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CT Lottery begins CEO search at a crucial juncture

Glitter falls after Gov. Ned Lamont made his first sports bet in September 2021 at Foxwoods Resort Casino. The lottery badly trails Foxwoods and Mohegan Sun in sports-betting market share.
Mark Pazniokas
Connecticut Mirror
Glitter falls after Gov. Ned Lamont made his first sports bet in September 2021 at Foxwoods Resort Casino. The lottery badly trails Foxwoods and Mohegan Sun in sports-betting market share.

The Connecticut Lottery is beginning a search for a new chief executive in a time of tumult: A new point-of-sales system has wrongly invalidated a few winning tickets, its sports-betting vendor is quitting in the second year of a 10-year deal, and an iLottery promised years ago has yet to launch.

Greg Smith, who has been seen as a stabilizing presence since being hired as the lottery’s president in 2018, when the quasi-public agency was struggling with turnover, staff dissension and other issues that damaged its credibility at the state Capitol, intends to retire in 2024.

Board members say they have been aware of Smith’s plans for months, and “Discussion of Executive Compensation and Succession Planning” was added to their public agenda in June. But neither Smith nor the board appears to have made his plans public.

The omission, combined with the ticket-verification problem and other issues, invited speculation Thursday after the lottery’s board voted with little explanation to formally begin a search by assigning the task to its executive committee.

“The lottery obviously had a very difficult few years going back a little bit. And I have to say that things seemed to stabilize for a while,” said House Speaker Matt Ritter, D-Hartford. Now, he said, the confluence of issues prompts a question: “Was it really as stable as we thought?”

Rob Simmelkjaer, the chair of the board, clarified in a brief interview after the meeting’s conclusion Thursday that Smith remains the CEO and the vote did not signal an imminent departure.

“He’s going to retire at the end of 2024. It’s a planned retirement,” Simmelkjaer said Thursday. On Friday, Simmelkjaer said he had not seen a need for further public explanation at the meeting. “It was a technical thing. We had to make the executive committee be the search committee.”

Ritter said he intends to ask a legislative committee to seek further information about the ticket verification issue, but he was happy to hear that Smith is not departing immediately.

“It makes me feel better if it’s a planned transition than sort of an abrupt resignation or something like that,” Ritter said. “Yes, we need to understand what happened with this terminal thing, and it’s not good. But I give Greg credit. I think he’s done a pretty good job here the last couple of years.”

Smith declined comment, and Simmelkjaer referred further questions to Chris Davis, the former state representative who is the lottery’s government affairs director and acts as its spokesman. Davis said the vote Thursday might have seemed abrupt but came as no surprise to staff.

“It’s been a few months in the making,” Davis said. “So at this point, the board has been in discussions about the potential retirement of Greg Smith, and he did notify the board a few months ago of his intention to do so.”

The lottery recently acknowledged that a few tickets, perhaps as few as 18 out of millions sold, had been incorrectly read as invalid by the point-of-sale terminal system launched on May 21 by its new vendor, IGT. The vendor bills itself as “trusted partner to the world’s most successful lotteries.”

On July 31, the lottery wrote the first of two public notices — it would not be posted until the next day on the lottery’s web site –to gamblers about potential problems validating winning tickets:

“The Connecticut Lottery Corporation (CLC) is advising players that there is an issue with the lottery terminal response when Retailers are manually validating scratch tickets by keying in the ticket number. The lottery terminal response may say the ticket has been Previously Paid.”

On August 2, they broadened the warning by advising players to double check if they believe an uncashed winning lottery ticket in any game might have been invalidated as paid. Retailers manually validate tickets when the scanner cannot read them, Davis said.

Sen. Cathy Osten, D-Sprague, whose district is home to both of the state’s tribal casinos and closely monitors gambling issues, said Davis assured her the problem was limited.

“Relative to the tickets that were not read correctly, out of 18 million, there were 18 that were not read correctly, is my understanding,” Osten said.

That ticket snafu came two months after the lottery’s split with its sports-betting vendor.

Rush Street Interactive, the Illinois company chosen to operate the lottery’s online sport book, PlaySugarHouse.com, and the Connecticut Lottery jointly announced an end to their partnership on March 27, offering little reason for the split.

In an earnings call in May, the Hartford Business Journal reported, the company said it was not seeing “appropriate return on investment.”

The company, known as RSI, continues to run the sports book online and at nine retail locations. A 10th is scheduled to open next month at the XL Center in downtown Hartford, with a bar and views into the arena on game days.

The legislature authorized 15 locations. In April, the lottery reported that revenues were 29% below what had been anticipated had all 15 been open.

Davis said a successor had been tentatively chosen in June.

“We’re currently in negotiations with that vendor,” Davis said. “Unfortunately, I can’t really comment much more beyond that because of the procurement process. But we are moving along with finding a new vendor. And RSI has agreed to stay on through that transition.”

Penn National, which was among the bidders in 2021, has since established a Connecticut connection: a sports betting partnership with ESPN, the network based in Bristol. Davis would not comment on who is seeking to replace RSI. MGM Resorts, which competes with Connecticut casinos, also was a bidder in 2021.

Connecticut legalized sports betting in 2021 after negotiating new gambling compacts with the state’s two federally recognized tribes, Mashantucket Pequots and Mohegans, which operate Foxwoods Resort and Mohegan Sun. The tribes and lottery were the only entities allowed to operate sports books.

The lottery is by far the biggest gambling money maker for Connecticut, providing the state’s general fund with more than $410 million a year in each of the past three years.

By comparison, the tribes now produce less than $250 million a year, primarily under a longstanding slots-revenue sharing deal that outpaced lottery revenues before competing casinos opened in New York, Rhode Island and Massachusetts.

But the lottery has badly trailed the tribes in grabbing market share of sports betting, which produces relatively little for the state. On a monthly basis, the traditional lottery games produce about $34 million for the state, while the state’s monthly take from sports bookmaking is less than $1 million.

In June, the state’s cut of sports betting: $501,970 from Mohegan, $329,091 from Foxwoods and $84,631 from the lottery.

The tribes’ sport books are run by two top sports gambling companies: DraftKings for Foxwoods and FanDuel for Mohegan. Osten said the tribal casinos had lined up DraftKings and FanDuel even before the legalization law was passed.

“They knew what they were doing,” Osten said of her constituents, the two tribes. “They knew what they needed. And they got it done.”

Under the terms of the deal negotiated by the tribes, no casino-based sports book could do business under their brand name in Connecticut, a condition intended to keep the MGM brand out of the state, had they been selected.

MGM Resorts operates casinos in Springfield, Mass., and Yonkers, N.Y.

This story was originally published by The Connecticut Mirror.

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