I was fascinated by an article I saw on Tuesday in Wired (Cracking the Scratch Lottery Code by Jonah Lehrer – ‘Easy Money’ in the print edition) addressing the lack of randomness in scratch lottery games, and especially in extended-play games. It’s an old story but a well-written article. TheÂ piece centres on a geological statistician named Mohan Srivastava in Toronto. A few years ago, Srivastava started noticing patterns in the Ontario Lottery and Gaming Corporation’s (OLG’s) Tic-Tac-Toe scratch tickets. By focusing only on the non-recurring numbers – the “singles” -Â from the unscratched cards, Srivastava was able to accurately identify winners approximatley 90% of the time. This wasn’t the only game that he was able to crack, either in Ontario or in other jurisdictions in North America.
At first, OLG wouldn’t even return Srivastava’s calls. They just assumed he was some crazy crank who thought he could beat the lottery. In what I thought was the funniest part of the article, he hit on a way to get their attention:
He bought 20 tic-tac-toe tickets and sorted them, unscratched, into piles of winners and losers. Then, he couriered the package to [Rob] Zufelt [a member of OLG's security team] along with the following note:
In the enclosed envelopes, I have sent you two groups of 10 TicTacToe tickets that I purchased from various outlets around Toronto in the past weekâ€¦ You go ahead and scratch off the cards. Maybe you can give one batch to your lottery ticket specialist. After youâ€™ve scratched them off, you should have a pretty solid sense for whether or not thereâ€™s something fishy here.
The package was sent at 10 am. Two hours later, he received a call from Zufelt. Srivastava had correctly predicted 19 out of the 20 tickets. The next day, the tic-tac-toe game was pulled from stores.
The article goes on to speculate (as doesÂ Srivastava) that, even with a considerably lower win-rate in other games that are still on the market, there are opportunities for organized crime to efficiently launder money through the use of several government-sponsored lotteries throughout North America.
I know this article didn’t target OLG, per se, but it caused me to reflect on the government’s lottery and gaming offerings here in Ontario.Â OLG is the provincially-owned body that operates and manages much legally-sanctioned gambling in the province, including lotteries, casinos, and slots at horse racing tracks. There are charitable groups, for example, that obtain narrow licences to conduct certain gamingÂ from the Alcohol and Gaming Commission, but as far as permanent lotteries and bricks-and-mortar casinos, OLG is theÂ only game in town. OLG is also the only body that will be sanctioned by the government to “conduct and manage” Internet gaming in Ontario as set out in the federal Criminal Code. (The province is targeting having an i-gaming offering ready by 2012.) OLG generates more than Cdn$6B in annual revenues,Â Cdn$2B in annual profit, and directly employs about 20,000 people in Ontario.
But are there more fundamental problems at OLG? Here’s a laundry list of someÂ news items in recent years:
- In 2007, Ontario’s ombudsman released a report (A Game of Trust) that accused the OLG of turning a blind eye to high win rates among lottery insiders – primarily lottery retailers and their families.
- In 2009, the provincial Finance Minister fired the former CEO for cause and accepted the resignations of OLG’s entire board of directors over an expenses scandal. This was followed up last year in a special report by the Auditor General of the province cautioning OLG employees to spend public monies more prudently.
- In 2010, the Ontario Provincial Police undertook a new investigation into insider wins at OLG and brought fresh charges as a result of that investigation.
Everyone acknowledges that OLG has made changes as a result of the various scandals. They have (eventually, in some cases) taken the allegations made against them seriously. I’mÂ not going to say that scandals don’t happen in the private gaming sector, especially in the Internet space, though I think that increased regulation would go a long way to preventing those types of scandals and offering transparency and accountability when they happen.
I’m generally in favour of free and open markets, so my instinct is to wonder if OLG, especially with its track record, should really be the agency charged with the conduct and management of much of the gambling that takes place in Ontario. Maybe gambling should be regulated by the province and operated by the private sector. This approach would require a fundamental shift in how gambling is seen from a public policy perspective here in Ontario. (This ideaÂ would require a change to the Criminal Code by Canada’s Parliament in the case of Internet gambling.) Maybe the public and our elected leaders aren’t ready for that kind of change.
ButÂ given what has happened at OLG over the years, policy makers must wonder if they have to do more. If people don’t trust the provincial lottery, they may not play it, or they mayÂ play it less. A lack of trust also bodes ill for Ontario’s Internet gaming offering, and especially poker. If people won’t play, then some kind ofÂ fundamental change might be OLG’s only option. Anything less may just put it on a course of gradual decline and marginalization. I doubt that’s what Ontario’s leaders want.