Future Focus in the Bluegrass State

All systems are go at the Kentucky Lottery, host of this month’s NASPL Professional Development Seminar in Louisville.

By Patricia McQueen

Published July 15, 2025

The Kentucky Lottery has had a few firsts in its history, ensuring its place on the American lottery scene. It was the first American lottery created as a corporation, a quasi-state agency whose directive is to operate in an entrepreneurial manner. It was the first to launch sales (on April 4, 1989) with not just one, but two instant games. And in April 2016, it was the first to launch an iLottery program with both a selection of eInstant games and some of the traditional draw-based games at the same time.

In a nod to its heritage in horse country, one of those first two instant games was Kentucky Derby Dreamstakes. It was a game with a twist – the big prize winners attended the Kentucky Derby that spring, each assigned one of the horses in the race. The ticket with the winning horse won $1 million, creating the Kentucky Lottery’s first $1 million winner. Not only was the game one of the industry’s first $2 instant tickets, it was an early precursor to today’s popular experiential lottery prizing.

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Thirty-six years later, the Kentucky Lottery has certainly lived up to its entrepreneurial spirit. Since the beginning, it has not been shy about trying new things, with a history of innovative draw games using various play styles and prize structures. The current draw game lineup has been stable since early 2020 – the daily games Pick 3, Pick 4 and Cash Ball 225; the monitor games Keno and Cash Pop; Fast Play; and the multistate games Powerball, Mega Millions and Lucky for Life. There are also a full range of instant tickets, from $1 to $50; the latter price point was introduced in October 2022. And of course, there is a never-ending stream of new eInstant (called Instant Play in Kentucky) games in the iLottery portfolio.

All those games have generated important revenue for the Commonwealth of Kentucky. In the beginning, lottery proceeds were sent to the general fund. “There was nothing wrong with that, but it didn’t give us an identity, a cause to own, and we know how helpful that can be,” says President and CEO Mary Harville. All that changed with a new law in 1999 that dedicated lottery profits to college scholarship and grant programs. “That was extremely helpful in being able to garner support for our mission, with the purpose of keeping Kentucky’s best and brightest students right here in the state.”

Since that change, more than $5.6 billion has gone to college scholarships and grants through the FY25 year just ended. It’s part of the overall total of $7.6 billion the Kentucky Lottery has raised since its inception.

The Lottery has succeeded despite an increasingly competitive marketplace. There has long been horse racing in Kentucky, and charitable gaming was authorized in 1992. Kentucky’s tracks started adding historical horse racing machines in 2011; these offer pari-mutuel wagering on past races and generated a whopping $9.6 billion in handle in FY24 alone. The tracks also partner with sports betting providers; since the launch of sports betting in Kentucky in September 2023, it has generated more than $4.7 billion in cumulative handle through May 2025. Only $154 million of that was bet at racetracks; the rest came through online/mobile channels. There are also casinos near Kentucky’s borders in Illinois, Indiana, Missouri, Ohio and West Virginia; they began opening in the early- to mid-1990s.

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Horse racing, historical horse racing, charitable gaming and most of the neighboring casinos are all limited to physical locations. “While that isn’t exactly direct competition, we nevertheless view it as competition because we know there’s only so much out there in discretionary dollars for our players,” says Harville. Sports betting is different. Not surprisingly based on the level of online/mobile betting, the activity has had an impact on the Lottery. “It’s difficult to show the impact, but we all feel it.” Of course, that’s not limited to Kentucky – sports betting has expanded across the country, with only a few lotteries involved in its operation and/or regulation. “Our challenge is to compete with them, and we still have some aces in our pocket!”

Key among those aces are 3,500 retail locations across the state, and the importance of good causes. The Lottery’s current One in a Million campaign, for example, celebrates a key milestone – more than a million students have received a Lottery-funded scholarship or grant.

Building Awareness

That campaign couldn’t have materialized as recently as 11 years ago. The original legislation prohibited the Lottery from advertising how proceeds were used. For years Lottery officials tried to get that law changed, but even after securing legislative sponsors, bills would never pass. So, from inception to 2014, beneficiary advertising was prohibited by state law. Then out of the blue, one legislator saw an opportunity, and helped change the law to allow beneficiary advertising.

The Lottery has never looked back. Combined with the 1999 change that sent Lottery proceeds to scholarship and grant programs, it has a great story to tell.

Not surprisingly given the inability to advertise, beneficiary awareness a decade ago was very low – only around 20% of the population knew where Kentucky Lottery proceeds went. Today, that awareness hovers around 70%. The One in a Million campaign is a fresh approach to beneficiary awareness, celebrating students who have received lottery funds by finding “ambassadors” willing to tell their stories. 

