Hoosier Lottery often pulls plug on high-dollar scratch-off games before all prizes can be won

Apr 6, 2018, 1:48 pm (31 comments)

Indiana Lottery

Brittany Mowell and her husband purchase Hoosier Lottery scratch-off tickets a couple of times a week in hopes they'll win big.

The Indianapolis woman said she felt cheated out of that dream once she learned the lottery was pulling certain high-dollar scratch-off games off the market before all the big-money prizes could be won and paid out.

It felt so unfair she questioned whether such a move was legal.

"That really ticks me off," Mowell said, "and I feel ripped off."

Not only is the practice legal, but it is happening with much greater frequency since Indiana hired a private operator — IGT Indiana (formerly GTECH) — to run nearly all of the operations of the Hoosier Lottery.

More than 51 percent of high prize scratch-off game tickets worth more than $1 million have gone unclaimed in the five years since IGT took over. That's because the company pulled the plug on those games before about half of the tickets could be sold.

In all, Hoosier Lottery players have lost out on $28.7 million worth of high-dollar scratch-off prizes since IGT signed the contract in 2012.

Similarly-sized lotteries end some games early, but not nearly at Indiana's rate. In four states considered peers by the Hoosier Lottery, up to 20 percent of high-dollar prizes aren't awarded. In Wisconsin, no high prizes were unclaimed.

Prior to IGT's takeover of the Hoosier Lottery, 10 percent of high-dollar scratch-off prizes weren't awarded.

Indiana lottery officials defended the increased rate of unsold prize-winning tickets, saying the timing of ending a game is all based on sales performance and player demand, not on how many top prizes have been claimed.

They also argue that the odds on the tickets are still the same, regardless of how many tickets are sold.

"As long as a game is open, the overall odds of winning a prize remain the same," the Hoosier Lottery said in a statement. "Our game closing statement is printed on the back of our tickets along with odds statement(s). Additionally players can see how many top prizes are remaining on every open game on the lottery website as well as game rules for each game."

Phillip Stark, a statistics professor at the University of California-Berkeley, who studies lottery odds, disagreed with the lottery's interpretation of a player's odds.

"Conditional on the fact that the prizes have not been claimed after some fraction of tickets has been sold, the odds for future buyers would have been higher," Stark said. 

He also noted that truncating games before winning tickets have been sold saves the lottery money. And IGT's contract with the state has put it under pressure to boost revenues.

In its original contract, IGT was supposed to bring in a net income of $410 million by 2017, but that goal was slashed to $290 million in an amended contract, after IGT repeatedly fell short of its goals. 

While the contractor is failing to meet state goals, it is also shorting customers, some say.

From a player's perspective, all lotteries are inherently unfair because of the low odds of winning, said John Kindt, who teaches economics at the University of Illinois. The large number of unclaimed prizes should be of greater concern, he added.

"I think the public should be suspicious of anything the lottery is doing when there are so many unclaimed prizes and those administrating the lottery aren't suffering at all even though they haven't performed up to satisfaction," Kindt said.

Deja vu

For those in the lottery industry, IGT's approach in Indiana is a familiar one.

A related company — Northstar Lottery Group, whose majority owner is GTECH — operated the Illinois Lottery and was criticized for not awarding 40 percent of scratch-off grand prizes.

The relationship between Illinois and Northstar quickly soured as the private consortium failed to deliver the revenue stream promised in its bid. Eventually, Illinois ditched the company.

Unlike Illinois, the Hoosier Lottery has no plans to end its contract early, despite IGT Indiana's inability to reach the revenue amounts promised in its bid.

"It's no surprise that Indiana, by ignoring what happened in Illinois, is starting down the same path," Kindt said.

After an investigation revealed the Illinois Lottery's rate of unclaimed high-dollar prizes in December 2016, the Hoosier Lottery appears not to have made any changes in its decisions to end certain games early.

For example, the $25-a-ticket game called "20 Years of Cash" and $5 game "$5,000 A MONTH 20 YEARS OF CASH" were both ended in June 2017, with two of their three grand prizes unclaimed.

Similarly the $20 "HOT 5s HOT STREAK" was pulled from shelves in February 2017, with only 41 percent of tickets sold and none of the three $2.5 million prizes claimed.

That game, the Hoosier Lottery said, ended because a second-chance drawing was already planned. In second-chance drawings, those who bought a non-winning scratch-off ticket can still be entered to win a high-dollar prize. 

The Hoosier Lottery said high-prize scratch-off games only offer a small look into the Hoosier Lottery operations. In addition, it noted that when second-chance drawings are taken into account, the rate of unclaimed high-dollar prizes drops to 34 percent.

