Montana Legislature rushes to close ‘lottery loophole,’ as governor’s team blamed for halted bidding

Earlier this month, a former Montana legislator who is now the director of the state’s lottery said that he has stalled the bidding process for a new contract for as long as a year because of pressure from several executive departments, including the Governor’s Office, the state’s budget director and the Department of Administration, while using a loophole inserted into state law in 2023 to renegotiate a contract with the current vendor, despite concerns about the company and problems in other states, including a $5 million fine in Washington, D.C.

Last week, Montana Senate President Matt Regier, R-Kalispell, introduced Senate Bill 232, which would close the loophole created in the waning moments of the 2023 Legislature, and that measure cleared the Senate Judiciary unanimously. SB 232 will now head to the Senate floor.

However, Montana lawmakers fear they’re up against the clock, as Montana Lottery Director Bob Brown has said that a new extension with Intralot, the current vendor, was close to being completed.

On Feb. 5, Brown struggled to give the Joint Subcommittee on General Government answers to questions about why he and the Gianforte administration have continued to defy the five-person state lottery commission, which has at least twice commanded staff to send out the request for new proposals. Furthermore, there are now questions about whether the Lottery Commission even has enough officials to act because three of the five lottery commissioners have had their terms expire, but Gov. Greg Gianforte has not named new ones, complicating the already tense situation.

Sets of questions about the lottery commission, the testimony of its leaders and the appointment process were sent to Gianforte’s office by the Daily Montanan, but officials there did not respond to those by the end of the day Monday.

Intralot, the Greek-based company that runs the lottery games for Montana, has its $50 million contract ending in March 2026, with officials saying the state’s lottery needs at least a year to select a vendor, and update the machines and technology that go along with it. Recordings, documents and testimony show that at least twice the lottery commissioners, which oversee the state’s lottery and supervise the director, told staff to send out new requests, once in March and again in September.

But that didn’t happen.

Instead, Brown told lawmakers that the Department of Administration pointed out the change in law, made during a 2023 conference committee to House Bill 51, a “clean-up” measure that allegedly corrected inconsistent or unclear language in the law. During that committee, an amendment was made that changed the wording from allowing the lottery to hire a consultant without needing to bid on the process to allowing the state’s lottery to hire a “person.”

That small, seemingly trivial change of words, had a big implication: Both the state’s Supreme Court and the U.S. Supreme Court have said that corporations or companies can be considered a “person.” And that created a loophole that Brown said he used to begin negotiating a new contract with Intralot, without sending it out for bid. Brown told the joint subcommittee that he stopped the bidding process after concerns from the executive branch, and he started to explore a contract renewal with Intralot without any competitive bids, which seemed to trouble lawmakers, who favor re-bidding the contract, which normally lasts for 10 years and means millions of dollars of revenue.

“Something seemed to change because the staff seemed excited for the RFP (request for proposal),” said Rep. Terry Falk, R-Kalispell, who is the chairman of the joint subcommittee.

“All these conversations that I had with all the other people made me question: Had we explored all the other options?” Brown responded.

“That sounds to me like a disingenuous statement because if you’re putting out an RFP process, aren’t you, by definition, exploring all the options?” Falk responded.

Later, Brown said that he and Intralot were in contract negotiations about continuing to keep the company by renewing the contract.

“There are nuances that I am not a liberty to share,” Brown said. “I believe our current vendor wants to maintain the contract they have and they’re motivated to put out the best deal they can.”

“If the current vendor is our best option, I have no problem with that, but if we delay the process, then we’re kind of running the clock out,” Falk said. “In September, the commissioners directed you to send out an RFP. I’m just still confused as to why you wouldn’t do what the commission directed you to do by law. That’s your responsibility.”

“I’m not saying we’re not going to go out to RFP. We have the ability to release that,” Brown replied. “It’s really just a decision that had we explored every option available in the state to get the best deal for the state?”

Brown also told the joint subcommittee that Intralot had sent an unsolicited contract extension, which he told lawmakers began a negotiation process that may still be ongoing.

Meanwhile, former Commissioner Jon Metropoulos, whose term expired in January but is still listed as an active commissioner, said that he and the other commissioners were frustrated by delays, and didn’t try to hide their displeasure at lottery board meetings. Still, it did little to motivate Brown.

“We were telling the staff to through the RFP process. That was announced last March,” Metropoulos said.