For example, there are great stories coming out of some of the community and technical colleges, where Lottery-funded Work Ready scholarships and Dual Credit scholarships (for high school students seeking college credit) make it possible for most students to graduate debt-free. That’s particularly important in the current environment where economic development is strong and companies need not only an educated workforce, but a skilled workforce.

And it doesn’t stop at public awareness, notes Harville. “We bring our ambassadors right here into our headquarters, and it has been so meaningful to our staff to have the recipients of our funds come and tell us about the positive impact of lottery-funded scholarships on their lives. It’s powerful to the public, and it’s powerful internally.” 

In addition to beneficiary awareness, winner awareness is also important, and Kentucky is modifying its general strategy in that area. Historically the focus has generally been on the larger winners, especially jackpot winners. Yet there’s a purposeful shift now to focus on some of the smaller winners, explains Terry Sebastian, Vice President of Communications and Public Relations. “Winners come in all shapes and sizes, and a great winner’s story doesn’t have to be a big one. We are broadening the look of a winner.”

At the same time, the Lottery’s communications team is working with the marketing, sales and products teams to explore what types of winners the Lottery should be highlighting. Are there certain products to focus on, as opposed to prize levels? It’s all about taking a more strategic approach to winner awareness.

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Partnerships and Promotions

Beneficiary and winner awareness, along with product innovation, helps the Lottery build even stronger relationships with its partners, vendors and retailers. “Fueling imagination and funding education” is more than just a tagline, notes Vice President and Chief Brand Officer Edie Frakes. “It’s baked into our logo and our brand.”

Partnerships are an increasingly important part of the Kentucky Lottery’s future, above and beyond new technologies and innovations in games. As the organization continues to emphasize beneficiary awareness, companies are taking notice. “We’ve established and grown our brand such that the Kentucky Distillers’ Association (Kentucky Bourbon Trail), the Kentucky Humane Society, and other entities are excited about partnering with us. That helps us reach new player groups with specialized interests.”

The new Kentucky Bourbon Trail partnership includes a $5 instant ticket, a Fast Play game and an Instant Play game, all of which offered second chance opportunities to win exclusive experiences such as a Sip Tours Package of Kentucky distilleries, Kentucky Lottery bourbon-themed swag, and of course, cash.

That partnership is already paying dividends well beyond ticket sales. There have been events at liquor stores and smoke shops, who are all excited to sell the “bourbon” ticket. “We’ve also had distilleries that want to carry our product,” says Frakes. “It’s a cool new opportunity and market for us to grow the retail base with these sorts of partnerships.”

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For the Retailers

As noted, that base currently consists of about 3,500 locations throughout Kentucky, with at least one in each of the state’s 120 counties, no matter the population. For more than a decade, self-service has been a growing part of the business, addressing needs in lower-population rural areas as well as higher-volume locations. About 2,400 self-service machines are in retail locations, most offering scratch-off and draw products. Of those, 850 are being replaced with modern digital units with all product and payment options; those that remain in the field are also digital machines that will be upgraded with new bill acceptors and cashless payment options. Self-service provides especially attractive options for players who would prefer not to wait at the counter and for retailers who struggle with staffing.

There are plenty of other investments being made in retail, with plans to elevate the Lottery’s in-store presence through digital menu boards and to optimize the retailer incentive program to strategically incentivize the right behaviors.

Last winter, the Lottery launched a program called Finish Strong in response to an observed slowing of scratch sales and retailers’ concerns that they were losing foot traffic. Teams from corporate joined the field team all across the state to conduct promotions at retail locations to help increase retail sales over the second half of the fiscal year. “Fun Fridays” were a collaborative effort by everyone, with marketing sending out emails and social messaging to help drive traffic into stores, and the corporate team happy to be out in the field meeting retailers. Some of the smaller stores in Eastern Kentucky saw sales increases of 300%. “The retailers hosting these promotions are really pleased,” notes Frakes. “It’s just a small promotion, but it’s a big deal to them.”

Kentucky also has an extensive and innovative network of cashing agents, which offer players more convenience by allowing them to cash prizes between $600 and $25,000 at selected retailers without having to go to Lottery headquarters in Louisville. About 200 retailers can cash prizes up to $5,000, with a small subset (about 20) able to cash prizes up to $25,000. “It’s a triple win,” says Maggie Garrison, Vice President and Chief Financial Officer. “We alleviate some of the stress on our small four-member validations team; players can redeem their larger prizes where it’s most convenient; and our cashing retailers receive a bonus on those prizes.”

That cashing network became particularly valuable at the height of COVID-19 in 2020. “We didn’t have any interruption in prize payments,” marvels Harville. “It made a tremendous difference.”