"By focusing only on select games, and then on select prize tiers within those games, your readers may get a false impression of the entire Hoosier Lottery," Dennis Rosebrough, spokesman for the Hoosier Lottery, said in an email. "Since FY2010 the Hoosier Lottery has launched over 400 different Scratch-off games."

The rate of unclaimed prizes on all instant games, not just the high prize ones, is largely unchanged since the Hoosier Lottery was privatized, lottery officials said. About 37 percent of prizes went unclaimed overall after privatization, compared to 27 percent prior to privatization.

Hoosier Lottery officials largely consider the operation's semi-privatization, or "sourcing agreement" as they call it, a success, despite IGT's inability to hit the lofty revenue goals set in the contractor's bid. In 2017, the lottery brought in just under $293 million which is $117 million less than they agreed to in the original contract before it was rewritten. 

The Hoosier Lottery said sales and revenue increased by 40 percent since fiscal year 2013, while instant game sales increased by 60 percent.

"Applying innovative product development and consumer marketing principles — a skill set provided by IGT Indiana — has proven to be very successful," lottery officials said in a written statement. "Instant sales continue to grow as our players enjoy the variety of games and price point options available to them."

'Imagine That'

Soon after the Hoosier Lottery was privatized, it poured money into advertising campaigns. The $11.7 million advertising budget in Fiscal Year 2012 jumped to $21.3 million in Fiscal Year 2013 after IGT was hired.

With that money, the Hoosier Lottery started an "Imagine That" campaign focused on what people said they would do with lottery winnings. Previously, the lottery had taken a more conservative approach to advertising, emphasizing what the lottery's revenue funded.

At the time, some people questioned whether the new advertisements and slogan presented an "unrealistic" dream by not including how slim the odds were of actually winning. For example, Hoosiers had about a one in 962,000 chance of winning the top prize in "50X THE MONEY," which ended in 2015 with two of the three high prizes unclaimed.

The odds on more recent high-prize games make it even more challenging to win. On the "$5,000 A MONTH 20YEARS OF CASH" game that ended in 2017, Hoosiers had a one in 2.9 million chance of winning the grand prize.

In some of its advertisements, the Hoosier Lottery hyped the perks of winning — only to cut ticket sales off early and not award many of the grand prizes.

Les Bernal, the national director of Stop Predatory Gambling, called it a scam.

"It's encouraging people to play games that are designed to beat them and they don't even offer (all of the prizes)," Bernal said. "...The Indiana lottery doesn't market itself as,' We're only going to pay out half the prizes.'"

Hoosier Lottery officials said their strategy doesn't involve limiting prizes. They said sales performance and player demand determine when games end.

"Much like an out-of-style product occupying valuable shelf space in a store, where the demand for that product no longer warrants the space it is occupying, stores remove it to make for a new product that customers want to purchase," lottery officials said in a statement. "Much the same, we need to remove an underperforming game from the valuable counter and bin space... at the retailer and replace it with another game that retailers can sell and players are looking to purchase."

On average, the Hoosier Lottery started printing 3.6 times as many tickets for each high-dollar game after the lottery was privatized, meaning the demand would have had to be that much higher or games would need to run longer in order for the percentage of tickets sold not to drop.

But the lottery chose to end many of those games early, leaving 51 percent of high-dollar scratch-off prizes unclaimed. "Peer" states surveyed have significantly lower unclaimed rates:

  • In Colorado, 13 percent of high prizes were unclaimed over the last 10 years.
  • In Washington, 18.4 percent of high prizes were unclaimed between 2005 and 2016.
  • In North Carolina, 13.5 percent of high prizes were unclaimed between Fiscal Years 2014-2017.
  • In Wisconsin, no high prizes were unclaimed in the last five years.

None of those states' rates included the $1 million prizes offered in second-chance drawings.

A representative from the Colorado Lottery said they were "fearful" when one of their $50 ticket games — their highest priced game — ended with one unclaimed grand prize left.

"We were all kind of in a panic," spokeswoman Kelly Tabor said.

While he said he didn't know the specific payout rates, David Brunori, a state tax expert who teaches at George Washington University, said most lotteries are starting to cut back on grand prizes. He didn't find the fact that Indiana had decreased their payout rates on high prizes particularly concerning. 

"That's usually good for the bottom line in the short run," Brunori said. "In the long run, making it harder to win might make people less excited to play."

For the most part, most people won't be incredibly angry unless it's a particularly nefarious situation, he argued.

So far, it appears that many Hoosier Lottery customers either haven't noticed or don't care.

