Recently the Dutch state-owned national lottery (known as De Staatslotterij) has become the subject of a controversy. Apparently the lottery was tipped in advance that gaming authorities would visit the lottery in order to investigate possible manipulation of the lottery.
The problem of this situation is as follows. At one side the government owns the most important lottery of the country – in fact the government has a very restrictive policy regarding licensing lotteries – which generates about 100 million euros in revenue for the treasury. While on the other side the government is charged with supervising the gaming industry, which is to great extent run by the government.
It is obvious that there is a huge conflict of interests here. Given the huge financial interests of the treasury, we should not be surprised that the government has little or no incentive for supervision.
Though in theory it would be sufficient to place the organization and supervision of the national lottery in separate institution, the reality is much harder. After all who appoint the employees of both institutions? Yes, the government.
The Netherlands is not the only country with a state-owned national lottery, many other countries as well many US states have similar schemes. And with similar conflicts of interests.
Lotteries and gambling in general are a contentious issue. Regulation of this industry is justified by its negative effects on society. However there is some controversy on what type of regulation is appropriate.
Many governments opt to nationalize the gambling industry, or least the large part of it. However this also means all net revenue of gambling goes to the government, which has hence an incentive to pursue dubious practices to increase its revenue. Therefore the argument of nationalizing gambling in order to protect society against the dangers of gambling is self-defeating.
Most government policies on gambling intent to discourage gambling, though in practice state-owned lotteries and casinos are actually spending much energy in advertising their services to the public.
Instead we would prefer that if gambling is to be allowed, it should be privatized albeit under strict government scrutiny. The state should limit the number of gambling facilities through a licensing policy. Further gambling advertisement should be banned.