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Lottery director says online gaming needs to be discussed

CHARLESTON, W.Va. - West Virginia lawmakers should consider legalizing online gambling, Lottery Director John Musgrave said Wednesday.  

Musgrave was asked about the matter in response to New Jersey's Tuesday passage of a law allowing casinos in that state to run websites that take bets for games like poker and blackjack.

"We need to discuss it," Musgrave said. "It is the way of the future."

According to The Wall Street Journal, New Jersey is expected to generate $410 million from online gambling in its first year, with the industry growing to $590 million in coming years.

West Virginia Lottery revenues have dropped off in recent years as new border state casinos have drawn customers from the state's panhandle casinos.

Musgrave said West Virginia has led the way in offering new forms of gambling such as racetrack video lottery and table games.

But he said the gambling industry and other states are moving rapidly into online gambling products, something that West Virginia leaders have yet to do.

"We're a little bit behind right now," Musgrave said. "There's really going to be a shift in the way that we do business, and we've got to participate in that."

While most people think of online gambling as Internet poker and blackjack, he said there could be other applications.

For instance, Powerball players could download an iPhone app as a way to buy tickets without having to go to a retail store.

"You could do it from an app - punch the app, buy your ticket, set up a debit account with a retailer, then automatically credit your account if you win," Musgrave said. "There's all kinds of things we can do like that to make it convenient for the players."

Musgrave said lottery officials across the country believe there are billions of dollars being lost to offshore gambling companies each year. He said those companies are operating with little regulation or security.

He said states could take it upon themselves to ensure that secure, regulated options are available domestically.

Also Wednesday, Musgrave told members of the state Lottery Commission that he had held initial talks with a committee of state limited video lottery retailers regarding a potential switch to a new electronic system protocol at the end of 2017.

The switch would affect about 6,500 video lottery machines and require retailers to spend about $3,000 per machine on newer software.

Video lottery permit holders have balked at this idea, saying it would cost them about $30 million.

Last month, the Lottery said it would work on the issue with a committee of lottery machine operators. Musgrave told members he has had one teleconference with the committee and got a "good response."

"It's a cost issue for them," Musgrave said.  But he said the retailers have nearly five years to prepare for the switch.

"We think that's reasonable, but there's some interest (by retailers) in trying to move it out to 2021, which will be very difficult," Musgrave said.

He said Lottery officials would hold a meeting with the committee again this Friday.

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Meanwhile, the Lottery is preparing to switch to a new version of the online Hot Lotto game May 12.

Hot Lotto is similar to Powerball and Mega Millions.

However, Lottery marketing director Nikki Orcutt said beginning May 12, the game will switch to an all-cash, "taxes-paid" jackpot.

"If the advertised jackpot amount is $1.3 million, the player will get $1.3 million," Orcutt said.

That would differentiate the game from the more popular Mega Millions and Powerball games, which advertise the pre-tax value of a jackpot that would be paid out through a nearly 30-year annuity.

The taxes would be paid with other money from the game's prize fund and not by the player.

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Lottery finance director Dean Patrick said lottery revenues are running 15.9 percent ahead of forecasts for the current fiscal year.

Since July 1, the Lottery has brought in $765.9 million, well ahead of forecasts of $660.8 million.

For the month of January, lottery revenue was 13.5 percent greater than forecast, coming in at $101.5 million. Racetrack video lottery did the best compared to forecasts in January, coming in 28 percent ahead of expectations.

Musgrave said he hoped the improvement over forecast was a sign of growth in the overall economy.

Contact writer Jared Hunt at business@dailymail.com or 304-348-4836.


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