Sales on instant tickets have steadily gone up year after year. In fiscal year 2017, sales were 1.6 times higher than they were in fiscal year 2012. The Hoosier Lottery also has given out more prizes in general, as instant ticket sales have increased.

Indiana recently became one of only 4 states to offer a $50 scratch-off ticket, which critics fear could exacerbate what they already consider to be a regressive tax on the poor. Sarah Taylor, executive director of the Hoosier Lottery, said the lottery refrained from marketing those tickets because it wouldn't be "socially responsible."

If the Hoosier Lottery ends that game early, Hoosiers could stand to lose out on some of the three $1 million prizes and two $5 million prizes — the biggest prize offered at one time on a scratch-off since privatization. (One $1 million prize has already been claimed.)

For players like Mowell, the discovery that the Hoosier Lottery has been ending games early is a game changer. She likely won't keep purchasing high-prize instant scratch off games.

"I think it's ridiculous," Mowell said. "I better get into the Powerball and start picking my own numbers."

Indianapolis Star

Comments

music*'s avatarmusic*

I am sure that Power Ball and Mega Millions welcomes Brittany Mowell and her husband. I do not play scratch-offs except when they are gifts to me. 

 Hoosiers will vote with their dollars and feet after they learn these facts in this post.

 I feel for the players who are poor and might not be able to find out the truth.

Angry 

paymentplan-man

Quote: Originally posted by music* on Apr 6, 2018

I am sure that Power Ball and Mega Millions welcomes Brittany Mowell and her husband. I do not play scratch-offs except when they are gifts to me. 

 Hoosiers will vote with their dollars and feet after they learn these facts in this post.

 I feel for the players who are poor and might not be able to find out the truth.

Angry 

 Yeah I don't play scratch offs either.  And no one I know is going to gift me one so it's even less likely for me to play them.

JADELottery's avatarJADELottery

Scratch-Off?

Sounds more like a Rip-Off than a Scratch-Off.

We only played one Scratcher here in MN, Pac-Man... because it's Pac-Man.

However, Beyond that, we rarely play them.

paymentplan-man

Quote: Originally posted by JADELottery on Apr 6, 2018

Scratch-Off?

Sounds more like a Rip-Off than a Scratch-Off.

We only played one Scratcher here in MN, Pac-Man... because it's Pac-Man.

However, Beyond that, we rarely play them.

 Pac-Man lol sounds like a very cool game to play.

Bleudog101

IDK about others, but this article, even though it will never affect me, really ticks me off.  To say it is unfair is an understatement.

 

Seriously doubt the Indiana lottery will publicize this, perhaps the media will get a whiff. 

 

Right up there with you music*, it'll affect the poor and disenfranchised types of players who will never know about this.

Saylorgirl's avatarSaylorgirl

Quote: Originally posted by music* on Apr 6, 2018

I am sure that Power Ball and Mega Millions welcomes Brittany Mowell and her husband. I do not play scratch-offs except when they are gifts to me. 

 Hoosiers will vote with their dollars and feet after they learn these facts in this post.

 I feel for the players who are poor and might not be able to find out the truth.

Angry 

Way to go Indiana!!  I for one am very happy I very rarely play the scratch offs.  I stick only with Powerball and Mega.  Sounds like a total rip off to the players.

Unfortunately, there are too many important issues to vote on so this won't enter into my decision this year in my voting.  I am sure they will get away with it.  It is written in black and white on the scratch offs that they can terminate the game at anytime.

wizeguy's avatarwizeguy

Don't expect me to play any IN scratchers!

noise-gate

This is classic bait & switch, it is also BS Don’t start a game and then pull the rug out from under the players who are “ hoping” to win the top prize.

IDK, but l seriously doubt CA does that, why do l say so? -cause our lottery was put on the ballot way back & got the “ green light “ from the voters to go ahead with the process without tax payers money. Since it was started to “ supplement education” costs, it has done just so.No lottery revenues in CA goes into a General fund, thank heavens for that. It’s hard enough winning at all, without some outfit pulling these shenanigans. Those folks ought to boycott those games altogether. Will they? we will have to wait and see.

grwurston's avatargrwurston

They hold back the big winning prizes until the game has been out for awhile and lost it's interest. Then they cancel it based on "poor sales". Sounds like a winner for the state. And bend over players.   

paymentplan-man

Quote: Originally posted by grwurston on Apr 6, 2018

They hold back the big winning prizes until the game has been out for awhile and lost it's interest. Then they cancel it based on "poor sales". Sounds like a winner for the state. And bend over players.   

 Of course it sounds like a winner for the state. The purpose of any lottery is to generate revenue for the state. Which means any decision they make is going to be based off of what can increase our (the states) pockets.

