The cashless society that futurists and sci-fi writers predicted has, to a large degree, arrived for residents of Los Angeles. These days, Angelenos can use credit and debit cards to pay for everything from midwives to caskets, giving a new aspect to the phrase “from cradle to grave.”
That California companies are playing a central role in this cashless evolution isn’t surprising. Both the state and the L.A. region have a solid track record as hubs of innovation. But at least one chunk of the state’s economy, totaling more than $4 billion annually, remains cash only: lottery ticket sales.
The California Lottery is in the midst of a resurgence thanks in part to recent nine-figure Powerball and Mega Millions jackpots. Additionally, in 2010, a bill that granted Lottery officials more flexibility to determine the percentage of ticket revenue that would go to prize payouts became law.
But the Lottery could nonetheless benefit from an additional policy change: allowing tickets to be purchased with debit and credit cards. Such a development would also pave the way for sales via the Internet, a steadily growing part of the state’s (and the nation’s) consumer economy.
Consumers’ comfort with, and in some instances preference for, cashless transactions is growing. This year, Americans are expected to make Internet purchases totaling well over $250 billion. The popular cryptocurrency Bitcoin, which might or might not have been developed by Temple City resident Dorian Nakamoto, isn’t issued by a national bank and doesn’t even exist in physical form.
The L.A. region, a hotbed of e-commerce companies such as Nasty Gal and JustFab, stands to benefit from this change. These developments would represent much more than cool new technologies, but efficiencies that hold out the promise of saving consumers money. According to a Tufts University report, the use of physical currency represents $200 billion, or $1,739 per American household, in additional cost each year.
I’m not suggesting Lottery officials start accepting Bitcoins. But they should acquiesce to a growing consumer preference for cashless payment options, much like some Girl Scout troops, farmers market vendors, food truck owners and even lottery agencies in other states have done.
Despite California’s trendsetting reputation, other states have led the way when it comes to allowing cashless in-store as well as online lottery ticket transactions. In 2012, the Illinois State Lottery became the first to allow individual lottery tickets to be purchased online. Since then, other states, including Minnesota, have begun offering tickets online. Connecticut allows tickets to be purchased with gift and debit cards. New York goes one step further and allows tickets to be purchased with credit cards.
Addiction issue
Despite these moves by New York and other states, there are those who argue allowing lottery ticket purchases via cashless transactions and over the Internet could lead to a host of negative consequences, including a spike in gambling addiction.
Las Vegas gambling mogul Sheldon Adelson and his Coalition to Stop Internet Gambling has provided a textbook manifestation of this thinking, arguing against online gambling because it “crosses the line of responsible gaming by bringing gambling into our living rooms and onto our smartphones.” Adelson, of course, asserts that his stance has little to do with his interest in getting people into his casinos.
Like Adelson, I’m not a disinterested bystander in this debate. I’m the founder and chief executive of L.A.-based startup LottoGopher, a social lottery website that allows users to purchase tickets online. Currently, we provide the only way for consumers to order California lottery tickets via cashless transactions.
Lottery officials are right to be concerned about gambling addiction. But there’s little data that shows a strong correlation between electronic and online purchases of lottery tickets and an increase in gambling addiction. It’s worth noting that in recent years the gambling that’s most harmed our economy didn’t have anything do with scratchers or Powerball numbers, but rather credit default swaps and mortgage-backed securities.
Since the launch of the California Lottery nearly 30 years ago, gambling options, whether in the form of scratchers or slot machines, have increased in the L.A. area and across the country. This development has certainly had positive and negative impacts. With respect to the state Lottery specifically, one of the positive impacts has been more than $1 billion in funding each year to the state’s schools.
It would be nothing short of odd if California Lottery officials sent armored trucks to school districts around the state to distribute that money in cash. As our economy becomes increasingly cashless, it seems similarly odd to make Californians purchase lottery tickets with physical currency.
James Morel is the chief executive of LottoGopher.