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An Innovative Future

To continue supporting innovation, it’s critical to have the right systems and services in place. In April, Kentucky launched a new version of its iLottery platform, the first conversion since the original system launched in 2016. It was actually the first iLottery conversion in the U.S. that included both draw games and eInstants, notes Vice President and Chief Technology Officer T. H. Morris. “The new platform features significant increases in system capacity and scalability so that we can have optimal performance as workloads increase over time.”

It also sets the foundation for a series of new features, called “Connected Play,” that will integrate iLottery and retail play like never before, explains Morris. “Our players expect convenience, and Connected Play provides that convenience to engage with the Lottery anytime and anywhere in Kentucky by converging the retail and iLottery experiences through real-time integrations.”

For example, players will have the option to redeem winning tickets up to $600 directly into their Fun Club player account using the Kentucky Lottery mobile app. Additionally, Fun Club members will be able to use their account funds to make lottery purchases at any of the 3,500 retail locations, via the counter or self-service machines, which, as noted, are being upgraded.

All of these features will be fully enabled after the Lottery’s central gaming system conversion in early 2026. “Connected Play will be huge for us,” says Harville, noting that to this day, lottery retailers think that online sales hurt retail sales. “No matter how many facts, figures, statistics and reports we throw at them, they still believe that to be the case.”

With Connected Play, retailers will see iLottery players use their account funds for in-store lottery purchases or cashing out winnings and spending them on other items in the store. “I think that will be a visual that will be more convincing than anything else we can do.”

Once all the new technology is in place, there is still more to do. “We are looking at replacing Fun Club with a true loyalty program, and also exploring affiliate marketing,” notes Frakes, adding that all these projects are data-driven with research. For example, the Lottery launched a player panel (called “Game Changers”) this year. This group, which is quite large and very responsive, complements existing work on segmentation and tracking studies, along with focus groups, to find out what players really want. “We want to make sure that we’re working smarter, not harder.”

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Responsible Gambling

Through it all, responsible gambling takes center stage. “When you’re involved in innovation and you’re moving as fast as we are, you need to have a robust responsible gambling program,” emphasizes Harville. She gives a lot of credit to Sebastian for taking this initiative even further over the past year.

“We care about giving our players information and services should they need assistance, and we do that in two ways,” he explains. First is the Play Responsibly program, which centers on the 1-800-GAMBLER hotline, which in Kentucky is operated locally by RiverValley Behavioral Health in Owensboro. “We have a great partnership with them.” The Lottery’s hotline support comes through things like sponsorships and conferences, which helps RiverValley train more gambling addiction counselors – currently there are only 16 across 120 counties, and the rise of sports betting in particular has led to an increase in hotline calls. “We’re helping our lottery players, but we’re also invested in the entire state at a time when these other forms of gambling are now affecting all Kentuckians.”

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In addition, Sebastian is leading the charge with the Lottery’s Positive Play initiative, which ensures that players know the everything about odds, myths, self-exclusion options, and more. “We want to reach people in a meaningful way, and Positive Play does that,” emphasizes Harville.

She’s also appreciative of the way Sebastian has made RG a corporate-wide initiative, bringing in speakers and including team members in discussions with the Kentucky Council on Problem Gambling.

In the End, People Matter Most

The Kentucky Lottery certainly has ambitious plans for the future. All the initiatives described above will play a role, but there’s something even more critical. “We know our roadmap and we know where we want to go, but it’s really important to have the vehicle to be able to get there, and we know that is our high-performing team,” explains Harville. Currently with 176 employees, the Lottery will soon be making some additional hires. “We need people to make that vehicle move forward.”

She notes that there has been considerable corporate restructuring in recent years. By more clearly identifying various departments, such as moving products out from under a “product and marketing” umbrella, allows each division to excel. And since most of the previous executive team expressed desire to retire after the pandemic, the new team in their place – either new hires or those promoted from within – is taking on all challenges. “It was a smooth transition, and I’m really proud of where we’ve come.”

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One key to that success was intentionally developing the new leaders, including leadership training and assessments using the DISC model (dominance, influence, steadiness and conscientious) to identify leadership styles and personalities. “Our leadership coach helped us understand each other’s leadership style and understand how to capitalize on our strengths to work together more effectively,” says Harville.

Recently there was specialized project management training that brought such an enthusiastic response that not everyone interested was able to participate. As a result, that’s likely something that will be repeated.

In addition to all the new emphasis on structure, employees are more valued than ever. “Parental leave” has replaced “maternity leave,” truly equalizing men and women in the workplace. The senior team also finds opportunities to recognize staff members by nominating them for various community awards. For all these reasons and more, the Kentucky Lottery has been named one of the “Best Places to Work in the Commonwealth” by the Kentucky Chamber of Commerce and the Kentucky Society for Human Resource Management for five consecutive years.

“I think this speaks volumes about what our employees see in this organization,” says Harville. “They are an investment in our future.” And the future appears bright.