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James “Jim” Carey Jr., a New Jersey native and former deputy attorney general, has led the New Jersey Lottery since July 23, 2018. Every year of his tenure, the Lottery has contributed more than $1 billion to New Jersey’s public employee pensions. In fiscal 2023, the Lottery also set its sales and contributions records at $3.73 billion and $1.17 billion, respectively. Carey now guides the Lottery through a far different gaming environment than when he joined. In this interview with La Fleur’s Magazine, Carey addresses the increasing competition the lottery industry faces and how the New Jersey Lottery is responding to it.
La Fleur’s: You started in the lottery industry in 2018, the same year the Professional and Amateur Sports Protection Act (PASPA) was overturned. This had huge ramifications and completely changed the landscape of gambling in the United States. How have you seen the industry change since you joined the New Jersey Lottery?
Carey: I don’t know that the industry has changed that much yet due to PASPA. Sports betting and a lot of other forms of online gambling are more geared toward people in their twenties and thirties. I don’t know if the lottery was ever a game for people in their twenties and thirties. People grow into it as they get older.
The real impact you’ll see from PASPA is going to start coming in the next couple of years when it becomes harder and harder for the lottery industry to grow its player base because the people who would start playing are already sports bettors or online casino players. Those are people we may have lost to other forms of gambling on the internet already.
La Fleur’s: It’s such a fascinating issue. What are you doing to attract that younger audience?
Carey: We’re spending a lot of time on social media. We work with our partners at Northstar New Jersey, and we’re active on Instagram and other platforms. We’ve worked with influencers in New Jersey, who tend to be very Jersey centric.
One of the things we’re working hard on is scratch-off tickets that have a decidedly New Jersey flavor. We had the Jersey Debate ticket, which centered on a famous type of breakfast meat in New Jersey. Half of the state calls it one name and the other half calls it another.
Players like fun and different scratch-offs. So we’ve continued with things like the Jersey Debate. Last year, we went with more Jersey-themed tickets, called “It’s a Jersey Thing,” which featured the Jersey Shore, Jersey diners, Jersey pizza, and “What exit?” It’s about fun, Jersey-centric ideas that make people smile. New Jersey often has an image crisis, wedged between New York and Philadelphia, but it still has its own personality. We like to feature that in our tickets.
Now we have an oversized ticket with Shaquille O’Neal. Most people in the state know Shaq is from New Jersey, but everybody in Newark knows Shaq is from New Jersey. He is very proud to have grown up in Newark. We had a lot of fun with that. To us, that’s a very Jersey-centric ticket because it’s not just a fabulous superstar who’s doing a ticket with us, but it’s a fabulous superstar who also loves New Jersey.
Online Sales
La Fleur’s: You’re facing competition from other sectors of the gambling industry that are selling online. You have couriers in your state, but the Lottery itself isn’t yet online.
Carey: We have passed regulations that will allow us to sell online. We are working with our retailers to create an environment in which everyone will succeed once the New Jersey Lottery begins selling online. We want to do it when the time is right—when everyone agrees that all will benefit.
What do I think? I believe it’s obvious that everyone will succeed, including the couriers, if the New Jersey Lottery goes online. We talk about young people—those in their twenties—and we have to reach them where they are: on their phones and on the internet. By doing that, we can offer a more personalized marketing experience, including introducing them to our full portfolio of scratch-off tickets. They aren’t buying scratch-offs now, but engaging them online could change that.
I don’t foresee New Jersey offering eInstants. However, selling draw tickets online would give us an entirely new way to market the Lottery, one that benefits both our retailers and the Lottery itself. Given how effective the couriers are at marketing and acquiring new players, I believe we can all coexist and significantly expand the Lottery’s player base.
La Fleur’s: How do you encourage stakeholders to be convinced that it will help everyone? What are your talking points? What’s resonated?
Carey: The New Jersey Lottery is an asset of the state pension system. Governments across the country have underfunded their pension obligations in the past, so the Lottery’s role in the pension system is crucial to our state’s fiscal health.
For roughly 50 years, we enjoyed an almost-exclusive position in gambling. Even in a state like New Jersey—which already had casinos in Atlantic City and horse-racing tracks—the Meadowlands was once one of the most popular harness-racing venues in the world. We faced little direct competition. Now that landscape has changed dramatically.
