blanket exemption? It's like line nine on page two.

[Tucker Anderson, Legislative Counsel]: So I don't wanna qualify it as usual in the general sense, but it does replicate similar exemptions from the sports wagering statutes. And I would also note that each one of these is already reflected in the new enumerated public records act exemptions. Some of them we went through during the PRA overview a couple weeks ago. But things like personally identifiable information, personal financial information, already exempt under the Public Records Act, but there's some express cover here for those folks who are playing the lottery games through internet sale mobile devices. Same with the trade secrets, business records, financial records, related information. I believe it's three seventeen C9 already covers that. It's a very interesting nuance here, which is that that exemption that's enumerated in section three seventeen is based on competitive business advantages and that's not here. So that is one distinction that exists both in the sports wagering statutes here versus general public records act exemptions. And then the security technology facilities or systems also contained within actually multiple exemptions in section three seventeen that cover public agencies broadly, but was narrowed down and applied to sports wagering applications in the past and is brought in here as well.

[Rep. VL Coffin IV]: Does that affect if there's ever a lawsuit or proof of harm of the public? Does that affect their ability to get information?

[Tucker Anderson, Legislative Counsel]: So the Public Records Act exemptions only cover information that is requested through the Public Records Act procedures. It doesn't touch on judicial processes or information that would be gathered through judicial discovery, subpoenaed information as an example. Something to note about the way that this exemption is set up is that there is mandatory confidentiality applied to the department in managing this information. That's that shall keep confidential quote. So that duty might apply slightly more broadly than the Public Records Act, but it wouldn't touch on any official discoveries.

[Chair Matthew Birong]: Anything else?

[Tucker Anderson, Legislative Counsel]: Alright, thank you, counsel. Thank you all very much.

[Chair Matthew Birong]: How you doing, Commissioner?

[Rep. Lisa Hango (Vice Chair)]: Am I up?

[Chair Matthew Birong]: Yes, you are. And I've got to step out in about seven minutes, so when I leave, Representative Hango will be directing the conversation. Stay home.

[Wendy Knight, Commissioner of the Department of Liquor and Lottery]: Good afternoon. For the record, my name is Wendy Knight. I'm the Commissioner of the Department of Liquor and Lottery. Thanks for having me here. I wanted just to talk briefly. Tucker did a really nice job of outlining the enhanced procedures versus what's in statute. Just want to set the framework. So the bill would outline the intent, if you so choose, to move forward with it. This would identify the specific authorization for the department to sell via mobile devices and web browsers. So it's a specific authorization. The procedures is how DLL manages the program. And that's similar to sports wagering. We had a bill that had various, elements of the intent around online sports wagering. And then all of the details in terms of how it was going to be managed and what we expected of the operators is outlined in the enhanced procedures. And that's how we're envisioning this as well. Title 31 is the statute that governs lottery. All of those provisions in place for the lottery in general are also applicable to digital lottery. The only thing digital lottery is, is it's a mechanism. It's a method of purchasing. It's a new source of gaming. It's not like sports wagering, where that was a new enterprise and a completely different system. And it's not expanded gaming. For example, if we were to do iGaming, where people are talking about online casino, that would be an expanded. This is simply a different method of purchase. Right now, you go into the retail store, you can purchase from a clerk, you can go now with a self serve vending machine and a lottery agent, and you can go buy from a self serve vending machine. And this is, I don't have my phone, but it's a mobile phone that you can now purchase from your phone or from the internet. Very similar to banking, I talk about it. We used to always go into a bank, and you would make your banking transactions with a clerk. Then there's ATM machines, and now you could go to self serve machine and you can do your transactions through an ATM, or you can use online banking. And that's the same concept. So I think that's important to point that out. And the reason procedures make sense is because it's a single set of enhanced procedures. With lottery, we have, as Tucker was pointing out, we have priestate games, we have national games like Powerball that are governed by muscle. And so if you did a rulemaking, you would have to, the department has the rulemaking capability, would have to go in and update all of those. The enhanced procedures gives us an ability to have a single set of procedures that govern how this is operated. So I just wanted to point that out. Now, let's talk about what digital lottery is. And I talked very briefly about it when I was here as an overview. It's basically enabling lottery players to purchase from their internet or from mobile. How does it work? We have a little show and tell. Can we pull that up, maybe? So this is an example of an instant ticket. And then what you will see on digital lottery is it's the same game. So you have instant tickets you buy physically that you can scratch off. And then you would have the ability to buy those through your account on your phone. So we would be offering the same types of Yep, I think we're gonna try to get it up. See?

