China’s sports lottery business is expected to see continued explosive growth in 2016 thanks to event-driven catalysts and the possible restarting of online lottery sales, market watchers said. Quadrennial major sporting events including the UEFA European Football Championship, Copa America Centenario and the 2016 Rio Olympics are all rolling out in the three months from June to August. “We expect sports lotteries to deliver sustained high growth driven by frequent sporting events in the near term and the prosperity of China’s sports industry over the longer term,” said Yan Peng, an analyst from Citic Securities. Match betting, a major category in the sports lottery business, is likely to see domestic sales enjoy “a multiple yearly increase” in June 2016 over the same month last year, said Jiang Hao, an analyst from Everbright Securities. Match betting lottery sales in March and April this year jumped 71 per cent and 49 per cent year on year to 5.9 billion yuan and 6.42 billion yuan respectively. “I think the all-star teams in the European Championship and Copa America make these two sporting events more attractive for Chinese sports fans than the Brazil World Cup,” added Jiang. However, the 2014 FIFA World Cup in Brazil proved how a major sports event can boost China’s sports lottery business. In June of that year, China’s match-betting lottery sales soared 384.3 per cent year on year to 9.62 billion yuan. Still riding on the excitement of the Brazil World Cup, China’s total sports lottery sales reached an all-time high in 2014, up 33 per cent year on year to 176.4 billion yuan. However, sales in 2015 declined 5.7 per cent to 166.4 billion yuan , without any major sports events to spur the market and due to the impact of a ban on online lottery sales in February 2015. Online lottery sales had grown quickly in China before the ban, doubling to 85 billion yuan in 2014 and accounting for 22 per cent of all lottery sales, according to data from CaiTong Consulting. While the ban on online lottery sales suppressed the market’s development, analysts said they have noticed signals from Chinese authorities to indicate they may restart online lottery sales this year. The General Administration of Sport released the 13th Five-year Plan for China’s sports development on May 5 this year, restating the objective of policymakers to accelerate innovation in the sports lottery segment. And the plan outlines development of a lottery operation system for the domestic Chinese football leagues. “Considering that China’s lottery market is highly-regulated, we think such a supportive stance could be interpreted as a gradual opening-up on the supply side,” Citic’s Yan wrote in a report. “With the growing enthusiasm for China Super League (CSL) matches between famous football clubs like Guangzhou Evergrande and Shanghai SIPG and the frequent policies in support of China’s sports undertakings, sports lottery – especially match-betting lottery – will undoubtedly become an important monetization channel for China’s sports industry and a major contributor to lottery sales.” Following the 13th five-year plan, Chinese policymakers issued the “Circular on Properly Investigating and Punishing Unauthorised Online Lottery Sales” on May 24, 2016. “From another perspective, however, this means authorised online lottery sales approved in due procedures will be supported and protected by law,” said Yan. “Policymakers made it clear in the circular that lottery sales through the internet must be centrally managed and monitored on a real-time basis by the issuing entities.” Considering that China’s lottery market is highly-regulated, we think such a supportive stance could be interpreted as a gradual opening-up on the supply side Yan Peng, Citic Securities The circular also urged welfare and sports lottery issuing entities to “push ahead with relevant work and start implementation upon approval as per required procedures”. Yan said he believes the regulators were now adopting a cautious but open attitude towards online lottery sales, and this could drive concrete progress in the establishment of the management system and qualification approval process. The May 23 tender by the China Welfare Lottery Centre for its telephone and online lottery marketing project serves as another sign that the government is proactively preparing for the opening up of online lottery sales, added Jiang from Everbright Securities. Yan said online lotteries represent an enticing opportunity and operators with superior distribution channels and content will be the ultimate winners. “Among others, distribution channels, including sales permits or license and lottery games, lie at the core of the lottery industry chain,” Yan wrote in the Citic report. “ We believe leading lottery platforms like Baidu, Alibaba and Tencent and vertically-integrated operators like 500.com [a US-listed professional lottery site], will likely gain a strong head start in obtaining an online sales permit.” Wang Lin,an analystfrom Ping An Securities, warned that the biggest potential risk is that online channels for lottery sales would restart later than expected.