Talking to someone who knows a bit about gamblers today and they pointed out that it is the massive jackpots Lottoland offers that worry them the most. We were talking about as I got a new pitch by email today:
Given their betting and online-only model it is easy for them to pitch and sell.
I wonder what will happen if a customer wins the big one! On the Lottoland website they state “With a €100 million set aside that will be released by KPMG when major jackpots are won.” I am not sure how that will cover US$650mill and I can’t wait to see how their insurers go with the leftover….
If I was working at the insurance company I would be using every loophole and avenue possible to not payout an amount like this, it’s business. And if I was a customer of Lottoland I would make sure all of my t’s are crossed and i’s dotted due to the massive list of conditions. No commercial connection to Lottoland or any of their commercial partners. Don’t be a member of Manly Leagues or they will use that against you!
It’s an interesting consideration Chris. I also wonder if they apply the same rules that would apply in the US. The US$650M prize is never paid out at full value because of taxes etc.
Hmm, as I typed that I thought, let’s do a search. I found this:
How are the US Lottery MegaMillions and PowerBall Jackpots paid out?
We replicate the pay-out structure of the Official Lotteries in America and therefore a 35% reduction is made in the total US Jackpots to reflect the tax an Official Lottery winner would pay.
The MegaMillions and PowerBall Jackpots can be paid out in the 30 year installments, with one annual payment being made for the 30 year term.
The level of payments are calculated such that the payments rise 4% from year to year until the full sum has been paid out.
Payment can also be offered as a lump sum and will be paid out at 60% of the total value of the annuity amount.
Lottoland uses hedging to reduce risk. They know the numbers everyone has betted on before the draw, so they can place bets or purchase tickets to reduce risk. That and using catastrophe bonds (insurance) for the slim chance of massive payouts.
“Through complex hedging measures and instruments (both financial instruments and the purchase of actual entries into the underlying lotteries), EU Lotto guarantees the payout of all jackpots and Winnings offered on the Website.” Lottoland website
They also get a premium for bets on overseas draws. For example a US Powerball 1 game entry in the US is $US 2, at current currency conversion that’s about $AU 2.70. A US Powerball 1 game entry through Lottoland is $AU 5. Even with currency risk of 10% that’s $AU 2 premium. The Oz Powerball carries a $AU 1.50 premium if purchased in Euro from overseas.
Theoretically they could buy every game someone has bet on and still come out well ahead. It’s a bookmakers dream there aren’t any unknown variables like sports or horse racing and the odds are fixed for each draw every time.
I wouldn’t be surprised if Lottoland isn’t Tatts single biggest customer.