[Rep. Chea Waters Evans]: There you go.

[Wendy Knight, Commissioner of the Department of Liquor and Lottery]: So we're offering the same games that you purchase physically in a store. No different, just the same games. Powerball, Tri State, and Insta. That's what a game looks like. Okay, why? I talked about the access. So we're basically providing players with the ability to it's not one or the other. You can either go to a retail store now, you go to a self-service vending machine, and we're asking for the ability to have them purchase on their phone. As I mentioned before, we're really looking This is a modernization initiative. Just like we do all kinds of transactions on our phone and the internet, this is similar to that. The difference here in terms of players, I wanna get to the retail strategy, because you had a great question. And representative Marcotte had indicated or alluded to this. Digital lottery players are not going into Vermont lottery stores right now. So one of the reasons to offer digital lottery and allow the ability to purchase tickets from your phone or the internet is because that's capturing new players. So the research is showing that a digital lottery player is age 25 to 44. 56% of the online digital lottery players are That's redundant. 56% of digital lottery players are between the ages of 25 and 44. So they're skewing much younger. You heard representative Marcotte talk about, he doesn't have young people in his store trying to buy lottery tickets. So this is one of the reasons to allow this is because you're going to give access to players that aren't currently playing the lottery. And the reason that's important is because of retail sales. We want to ensure the future of the Vermont lottery so that stores like Representative Marcotte's store can continue to grow. Because if we're not growing Vermont Lottery, they won't have that revenue source. I'm gonna get into some specifics in terms of retailer engagement, and representative Mark Gott talked about that. So there are safeguards in place with digital lottery, much like they are with sports wagering, online sports wagering, that don't exist in the physical retail store. One of the things you had talked about was customers and how we know they're of age. There's something called Know Your Customer and Age Verification. And we have that in place for sports wagering, where there's a process in place that the operator is able to determine the verification of the age of that individual. And it's photo identification, I have to submit it. And the same sorts of age verification process would exist here with the digital lottery. So the worry that someone's going to be 14 and trying to, because of the phones and the verification system, that is one of the safeguards. Similar to sports wagering, there's time outs, there's limits on funding, there's limits on play, there's the voluntary self exclusion list. So there's safeguards in place using a phone. The other thing the phone provides is data in terms of activity. And so, much like sports wagering, the operators can see the activity of the player, identify behavior or activity that looks like problem gambling, and then direct that person to resources. On the retailer side, I'll talk the retailer engagement. And representative Marcotte alluded to this. How we would structure this is that we're never going to be supportive of something that takes away money from our lottery agents. This is an added revenue stream. And so we would structure this so that the five eighty lottery agents receive a percentage of the online sales. So you're going to have online sales that we collect. We're going to take a percentage of that, and we're going to give that to all of the lottery agents as a revenue share. That will happen as long as the program is in place. And that ensures that they benefit and they derive income from online lottery sales. It's not taking away from them. Again, the other point is these are new players, so we're not taking people out of their goodbye store and having might wanna do that, right? It's called omnichannel, and we're giving them the option. But right now, we're seeing that those people who would be digital lottery players are not currently the retail customers. I've mentioned this before, all of the retail agents will have a QR code for the digital lottery program. If I go into Representative Markup's store, I see the advertisement or the information about Digital Lottery, I can click on that QR code, set up an account, and Representative Markup would receive a commission. You're talking about it in terms of a referral commission, not a typical commission that a retailer would earn from sales. So that's an extra bonus that the retailers would have. And then there's all kinds of cross promotions and marketing we could do that are driving foot traffic. So we want to be bringing people into the retail stores. There's options to include when you have a new ticket, we would make it available in the retail stores first. We wouldn't make it available on digital lottery. There's incentives to have people go into the store, claim their ticket. When they claim their ticket, they can get a free cup of coffee or a jug of milk, whatever. We can do things like that. So there's a lot of cross promotion and marketing to drive people into the store itself. We do a lot of giveaways. So you buy a ticket, you have a chance to win. Like our quad ticket, for example, is a winter ticket we launched. You have an ability to win merchandise and skis and snowboards and ski passes, etcetera. You have to physically go into their store, fill a form out, put it in the box, and it gets selected. So, there's a lot of opportunity to support the retailers that way. I'm gonna pause for a second. I answered your question, sir. Any other specific questions before I continue on? Okay, so the one other piece that was discussed when representative Markot was here, and I will definitely follow-up with additional information, is other states that have launched iLottery. They have seen that overall retail sales have increased. And that's because of the reasons that I talked about. You're bringing in a new player. You're offering an additional access. And so we'll follow-up with you. But we've seen in New Hampshire, Michigan, Pennsylvania, in states that have launched digital lottery, digital lottery isn't cannibalizing retail sales. You're seeing overall sales increase. And I can definitely share that with you. Okay, I'm going to stop there.

