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The WZZM 13 Watchdog team is exposing a vulnerability being exploited by some lottery players to win every time they play, even though lottery games are supposed to be games of chance.
We found evidence some players used a low-risk keno game to turn tens of thousands of dollars in lottery bonus money into free cash.
THE BIG BONUS
Our investigative team realized there was an issue with a specific game as we investigated the lottery's bonus structure for it's online gaming platform. The online version opened in 2014 and Michigan's Bureau of State Lottery routinely has been giving away up to $100 on bonus money for people to sign-up to gamble on the new site.
The online promotions seem to be working to increase revenues. More than half a million people signed up to play on the web site as it generated $48 million for the state in 2016.
We had questions, though, whether it was correct for the lottery to give away public money in bonuses considering the system's proceeds go to public school children. The lottery bureau provided $888.9 million to the School Aid Fund in 2016.
Executives told us the bonus money gets more people gambling money on the site which helps fund schools.
"The lottery offers a variety of promotions for both its traditional and online games to attract new players and retain players," Michigan Lottery spokesman Jeff Holyfield wrote in an e-mail. "Promotions provide a direct benefit to the lottery by supporting incremental growth and increased contributions to the School Aid Fund."
"Any business uses marketing techniques to give folks the opportunity to play as an option," Bureau of Lottery Commissioner Aric Nesbitt said.
HOW TO GET BONUS BUCKS
There are clear indications people are taking advantage of any bonus the lottery provides.
Various people on the internet reported they were able to get "free money." They applauded the lottery for being "pretty good to us."
These players reported that they expected to make a profit of around $62 on any $100 bonus provided by the lottery. Charts were posted showing probabilities of 99 percent all the way up to 100 percent to show how sure they were they could "game" the game.
So here's how it works. The scenario begins as the player deposits $200 into the lottery's website as a first-time player and that player would automatically receive a one-time sign-up bonus of $100 using the "BONUS" code. They would then begin to gamble the $300 on one particular game, Fuzzball Keno. The player then has to play 300 games of Fuzzball Keno with one ball (the same ball) at $1 a game. In this particular game, if the ball is selected during the game, the player receives double the money. If the ball doesn't get selected, the player gets half the bet back.
When it was introduced, the lottery posted on social media that Fuzzball Keno has the "best odds of any online game." So we did our own testing of the gamers "recipe" to see if we could win some money as well.
The 13 Watchdog team played Fuzzball Keno as prescribed three times. The first time we put our $200 in and got a $100 bonus and we ended up earning $49 (on top of our original deposit of $200) and were able to withdraw the money immediately. The lottery allows players to only withdraw winnings and in this scenario, we played enough to be able to cash out.
The second time, our ball (No. 13) was selected more often and we won a total of $59 on top of the $200 we originally put in.
For our third time, we wanted to bring a guest in. One of the lottery's chief critics over the years, Sen. Rick Jones helped us test the system. In a matter of an hour in his Senate office, he signed up, played Fuzzball Keno 300 times with his lucky number of 17, and won as well.
"I have made $59.50 (on top of the original $200)," Jones said after finishing his required 300 games. He said he would withdraw the money immediately and pay taxes on it.
"I am going to be asking the lottery bureau if they are losing money with this stuff," Jones said. "It does seem logical people are going to take the money and run.
"It's shocking it's out there online to be able to game the system."
Jones said he opposed the state's move to bring the lottery online, fearing people would gamble and get in financial trouble. He told us about a senior citizen in his district who gambled all his money away and asked the lawmaker to buy him a cup of coffee because he didn't have enough money.
"I personally am not that thrilled by it and I could see how somebody with an addictive personality would enjoy all the noise," Jones said.
NOT JUST ONE-TIME MONEY
A spreadsheet posted on the web showed evidence of dozens of players using various Michigan Lottery promotions to gain free money using Fuzzball Keno. During the last year, the lottery has run several "buy one, get one free" promotions where the player would often get double their money to spend online. That's when people reported they were able to repeatedly use bonuses to rack up free money using the Fuzzball Keno method.
One player said online "I keep my withdrawals under $1000 to avoid drawing attention."
Another player asked others: "The question is do you do more withdrawals in smaller amounts or fewer withdrawals in larger amounts."
Another said: "I don't see situations like this come around much."
In our investigation, we found the lottery provided more than $2 million in promotional money to players on the online platform in 2016. How much of that money was compromised by this vulnerability is unclear.
The people taking advantage of the bonuses put charts up showing how certain they were they could win. Using the $1/300 Fuzzball Keno game approach, they had calculated that it was a 99.16% probability they would make a profit. The chart shows a 100 percent probability of profit if the player chose to play the .10 version of the Fuzzball keno game 3,000 times.
Calvin College statistics professor Thomas Scofield said he believes what's been posted is true and told us the 99 percent and 100 percent figures are accurate.
"The author has rightly calculated that the expected profit for the various strategies the rows represent is $62.50," Scofield wrote in an e-mail to us.
DO THEY KNOW?
We scheduled an interview with Michigan Bureau of State Lottery Commissioner Aric Nesbitt last week. We weren't sure if he was aware this was happening.
To his credit, Nesbitt's been on the job just three months after taking over for long-time former Bureau of State Lottery Commissioner Scott Bowen, a former Grand Rapids city commissioner. Bowen took a job with the Michigan Lottery's online gaming vendor, NeoPollard Interactive LLC, after leaving his post with the lottery.
In our interview, it was clear, at first, Nesbitt didn't know people were taking advantage of the bonuses.
"Whether you are using regular money, bonus money or the demo, the ratios are the same," Nesbitt said.
After we told him what was happening, Nesbitt acknowledged it was new to him.
"I don't know about this personally," Nesbitt said. "I am going to have to look at all the facts that are there and take corrective action if anything needs to be done. There should be the same chance as anybody."
ONE WEEK LATER
After Commissioner Nesbitt told us he would look into the situation, we checked back with the lottery bureau this week to see where the investigation stood and were surprised to hear the investigation could be closed.
Despite what we wrote above regarding the statistical probabilities, the lottery's spokesperson said it's not true and hinted no changes would be made.
"It is inaccurate to say that playing Fuzzball Keno or any lottery game in a certain manner guarantees gains for players," Michigan Lottery's Jeff Holyfield said. "Like all lottery games, Fuzzball Keno is a game of chance and as with all games of chance, anything is possible. As the blog notes and as we constantly remind players, Lottery games are not designed to serve as investments or provide income. They’re games of chance designed to provide fun and entertainment."
Holyfield didn't respond to a question today asking if any changes had been made to the system as this vulnerability is made public in this report. Fuzzball Keno was still active as of late Wednesday afternoon.
EDITOR'S NOTE: All of the winnings from this investigation were donated to Sen. Jones charity of choice, Special Olympics of Michigan.
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