Artist77's avatarArtist77

Another reason why I never buy scratchers.

ckrakowski

"More than 51 percent of high prize scratch-off game tickets worth more than $1 million have gone unclaimed in the five years since IGT took over.

Prior to IGT's takeover of the Hoosier Lottery, 10 percent of high-dollar scratch-off prizes weren't awarded."

 

Wow from 10% to 51%.

 

"That's because the company pulled the plug on those games before about half of the tickets could be sold.

Indiana lottery officials defended the increased rate of unsold prize-winning tickets, saying the timing of ending a game is all based on sales performance and player demand"

 

How can you know what player demand and sales performance if you decide to end the game before half the tickets are sold.

 

"In all, Hoosier Lottery players have lost out on $28.7 million worth of high-dollar scratch-off prizes since IGT signed the contract in 2012."

 

Now imagine how much tax money you guys have missed out on.

 

"In four states considered peers by the Hoosier Lottery

"Peer" states surveyed have significantly lower unclaimed rates:

  • In Colorado, 13 percent of high prizes were unclaimed over the last 10 years."

For the love of all that is good indiana do not consider colorado a peer lottery. Colorado is a state that is leading the nation in doing things right while you are leading the nation in doing things wrong.

 

"They also argue that the odds on the tickets are still the same, regardless of how many tickets are sold."

That is not how it works. If you do not sell all of the tickets the odds change.

 

"As long as a game is open, the overall odds of winning a prize remain the same," the Hoosier Lottery said in a statement."

 

Yea but when you close the game early the odds change significantly.

 

"Additionally players can see how many top prizes are remaining on every open game on the lottery website"

 

So??? Just because it shows they are remaining does not mean they can still be won.

 

"He also noted that truncating games before winning tickets have been sold saves the lottery money. And IGT's contract with the state has put it under pressure to boost revenues."

 

Well let us say there are 5 $10 million top prizes and the game ends before they are claimed. Well not only did the lottery save $50 million dollars they can also say they have brought in $50 million more in revenue.

 

"In its original contract, IGT was supposed to bring in a net income of $410 million by 2017, but that goal was slashed to $290 million in an amended contract, after IGT repeatedly fell short of its goals. "

 

Makes you feel so confident in the lottery doesn't it. We can not bring in the money we said we woould so let us just slash it and end games early.

 

"While the contractor is failing to meet state goals, it is also shorting customers, some say."

 

No s--t

"A related company — Northstar Lottery Group, whose majority owner is GTECH — operated the Illinois Lottery and was criticized for not awarding 40 percent of scratch-off grand prizes.

The relationship between Illinois and Northstar quickly soured as the private consortium failed to deliver the revenue stream promised in its bid. Eventually, Illinois ditched the company.

Unlike Illinois, the Hoosier Lottery has no plans to end its contract early, despite IGT Indiana's inability to reach the revenue amounts promised in its bid."

 

So apparently indiana likes to lose money.

 

"It's no surprise that Indiana, by ignoring what happened in Illinois, is starting down the same path"

 

And when they lose too much money and are forced to get rid of the company they will claim they had no idea it was like this and if they had known they would have done something sooner.

 

"Similarly the $20 "HOT 5s HOT STREAK" was pulled from shelves in February 2017, with only 41 percent of tickets sold and none of the three $2.5 million prizes claimed.

That game, the Hoosier Lottery said, ended because a second-chance drawing was already planned."

 

So are they deliberately planning second chance drawings before the top prizes are sold?

 

"Hoosier Lottery officials largely consider the operation's semi-privatization, or "sourcing agreement" as they call it, a success, despite IGT's inability to hit the lofty revenue goals set in the contractor's bid. In 2017, the lottery brought in just under $293 million which is $117 million less than they agreed to in the original contract before it was rewritten."

 

So you are ok with losing money. Instead of getting rid of them when they did not bring in the money they said they would you decided to hurt the people of the state by rewriting the contract to bring in less money.

 

"Soon after the Hoosier Lottery was privatized, it poured money into advertising campaigns. The $11.7 million advertising budget in Fiscal Year 2012 jumped to $21.3 million in Fiscal Year 2013 after IGT was hired."

 

So it looks like it was already losing money from the start.

 

"With that money, the Hoosier Lottery started an "Imagine That" campaign focused on what people said they would do with lottery winnings. Previously, the lottery had taken a more conservative approach to advertising, emphasizing what the lottery's revenue funded."

 

Yes let us focus on what people would do with the money instead of where the money goes. This is just stupid.