[Rep. Lisa Hango (Vice Chair)]: Just mentioned New Hampshire, surrounding states. Implemented this.

[Wendy Knight, Commissioner of the Department of Liquor and Lottery]: Well, several countries have implemented lottery. And then we have 15 states. New Hampshire has, and Massachusetts just now. You talked about just specifically the ones surrounding us? Pennsylvania has. They've done a nice job. Pennsylvania. We've got some data from Pennsylvania. Kansas has done a good job. Michigan's done a good job.

[Rep. Lisa Hango (Vice Chair)]: You're welcome.

[Rep. Lisa Hango (Vice Chair)]: Any questions for the commissioner?

[Rep. Lisa Hango (Vice Chair)]: I feel like I might have had a I

[Wendy Knight, Commissioner of the Department of Liquor and Lottery]: just wanna talk about the revenue, the expected revenue. So, let's talk about timeline. Assuming we get the authorization and the bill passes in July, then we need to develop the enhanced procedures, send an RFP out to prospective operators. We only select one, just like we do on lottery. We have a lottery gaming system. We select one vendor. Unlike sports wagering, where we had up to six, we could have selected, we selected three. There's a bid process, a review, a selection, a contract negotiation process. Then it takes six to eight months before the digital lottery platform is developed and launched. So, we're really looking at December 2027, the 2027, before we even have digital lottery up and running, assuming the bill passes. So, in terms of revenue, we're really looking at FY '28 to have six months worth of revenue, very similar to when we did sports wagering, we launched it in January, we had six months. So, the expectation for the first full year of revenue is 2,400,000.0, about 2,450,000.00. Year two would be 4.9, and then year three is 9.94. So, that's just some projections in terms of what we would see additional revenue. Again, reminding everybody that the revenue generated through lottery goes to the Education Fund, so this is additional revenue stream for the Education Fund.

[Rep. Lisa Hango (Vice Chair)]: Any other questions? Rev Coffin and Rep Stone.

[Rep. VL Coffin IV]: I don't know. Was just pointing, so I was And walking

[Rep. Mary-Katherine Stone]: I just to confirm that the digital lottery will have the same safeguards as your as the online gambling.

[Wendy Knight, Commissioner of the Department of Liquor and Lottery]: The online sports wagering.

[Rep. Mary-Katherine Stone]: The online sports game wagering and however you want call it. It's okay. Yep. It'll have the time out cool down period. Yes. That's looking that up, make sure if they're gonna match up.

[Wendy Knight, Commissioner of the Department of Liquor and Lottery]: Yeah. And what we would do is we would be looking for looking at the enhanced procedures that were developed for sports wagering. When we're looking to develop the enhanced procedures for digital lottery, a lot of those components you would see in the digital lottery, we would put them in the enhanced procedures. Because we have a similar model in terms of online sports wagering. And then we also have the lottery itself, right? And I mentioned that the lottery is governed by Title 31 and rule making, and then the enhanced procedures guide the sports wagering.

[Rep. Mary-Katherine Stone]: Right, I just because I foresee desperate people reacting middle of the night. The lottery is up in the billions. I could of course, I I worry that desperate people would just start spending all the time to come on tickets without any protections.

[Wendy Knight, Commissioner of the Department of Liquor and Lottery]: Yeah. And as I said earlier, there are actually more safeguards when you're purchasing lottery tickets on the phone than there are if you go into a retail store. I understand the access piece you're talking about.

[Chair Matthew Birong]: I get that. Get Easier access.

