I thank the committee for inviting me today to discuss issues relating to the national lottery. I am joined today by Mr. Derek Donohoe, deputy regulator and head of audit and finance. The Office of the Regulator of the National Lottery was established in 2014 as an independent regulatory office under statute by legislation passed by the Oireachtas, the National Lottery Act 2013. The regulatory role includes to procure the holding of the national lottery; to monitor and enforce compliance by the operator with the National Lottery Act 2013 and the 2014 licence awarded to it; to manage and control the national lottery fund to ensure the amounts going to prizes, good causes and the operator are correctly accounted for; to consider for approval certain matters relating to the national lottery, including schemes for national lottery games proposed by the operator; and to exercise the enforcement rights of any trademark of the national lottery.
I took up the role of regulator in 2017, following a career in competition and consumer protection law and policy. I am trained in economics, law, and regulatory governance. Our aim is to ensure a safe, sustainable, properly run national lottery maximising funds for good causes. I am assisted in this role by nine staff who are experienced in law, accounting, auditing, psychology, research, communications and risk management. As Regulator of the National Lottery, I and my staff work to ensure that the national lottery is run with all due propriety and that the interests of all those who participate in the national lottery are protected. While those who purchase tickets for the national lottery do so in the full knowledge that it is a game of chance, as are all lotteries, my office seeks to provide them with the confidence that the national lottery is being run to the highest standards of probity and consumer protection and that their interests are safeguarded.
The regulator’s office oversees the holding of national lottery games in several ways. Any new game, or any change to an existing game, must be submitted by the national lottery operator to the regulator for approval prior to launching the game. The regulator’s office then determines whether the scheme for the game is compliant with parameters set out in the Act and licence. Only certain game types are permitted, certain information must be made available to players and the game must complete extensive testing requirements. Every proposal from the operator goes through a rigorous set of checks by the regulator, the head of audit and finance, our legal and compliance team, and the head of player protection and research. Our objectives, given to us by the Oireachtas, are to ensure: the game is run with all due propriety; that the interests of players are protected; that the long-term sustainability of the national lottery is safeguarded; and, after that, we consider the return to good causes generated.
Commercial considerations such as the price of a ticket or the prizes to be won are reserved to the operator under the Act and the licence. The financial model in the licence incentivises the operator to maximise returns for good causes in the design of its games. In each game, 65% of the proceeds, after prizes, go to good causes and, after retailer commission and the regulatory levy, the remainder goes to the operator.
When a game is approved, my office then continuously monitors the operator to ensure that it is operating the game in compliance with terms of the approval, and the Act and licence. My office performs numerous checks and reviews across a broad range of aspects of the game and areas of the operator’s business - from ticket sales through to draw operations and prize claims - using a risk-based approach. We vary our checks and interrogations across the entire operation in order that the operator is focused on being compliant in all matters. Some examples of the checks and balances in place are as follows. There are strict tests and process protocols in place for how each and every draw is conducted. An independent company performs statistical checks on ball sets. The appointment of this company is approved by my office. Each week we review sales figures for every national lottery game and perform checks to ensure the proceeds are correctly allocated to prizes, good causes, retailers and the operator. We receive regular reports from the operator on the speed of prize payments, on who has access to the secure areas and on online play patterns. My office has conducted proactive expert reviews of the quality and capacity of the operator’s IT and communications systems, including its cybersecurity, to check that it is capable of operating the national lottery games with all due propriety. We monitor the advertising and public relations of the operator to check that the content and location meet the relevant standards and take enforcement action where required.
With regard to the current unprecedented rollover of the lotto jackpot, I can assure the committee the lotto game is operating in line with the game rules and there are no regulatory issues. Independent observers from KPMG attend every lotto draw, although they are not on camera any more, to ensure the strict protocols in place are followed to the letter. The €19 million cap on the lotto jackpot is part of the game rules introduced in 2015. The cap allows prize moneys that ordinarily go to growing the jackpot to go instead to growing the value of the next highest prize won and this flow-down of prize money has been operating correctly. Since the lotto jackpot reached its cap on 29 September, 215 players have won much larger amounts than would ordinarily be available for matching five numbers or five numbers plus the bonus ball, 27 of these players won prizes ranging from almost a quarter of a million euro up to €1.25 million, and the remaining 188 won match five prizes ranging from €22,872 to €35,234.
Importantly, the split of the proceeds from lotto sales are, and have been, the same in every draw, regardless of the jackpot level. For every euro spent on lotto tickets 52 cent go into prizes, 31.2 cent is returned to good causes, 6 cent go to the retailer in commission and the remaining 10.8 cent go to the operator from which they pay the costs of operating the game.
The current extended period without a jackpot win is unusual in the history of the game but it is not unusual in the history of lotteries. Statistically unlikely events are part of the nature of games of chance and lotteries. It was also statistically unlikely that the lotto jackpot would be won three Saturdays in a row and yet this happened at the end of May and over the June bank holiday weekend earlier this year when players won jackpots totalling more than €11 million in three consecutive Saturday draws. Lotto sales have attained sustained high levels since the record-breaking jackpot was reached and good causes have benefited significantly from this. Approximately €46 million has been earned for good causes by lotto since the jackpot was last won.
I have provided further details to accompany my statement that I hope is helpful to the committee in providing an overview of the role of the regulator. I look forward to answering any questions the members may have.
