Record Lottery Jackpots Will Have Massive Impact On Colorado

Written By Ian St. Clair on 01/29/2021 - Last Updated on January 31, 2021

When it comes to massive jackpots, it’s not just players who can win big.

It’s the Colorado Lottery, retailers, beneficiaries and even the state.

While no one in Colorado won either the Powerball or Mega Millions jackpots last Friday, reaching a record $1.736 billion in combined jackpots over that three-week run will pay off for the foreseeable future.

As the Colorado Lottery recently announced, during that run from Jan. 2-22 leading up to the winning of the Mega Millions, the Colorado Lottery sold $33.6 million in Powerball and Mega Millions tickets alone. That is more than a 526% increase from the same time last year.

Tom Seaver, director of the Colorado Lottery, told PlayColorado:

“Why that’s really important is, it’s not just great news for us, but mainly it’s great news for our beneficiaries.”

Who are the Colorado Lottery beneficiaries?

A portion of lottery sale proceeds help preserve and protect Colorado’s parks, trails, and open spaces. So the beneficiaries are Great Outdoors Colorado, the Conservation Trust Fund, and Colorado Parks and Wildlife.

In terms of the breakdown of payouts to those beneficiaries for that three-week run, the Colorado Lottery notes in its release:

While the amount of every dollar spent that goes to lottery beneficiaries averages 23 cents across all games, for national jackpot games 39 cents of every dollar spent goes back to lottery proceeds partners.

So in that three-week run, the release notes $13.1 million will go back to lottery beneficiaries.

Of that, according to the release:

  • Great Outdoors Colorado receives 50% or $6.5 million
  • Conservation Trust Fund gets 10% or $1.3 million
  • Colorado Parks and Wildlife receives 40% or $5.2 million

That three-week run was also massive for the retailers.

The release notes that grocery and convenience stores and others make up the nearly 3,000 CO Lottery retailers.

Retailers make a 6% selling commission on every ticket they sell, and 1% commission on winning tickets of $599 or less that they validate.

So for that jackpot run, retailers received a boost of $2 million on lottery ticket sales alone. That is a more than 700% combined increase over the same time period last year.

Cap on lottery beneficiary proceeds

There’s also a constitutional proceeds cap for those beneficiaries.

When the Colorado Lottery hits that cap, the spillover proceeds go to Building Excellent Schools Today (BEST).

As Seaver said:

“I think we have a good chance to go above the cap. We aren’t going to hit it just based on one really good month. In the past, we’ve hit it as early as late April or early May. But that would be quite an extraordinary year. So I’m hopeful that we’ll hit it early.”

Seaver added that the cap limit hasn’t been decided, so that number isn’t known yet.

“The cap is adjusted based on the consumer price index. So every year it’s a little bit different. I don’t know if they’ve set the cap for this year because they have to go process the fiscal year 2020 consumer price index. It’s not going to be a big increase this year because prices were pretty stagnant due to COVID.”

Impact of COVID-19 on the Colorado Lottery

Speaking of COVID-19, you can’t talk about anything without highlighting the impact it’s had. The Colorado Lottery is no different.

According to Seaver:

“When we were first going into the stay-at-home order, where people were only really allowed to go out for essentials and so forth, we took a really big hit. We went down about 20 to 25% during the lockdown period. But after people were able to go back out and shop again, we rebounded pretty nicely.”

So the fact the Colorado Lottery bounced back to have its second-best year in history is pretty remarkable.

For the fiscal year that ended on June 30, 2020, the lottery recorded $658.8 million in sales. This is on the heels of $681 million in 2019, the highest amount ever in Colorado Lottery history.

As Seaver said:

“That was surprising to me. I thought it would take longer for the market to recover. But when you think about it, the majority of our stores are convenience stores or grocery stores, so those are essential businesses. And they’ve been open pretty much all the time. So, for us, we benefited from the fact our retail network was able to stay open and still accommodate our players.

Future of the Colorado Lottery

With this jackpot run behind us, Seaver and the Colorado Lottery are looking to the future.

“The Colorado Lottery has been really slow to adopt industry-best practices and change products and introduce new products. We’ve kind of not been a leader in that category, and I’d like to see us be more assertive in the marketplace with new games.

