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Is Lottoland just another form of gambling or is it something more nefarious? IA critical thinker John Turnbull investigates.

If you’re one of those people who still watch commercial TV, there’s a chance that you’ve seen the ad below recently.

Funded by lobby group Real Lotteries, with members that include the Tatts Group, LotteryWest and the Lottery Retailers Association, you could be forgiven for thinking this was little more than sour grapes — comparable perhaps to taxi drivers complaining about Uber. They might have a point, but that’s competition for you…

It is worth pointing out that all of the claims in the ad below are factual, but don’t really tell the full story.

Who are Lottoland?

Formed in Gibraltar in 2013 and registered in the Northern Territory in 2016, Lottoland Limited is a company that allows individuals to bet on the outcome of lotteries around the world. The company claims to have paid out 960 million Euro worldwide with a Melbourne woman winning $1.3m in July, and guarantees to match major lottery payouts by using an insurance-based model.

Already banned in South Australia (who have a more conservative approach to gambling in general), Lottoland is facing legal challenges around the country with Tasmania leading the charge to ban the company. Departing senator Nick Xenophon has also been a vocal critic, but his move to state politics may limit his ability to exert influence where it counts.

Lottoland’s managing director Luke Brill claims that over 600,000 Australians have registered with Lottoland, although the company doesn’t seem to be a big fan of corporate transparency.

Recently interviewed on the ABC, Brill justified his proposed 15% tax rate vs the 65% paid by lotteries:

“We’re not actually a lottery. We’re a sports bookmaker. We’re attracting people who have never walked into a newsagency and bought a lottery ticket… we believe we’re growing the market.”

As to why the company is based in notorious tax haven Gibraltar, Lottoland claims 'Gibraltar is the European "Silicon Valley" of the gambling industry', which is code for “we’re all as dodgy as one another”.

What’s the Problem?

Apart from those mentioned in the "Lottoland Gotta Go" ads (most notably the low tax rate and lack of forced charitable contributions), one of the biggest issues many critics have with Lottoland is that it encourages punters to play every day, rather than betting once a week on a "proper lottery". While this is really no different to the slew of gambling apps that allow you to bet on various types of racing every day, it’s possible that the significantly higher prize values may lure more people into gambling addiction.

Brill counters this claim (via ABC) by saying Lottoland is a “soft product” with “very very limited problem gambling”, yet “with 600,000 Australians playing, there’s clearly a demand for our product”.

Hmm…

Lottoland is also a bit of a bummer for newsagents, quite apart from making fun of them in their ads. From a certain angle, the funny thing here is that Lottoland’s ads portray their customers as absolute morons, unable to grasp the fact that Lottoland isn’t available in newsagents. The bigger problem is that the sale of lottery tickets provides a consistent revenue stream for newsagents — a struggling business, particularly in regional areas.

Wait, so Pauline Hanson is right?

Well, let’s not get too excited.

While the rise of Lottoland does reduce one revenue stream for newsagents, the problem with the business model runs far deeper. Circulations of both newspapers and magazines have been in freefall for the last dozen years, and the ready availability of online content reduces the reasons to visit a newsagent.

Sure, you still need to go to a newsagent to buy birthday cards and project supplies for kids, but the market is definitely in decline.

How long until competitors are offering the same thing?

No time at all.

William Hill have already entered into a joint venture with Lottoland called William Hill Planet Lottery.

In addition, local player CrownBet announced last month that they are planning to launch an online lottery called CrownLotto, echoing Lottoland’s claim that:

“Lottery wagering attracts a different demographic and will grow overall interest in lotteries, rather than competing with traditional physical lotteries.”

Interestingly, the Packer-backed CrownBet dumped the idea shortly afterwards, with many commentators suggesting the decision was based on the growing political backlash against Lottoland.

Is Gambling really a Problem?

Godfather author Mario Puzo once said

“Show me a gambler and I’ll show you a loser..."

While this assessment seems harsh, he sort of has a point. Losing goes hand in hand with gambling and the odds are always in favour of the house. I respect people’s right to gamble, but I often wonder if they really understand how statistics work.

Back in 2010, the Productivity Commission released a report saying that around 70% of Australians participated in some form of gambling over the past year, leading to cumulative losses of $19 billion. I’ll say that again: cumulative losses of $19 billion. This averages out to $1,500 per gambler, although “high intensity” punters can spend this much in a single hour.

The latest data from AC Nielsen suggests that 58% of Australians have gambled either in a casino, on lotteries, at the pub, at the TAB or Online in the last 12 months. Figures on problem gambling are a little harder to come by, although the aforementioned Productivity Commission report suggests around 115,000 Australians are classified as “problem gamblers” with a further 280,000 people at “moderate risk”.

Is Lottoland a scam?

Not in the traditional sense of the word. The fact that the company reportedly makes around $1 million per week but has only paid a tiny fraction of this out in prizes may bother some — but this is a gambling company, so aggressive pursuit of profits is standard operating practice. The odds of winning a massive jackpot are infinitesimally low, but it’s not totally outside the realms of possibility. But don’t get too excited about that $100 million jackpot, as the good folks at The Checkout point out;

In case you don’t have time to watch that video, let me recap what I see as the key point: while Lottoland may tout $100 million jackpots, in reality you won’t receive anywhere near that amount. Firstly, they subtract the amount that the actual winner pays in tax, reducing $100 million to around $65m for U.S. based lotteries. In the likely event that you want all your winnings at once rather than spread out over 30 years, this $65 million falls further to $39 million. Still not a bad sum to walk away with, but hardly the "hundred million dollar jackpot" claimed in the ads.

Some argue that the use of “Lotto” in their name is fundamentally misleading and this gambit may end up proving successful — particularly considering the power of the Real Lotteries lobby group. At the end of the day, however, the launch of near-identical competitors may mean that it’s already too late — betting on overseas lotteries is just another way that Australians can throw away money gambling.

If you enjoy gambling and can afford to lose, knock yourself out. But don’t believe for a moment that winning is easy.

Think for yourself.

John Turnbull works in advertising. Books by John are available on Amazon and Kindle, including supernatural thriller, Damnation’s Flame; action/romance, Reaper; black comedy, City Boy; and travel guidebook, Bar Trek: EuropeDamnation's Flame by John Turnbull is also available in paperback in the IA store HERE (free postage).

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This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia License

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