 

"At the time, some people questioned whether the new advertisements and slogan presented an "unrealistic" dream by not including how slim the odds were of actually winning. For example, Hoosiers had about a one in 962,000 chance of winning the top prize in "50X THE MONEY," which ended in 2015 with two of the three high prizes unclaimed."

 

While the true odds of winning were one in never going to happen.

 

"The odds on more recent high-prize games make it even more challenging to win. On the "$5,000 A MONTH 20YEARS OF CASH" game that ended in 2017, Hoosiers had a one in 2.9 million chance of winning the grand prize."

 

While the true odds of winning are one in never going to happen.

 

"In some of its advertisements, the Hoosier Lottery hyped the perks of winning — only to cut ticket sales off early and not award many of the grand prizes."

 

Also known as a waste of money.

 

"Hoosier Lottery officials said their strategy doesn't involve limiting prizes."

 

But your strategy is to end games before all prizes are awarded which is exactly limiting prizes.

 

"They said sales performance and player demand determine when games end."

 

How can you have player demand when you end the games early? Of course they then use the fact no one wants to play as fact that they need to end the game.

 

"Much like an out-of-style product occupying valuable shelf space in a store, where the demand for that product no longer warrants the space it is occupying, stores remove it to make for a new product that customers want to purchase"

 

Yea but they do not do it before half of them are sold.

 

"Much the same, we need to remove an underperforming game from the valuable counter and bin space... at the retailer and replace it with another game that retailers can sell and players are looking to purchase."

 

It is only under performing because you are ending the game early. Players are not looking to purchase any more because they know you will end it before the prizes are awarded.

 

"On average, the Hoosier Lottery started printing 3.6 times as many tickets for each high-dollar game after the lottery was privatized, meaning the demand would have had to be that much higher or games would need to run longer in order for the percentage of tickets sold not to drop."

 

How can there be demand when the players know it will be ended early?

 

"But the lottery chose to end many of those games early, leaving 51 percent of high-dollar scratch-off prizes unclaimed."

 

So print 3.6 times higher and destroy 51% of them.  The lottery wasting your tax money again.

 

"In Colorado, 13 percent of high prizes were unclaimed over the last 10 years.

 

A representative from the Colorado Lottery said they were "fearful" when one of their $50 ticket games — their highest priced game — ended with one unclaimed grand prize left.

"We were all kind of in a panic," spokeswoman Kelly Tabor said."

 

See this is how it should happen. They want the higher prizes to be claimed and they do not end the game early the let the game run its course.

 

"Indiana recently became one of only 4 states to offer a $50 scratch-off ticket, which critics fear could exacerbate what they already consider to be a regressive tax on the poor. Sarah Taylor, executive director of the Hoosier Lottery, said the lottery refrained from marketing those tickets because it wouldn't be "socially responsible.""

 

So it is not socially responsible to marketed the tickets but it is socially responsible to print them. 

 

"If the Hoosier Lottery ends that game early, Hoosiers could stand to lose out on some of the three $1 million prizes and two $5 million prizes — the biggest prize offered at one time on a scratch-off since privatization."

 

Not if they do it early but when they do it early and they will.

 

"For players like Mowell, the discovery that the Hoosier Lottery has been ending games early is a game changer. She likely won't keep purchasing high-prize instant scratch off games.

"I think it's ridiculous," Mowell said. "I better get into the Powerball and start picking my own numbers.""

 

Good for her. Well the indiana lottery just lost a player. 

 

 

Well indiana if you do not like losing millions of dollars than you need to vote these clowns out.

 

This company was hired by the people you elected. So in a way you have no one else to blame for the losing of money but yourselves.

 

 

 

 

 

 

 

 

"

 

 

 

 

 

"

ckrakowski

Quote: Originally posted by Saylorgirl on Apr 6, 2018

Way to go Indiana!!  I for one am very happy I very rarely play the scratch offs.  I stick only with Powerball and Mega.  Sounds like a total rip off to the players.

Unfortunately, there are too many important issues to vote on so this won't enter into my decision this year in my voting.  I am sure they will get away with it.  It is written in black and white on the scratch offs that they can terminate the game at anytime.

So you play the scratchers even though it sounds to you like a total ripoff which it is.

 

So even though you know this is an important issue and you should vote on it you will not.

 

Of course they will get away with it because of people like you. People who know something needs to be done but do not want to actually do anything to get it done and expect others to do it for them.

 

We have a word for people like you and that word is hypocrite. 

TemplarLoyalty's avatarTemplarLoyalty

They have to know when the winners are printed so of course they know when to pull the game. Otherwise, how would they know if winning tickets were printed at all? I lived in Indiana for 20 years and played religiously, mostly for fun. But what IGT did and continues to do, should be illegal.

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