“One thing we did this past year was revamp the Colorado Lotto game that had been essentially the same exact product for 30 years. So we went in and changed the matrix, made it a little bit easier to win, added a built-in multiplier, and added what’s called a plus feature, which is quite a bit like the power play-type feature that you can get in the national games. And that’s been a huge success for us.”

One of the ways the lottery will do that is through scratch games.

As Seaver said:

“We’ve been pretty assertive in development of scratch games. Our scratch games are really growing stronger all of the time. We are now trying to catch up with most of the states who, usually the average is about 46 games at once, that most lotteries sell. And, of course, not all retailers carry all games. But up until about a year ago, we were only selling 24 games at once, so we were just about half of what the national average is.

“Today, I’d say we’re into the low 30s. The average number available is about 32 games. Choice is king with consumers. You want to give them as many choices as you can. So we’re trying to be consumer-driven and, like I said, really improve our game lineup.”

Could Colorado Lottery go online?

When you contemplate the future, the topic of online lotto is always at the forefront.

Is that an area the Colorado Lottery could jump into?

Colorado users do have the option to use Jackpocket, a third-party lottery app that allows them to play their favorite state lotteries online.

According to Seaver:

“You know, I wouldn’t say never. But there are a lot of changes with online lottery. One of the biggest is that most of the apps that you can use, for example, that do sports betting, you can use a credit card and establish an account that way. Colorado law prohibits the purchase of lottery tickets with a credit card, so that would be a considerable hurdle. But even beyond that, there really aren’t any lotteries that we look at that have really figured out how to make a really good income from online lottery. Most of them have really high payouts, and that’s not what we’re looking at.

“We’re trying to create games that have good payouts but also good returns to our beneficiaries. Some of the online games that are available now in the industry have 80-85% payouts, and that’s just really high compared to lottery games. So I don’t think we’re there.

“I will say that Jackpocket has done a great job marketing and selling lotto games in Colorado through their app. And people love that. Obviously consumers love to be able to buy things online. That’s like the understatement of the century. But we have some pretty serious restrictions around that, and I don’t think that’s going to be something that we’re pursuing any time soon.”

Intersection between the lottery and sports betting

One fascinating intersection is the Colorado Lottery and Colorado sports betting.

Since they both fall into the “gaming” category, one might think they could play off each other and boost enthusiasm for the other.

As Seaver said:

“It’s a really good question. And, in fact, some of our next tracking research will ask for peoples’ cross-play habits. Whether they’re doing sports betting and lottery. Or doing exclusively one or the other. It’s really interesting because sports betting was ruled to be a game of skill and a game of chance. So that meant, for one thing, the lottery was not going to be the one to run sports betting. But, also, it just appeals to a different kind of mentality.

“Players that feel like they can outsmart the game or beat the game, sports betting is much more in line with that mindset. While I do think there are people who play everything available — including lottery, including sports betting, including going up into the mountains to the casinos — I think there are also groups of players that are fairly exclusive to one type of product or another. We’ll see, though. It’s a really good question. I think our research is going to help us understand that a little better.”

Lottery tries to sustain some of the jackpot players

When a magical run happens in life, you try to sustain it for as long as possible.

That’s a little tougher for a lottery when those massive jackpots cash out and the dream of being on an episode of HGTV’s “My Lottery Dream Home” disappears.

For now, the Colorado Lottery is hopeful that some of those new players stick around.

Seaver said:

“It definitely dies down. The question is: how many people will have gotten into the big jackpot run and enjoyed it. The anticipation and the fantasy of ‘What would I do if I won that much money?’ Some of them are going to stick. Some of them probably hadn’t played before but did for the big jackpot. Some of them will stick with the game because they enjoyed it. But a lot of them will drop off and we won’t see them again until the jackpot is $300 or $400 million. It’s a little bit of a mixed bag.

“Obviously from a consumer standpoint, when you do something that can generate a high degree of trial, you are always happy about that because some of those players are going to stick around. Time will tell. Now that the two big jackpots have been won, our sales in the drawings following have been good. But we’ll see how much it sustains.”

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Ian St. Clair

Ian is an award-winning sports journalist and a University of Northern Colorado graduate. He’s a Colorado native and has over a decade of experience covering college and professional athletics. He broke into the gambling industry right as Colorado launched legal sports betting in 2020. Ian now manages the sites for some of the biggest gambling markets in North America and is an analyst for PlayColorado.

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