He characterized the stalling that had frustrated the commission as “unexplained delays,” and he said that he wasn’t aware that any of the five commissioners have details about the negotiations with the current vendor.

“Our integrity is at stake here and we’ve said what needs to be done and for reasons I do not understand, it’s not being done,” Metropoulos said.

Falk said he supported Regier’s proposed change that would mandate the lottery to go back out for bid, and close the loophole.

“I don’t understand what the pressure is to ignore the commission’s directive as your supervisor. You just ignored that?” Falk said.

“The pressure is making sure we haven’t ignored all the options that were given to me,” Brown said.

“That’s exactly my point. We haven’t explored all the options,” Falk said.

Racing to close the loophole

Lawmakers last week in the Senate Judiciary Committee said it is a priority to move it quickly because of the “unexplained delays,” and an apparent refusal by administration officials to put the upcoming contract out to bid, despite orders from the Montana Lottery Commission, which instructed the state’s staff to do so.

In the closing moments of the 2023 Legislative session, House Bill 51 was amended in a conference committee to create a loophole that allowed an exception for the lottery to receive a bid from one source. Who offered the amendment and how it got incorporated in the bill remains unclear.

Regier, who was the Speaker of the House at the time, rejected the notion that the amendment to create the “lottery exception” was a simple mistake or the result of trying to clean up unclear language in the law.

“Ethics is a word that has been used a lot this session. Nobody knew what the amendment did, but we’re finding out what the amendment does,” Regier said during the judiciary committee hearing on the bill this week. “We’ve heard that this was a result of unintended consequences, but anyone with two eyes can see that this is not the case. It was intended, and the consequences were to allow a department not to go out to bid.”

Scott Aspenlieder, who serves on the gaming advisory committee to the Department of Justice, echoed the concerns about Intralot, the current vendor during the Senate Judiciary hearing. Throughout the process of considering gaming’s future in Montana, he said several meetings have been riddled by concerns about user experience and the competitiveness of Intralot.

“What we have here now is not the best product, and I don’t think the users of that system would argue,” he said. “But I am not here to talk about that. I am here to warn about a company rolling through this loophole before it gets closed. We are not creating sweetheart deals for international companies.”

The current contract with Intralot is for $50 million, but Montana Director of Administration Misty Ann Giles said that the new contract could be for substantially more in order to upgrade the technology, addressing concerns about the user experience.

Questions about commission

At the Feb. 5 meeting, lawmakers were also concerned that back-and-forth negotiating with Intralot had already begun, and that Gianforte had not appointed or reappointed members to the Montana Lottery Commission, which has oversight in law. The governor’s office did not answer questions about that decision.

However, because current state law vests supervisory power in the lottery commission, which has five governor-appointed members, one of whom must be an attorney, legislators said they were concerned that process would be delayed even further because three of the members’ terms had expired. And by law, the current lottery commission needs three commissioners to take action, often called a “quorum.”

Lawmakers worried that without the commission fully intact, that staff will circumvent the bidding process. Brown told the subcommittee that he assumed that the commissioners would serve in place until they’re either reappointed or the governor makes a new appointment, but Metropoulos, an attorney, said he disagreed with that conclusion. He said the commission does not have enough members for a quorum, and that his term has expired, leaving him in limbo.

“I would suggest to the director that we need to figure that out,” said Sen. Forrest Mandeville, R-Columbus, “There are open seats, and I don’t know if they’re filled or expired or if they can continue till they’re reappointed. They truly have big decisions that need to be addressed in the next couple of weeks at the latest, and we don’t know who is making the decisions and we don’t know who is supervising you.”

Problems with Intralot

Aspenlieder said his perspective includes working with the state for supporting gambling addiction and recovery services. Intralot is close to $100,000 in arrears with its support.

But those numbers pale in comparison to other troubles the company is facing outside Montana. Intralot faced a $5 million fine in Washington, D.C., a month ago. Those problems stemmed from a sole-source contract not unlike the kind that Regier’s bill attempts to halt.

In June 2024, Ohio lottery officials selected a different vendor, and moved away from Intralot, which according to Cleveland.com, was a $50 million, 10-year contract to oversee its gaming machines.

However, in 2023, Wyoming and Intralot continued their own business relationship with a five-year extension that will mean they’ll do business in the Cowboy State till 2034.