Nevada Lottery’s Time Has Arrived

The idea of a Nevada Lottery pops up every few years. I first wrote about my support for it in March 2015.

Historically, there has never been an appetite for it and the talk disappears. The COVID-19 pandemic will bring historic budgetary problems to the state. A lottery is one of the ways we can soften the blow.

Nevada is one of only five states without a lottery. Alabama, Alaska, Hawaii and Utah are the others. The last two have no forms of legalized gambling. The other two have current proposals to legalize lotteries that seem to have momentum. Nevada is unlike any of these states in terms of its gambling laws.

Traditional arguments against lotteries do not work in Nevada

There are many great arguments against state lotteries, ones I agree with if it was a discussion in any other state. Gambling problems related to lotteries can disproportionately affect low-income families. That holds true in states that do not have slot machines in nearly all gas stations, bars and grocery stores.

There is already ample access to bad gambling games in most Nevada neighborhoods. There is little theoretical difference in expected loss between playing penny slots for an hour at a gas station and buying $20 worth of Powerball tickets. As limits go up, buying $20 in lottery tickets becomes a better investment.

Give gaming establishments a lottery monopoly to appease them

The gaming industry has historically opposed a lottery in Nevada. The concern is that the state would compete for gambling dollars with its largest industry. That is a fair argument that has a solution.

Limit the sale of lottery tickets to places that already have a gaming license. Most of these establishments are typically where one would buy lottery tickets anyway. The casino, store or bar would receive a five percent commission on every sale, as well as bonuses for selling jackpot tickets. This would help cover the perceived losses from offering an additional form of gambling to customers. Nevada could exempt this revenue from margin taxes to make it more lucrative to retailers.

Nevadans already buy lottery tickets in other states

One point that seems to get missed by lottery opponents is that Nevadans already play the games. A 2009 report by the New York Times noted that the California Lottery store in Primm, about 40 miles south of Las Vegas, had $13 million in annual sales. It is the often the California Lottery retailer with the highest sales in the state.

The same report notes that the closest California Lottery retailer to Reno sold $6.3 million in tickets per year. Adjusted for inflation, these two stores account for $25.5 million a year in lottery sales. Add another $3 million to account for Nevada’s population growth since then.

The largest Arizona Lottery retailer is in the small town of Littlefield. It is the only exit off Interstate 15 between Nevada and Utah. It reported $2.2 million in sales in fiscal year 2009. It had 40 percent higher sales than second place, which was in White Hills, an hour south of Hoover Dam.

This tells a story about Nevadans playing out-of-state lotteries already to the tune of about $30 million a year. That number would grow exponentially when including sales to people not willing to drive an hour and wait in line and tourists that buy tickets at resorts.

Make the minimum age 21

One argument against a Nevada Lottery is that it would give access to gambling to those under 21, which is the minimum age for most forms of gambling in the state. The solution is simple there. Make the minimum age for lottery ticket purchases 21. Arizona, Iowa, Mississippi and Louisiana already do this.

No need for instant games

North Dakota and Wyoming have state lotteries that only sell tickets for lotto drawings and do not offer scratch-offs. Each holds a unique in-state lotto game while joining interstate pools for all others. Nevada taking this route would cut down on startup and administration costs, while dropping a segment of games that would compete more with slots.

In fiscal year 2019, North Dakota sold $33.4 million in lotto tickets. This sent $9.3 million to the state. In fiscal year 2018, Wyoming sold $28.7 million in lotto tickets. It generated $9.4 million in taxes. Nevada’s population is four times that of North Dakota and five times Wyoming before accounting for tourists.

Casino Lottery Study Projects Millions in Annual Taxes

A 2007 study commissioned by Boyd Gaming and Station Casinos estimated that the state would generate $48 million in annual lottery revenues for Nevada. That is about $60 million when adjusted for inflation and $72 million when adding in the 20 percent population growth since then. The study estimated that a state lottery would add 316 new jobs, while costing the gaming industry about 595 positions, numbers that would also need an adjustment due to time and population growth. 

If gaming still opposes a lottery, raise gaming taxes instead

If the gaming establishments still oppose a state lottery, it would be a good time to remind them that Nevada casinos pay the lowest commercial gaming tax rate in the country. High volume unrestricted licenses are especially undertaxed in our system. The revenues must be generated, the only question is if the operators want to be the ones to pay it or pass it on to people willing to donate taxes voluntarily.

Constitutional amendment needed

A special session of the Nevada Legislature seems inevitable after the budget crisis the state will see from COVID-19. A lottery constitutional amendment could be on the agenda. If it passed, it would go up for another vote by lawmakers in 2021. If a lottery constitutional amendment passed by a majority in both chambers in each session, it would go to the ballot in November 2022, needing a majority to become a constitutional amendment.

There is another, less efficient process, for getting a constitutional amendment for a state lottery in Nevada. Canvassers could collect an amount equal or greater to 10 percent of the registered voters that cast ballots in each congressional district during the previous statewide election. This would require at least 113,000 valid signatures. The deadline for this would be June 16, a seemingly impossible task considering the COVID-19 situation. If it passed in November, it would need to return to the ballot in November 2022 to be confirmed.

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