In March 1989, Kentucky opened for business with two instant games: Beginner's Luck, a $1 game with a $1,000 prize, and Kentucky Derby Dreamstakes, a $2 game based on the Kentucky Derby. Generally, proceeds from the KLC are distributed such that retailers earn about a 7% commission, approximately 60% is paid to players as prizes, less than 6% is spent on operating costs, and 28% is transferred to the State Treasury, benefiting state education primarily.
In October 1989, the KLC became the first US lottery to offer an online game, Lotto Kentucky. GTECH Corp., the KLC's online service provider, had installed 1,000 online terminals in preparation for the game.
In 1993, the KLC underwent a state audit prompted by its failure to make payments to the state consistently and on time. The audit found problematic financial practices and financial abuses. Gov. Jones called for the resignations of the board and four senior staff members, including the KLC President. The new board immediately put a new policy in place that dictated monthly transfer payments to the state by the KLC. The incident also created pressure to increase profits and, in turn, dividends to the state, which resulted in reduced prize payouts on Lotto Kentucky from 80% to 60%.
On 28 June 1998, the KLC launched a new online gaming system, replacing the one used since its opening. GTECH implemented the $50 million network and ISYS terminals. In October 2006, the KLC extended its online gaming contract with GTECH for another three years, projecting an upward savings of $9.4 million. In April 2010, after a comprehensive yearlong process, GTECH was selected to provide the KLC with new online game technology as part of a new seven-year contract starting June 29, 2011. The contract allowed for eight one-year extensions, for a total of 15 years. GTECH would provide online and instant systems, 3,000 online lottery terminals, self-service lottery vending machines, a new dual-communications network, and maintenance services.
In 2008, legislators approved a 2009/2010 state budget that required a return of 28% of lottery proceeds to the state. This first-ever mandate caused a major restructuring at the KLC, eliminating staff, minimally reducing cash prizes and retailer compensation, lowering liability limits for Pick 3 and Pick 4 drawings, and decreasing advertising expenses.
On 2 July 2013, KLC entered into a three-year contract extension with GTECH to continue to provide technology and related services to the Lottery through July 10, 2021. The legislature's Government Contract Review Committee also authorized a $635,000 contract amendment for GTECH to provide equipment and services for keno. Keno became available at restaurants, bars and bowling alleys in late 2013. The number of retail locations offering keno is expected to ultimately grow to 700. The KLC tried unsuccessfully to allow keno in 1989 and 2003; both attempts proved too controversial at the time, causing KLC to withdraw the game.
On 23 March 2013, to help a depleted state treasury, the KLC board voted to launch keno, a fast-paced bingo-style lottery game played on a keno terminal. State Treasurer Todd Hollenbach IV had recommended adding keno to the game mix. Lottery officials estimated contribution to the state would be $80 million annually after 10 years.
The KLC has been monitoring Illinois and Georgia, two states currently selling lottery tickets online, as it decides whether to offer it in Kentucky using a system called I-Lottery. It has been estimated that Internet games could produce $49 million for the state by 2023. The KLC is looking at offering sales on computers or mobile phones by 2015.
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