[Wendy Knight, Commissioner of the Department of Liquor and Lottery]: Yeah. As opposed to walking into a store. But right now, you walk into a retail store, and there are virtually no safeguards except the requirement that they age verify, which, as representative Marcotte indicated, isn't a problem because you don't have 18 year olds, 20 year olds, 25 year olds buying lottery tickets.

[Rep. Mary-Katherine Stone]: Okay. I understand. You know, if you buy a 100 tickets

[Wendy Knight, Commissioner of the Department of Liquor and Lottery]: You can buy a 100 tickets.

[Rep. Mary-Katherine Stone]: Buy a 100 tickets, but I see, you know, online easier to spend more.

[Chair Matthew Birong]: Understood. That's why there's Just Yeah. Continue.

[Wendy Knight, Commissioner of the Department of Liquor and Lottery]: The one I'm sorry.

[Rep. Robert Hooper]: Do you do this via bank card? Do you have to have a bank on the site?

[Wendy Knight, Commissioner of the Department of Liquor and Lottery]: It'd be through a debit card, just like in sports wagering, not a credit card. Credit Not card. Just like a machine.

[Rep. Robert Hooper]: Well,

[Wendy Knight, Commissioner of the Department of Liquor and Lottery]: let me offer something to consider. I think there's a lot of misconceptions about what a Vermont lottery player is. The national data shows that all kinds of people play lottery. And so we assume that all kinds of people play lottery here in Vermont. I think there's a I've been hearing, as I've been having discussions about this since October, lottery players are poor, they're uneducated, they're vulnerable. And I would encourage us to not make those assumptions about a Vermont lottery player. Lottery games are a legal activity for adults in Vermont. And if someone wants to take their disposable income and go into a lottery store and buy a whole bunch of lottery tickets, because it makes them feel good, or they're hopeful, or they're bored, that is consumer choice. That's a legal activity that people are engaged in. I might not buy lottery tickets. You might not buy lottery tickets, but it doesn't mean that we don't recognize that other people want to engage in that.

[Rep. Mary-Katherine Stone]: No, and I wasn't trying to say that for an educated

[Wendy Knight, Commissioner of the Department of Liquor and Lottery]: I wasn't saying you were What

[Rep. Mary-Katherine Stone]: I was looking getting to was somebody finds myself in a desperate situation, and decides to make their situation worse. It's good to hear that they can't use credit cards.

[Wendy Knight, Commissioner of the Department of Liquor and Lottery]: Right. And that's why there's the phones will identify behavior that suggests this person might need resources, And that's why those safeguards exist. Where that person can be referred for resources and can sign up for a self exclusion list, can limit themselves, and the activity on the phone will identify that for the operator. And I think that that's one of the safeguards. As opposed to a store, we have no idea the activity that's taking place with an individual, because it's not tracked like it is on the phone. Doctor.

[Rep. Michael Morgan]: And again, I think it's Ben's favorite, just to reiterate, it's fuel located like sports wagering. Correct. So, an individual could come across the ferry in New York here, once they're in the confines of Vermont, they can do it.

[Wendy Knight, Commissioner of the Department of Liquor and Lottery]: Absolutely. That's correct. Vice versa, if they're in Vermont using their app, and then they travel to New Hampshire or to New York, they would be dropped from the Vermont app, and they would be either not allowed if New York doesn't have online lottery at this point, in New Hampshire they do, so they would have to.

[Rep. Michael Morgan]: Until they were physically back here, could they do it again? Correct.

[Wendy Knight, Commissioner of the Department of Liquor and Lottery]: On the Vermont app,

[Rep. Michael Marcotte]: correct. Any

[Rep. Lisa Hango (Vice Chair)]: other questions for the commissioners? You answered mine, because I was going to ask about revenue, projected revenue.

[Wendy Knight, Commissioner of the Department of Liquor and Lottery]: So, we will follow-up with additional information on some of the other states and look forward to more conversations.

[Rep. Lisa Hango (Vice Chair)]: Thank you very much.

[Rep. Mary-Katherine Stone]: Thank you.

[Rep. Lisa Hango (Vice Chair)]: Council, you're headed off to the Senate. Is that correct? Okay. So, we're going to take a break until 02:30 to work on some individual budget items and other things we might need to work on. Nick, could you please take us off live? Yep.