This year, for example, sales have been flat. With Powerball and Mega Millions, it takes a larger and larger jackpot to excite players. When I arrived in 2018, sales spiked at around a $450 million jackpot. Today, they don’t surge until the jackpot reaches roughly $1 billion, and it can take 12 or 13 weeks just to get to $500 million.
The gaming industry is clearly changing. While we still generate billion-dollar profits (“contributions,” as we call them in New Jersey), it can be hard to convince people that a challenging horizon is already visible to those of us inside the lottery industry.
Profit Mandate
La Fleur’s: New Jersey is one of seven states that still have a profit mandate. It’s interesting because your casinos and sportsbooks can offer much higher prize payouts. How has that profit mandate affected the Lottery’s ability to market and offer different products, and what have you done to mitigate its effects?
Carey: We’re one of the few states with a high mandatory contribution. That requirement has allowed us to properly support our beneficiaries, and we’ve done a great job of it. Last year, we contributed more than $1.1 billion to the state. But in some ways, it ties our hands, making it harder to offer certain kinds of products.
Industry trends are moving toward higher-priced tickets, and it’s difficult for us to compete at those price points. Tickets priced at $10, $20, and $30 are now our highest revenue generators, yet their payout percentages aren’t as high as those in neighboring states.
To address this, we’ve introduced Jersey-centric tickets and other games that appeal to core players, for example, a $30 crossword game that has performed very well. We’re also experimenting with more eye-catching colors and graphics in collaboration with IGT and Scientific Games to make tickets stand out more to players.
Even so, it’s tough to compete, and a $50 ticket isn’t likely in New Jersey unless the contribution requirement is lowered.
La Fleur’s: Every time a profit mandate is removed, we see both sales and contributions to good causes rise significantly. I’m thinking of Texas, California, Florida, and Oklahoma. Have you discussed with your stakeholders why removing or reducing the mandate might be beneficial?
Carey: We explain to stakeholders the current industry trends: players want tickets at higher price points and, consequently, bigger and more frequent prizes. We also show how adjusting the contribution rate could help us deliver on those expectations.
Many people outside the lottery industry don’t realize that our largest expense is the prizes we award to players. That’s the core of our business. We give away prizes, and players are highly sensitive to prize structures. Lottery players are sophisticated; they know how the games work, which games they prefer, and what price points suit them. They also know a pack of scratch-offs will contain winners, and they want to see even more of those.
So we tell our constituents and stakeholders, “Here’s what players want, and here’s how meeting those expectations will benefit everyone.”
La Fleur’s: New Jersey also adopted a unique model in which all of the Lottery’s profits go to pension funds.
Carey: We became an asset of the state pension system in 2017. States across the country have struggled to fully fund their future pension obligations, and New Jersey decided to address that, and a law was passed making the Lottery a pension asset where all of our profits support state pensions.
Roughly 88% of our contribution goes to the teachers’ pension fund. That’s critical for the state’s fiscal health and for retirees’ finances. It also supports education in a meaningful way, because a promise was made to New Jersey teachers that this is how they would be compensated, and the state needs to keep that promise.
La Fleur’s: That’s a huge obligation for you as an institution. We’ve talked about some of the constraints you face. Given such an important obligation and with sales currently flat, shouldn’t the Lottery be granted a bit more flexibility to ensure these benefits are delivered?
Carey: The New Jersey Lottery has succeeded for more than 50 years. We have a Lottery Commission that sets rules for the games, and a state lottery law passed by the legislature that establishes the framework in which we operate. We also have a network of retailers who are the primary sellers of our tickets. We’ve thrived within this structure for decades, and I believe we can keep succeeding, but we could do even more if we’re given opportunities to expand our reach.
La Fleur’s: Do you want to end with any specific thoughts?
Carey: I’ve had a great time at the New Jersey Lottery. I was appointed to this position in 2018 and have served ever since. It’s the best job I’ve ever had—lots of fun, great colleagues, and a terrific industry doing meaningful work. Even in the face of growing competition, lotteries have unique strengths that will help them continue to thrive.
The lottery industry boasts some of the best brands in gaming, including Powerball, Mega Millions, the New Jersey Lottery, and others. We offer a distinctive product: the chance to win life-changing sums of money. And, because we’re a government agency, we do it in a way that is completely responsible and transparent. In that environment, I’m confident lotteries will keep succeeding.