Montana's Auditors Say the Lottery Withheld Emails on Its Intralot Deal, Which Competition Made 37% Cheaper

A legislative audit says the Montana Lottery, the Department of Administration and the governor's office would not let auditors review emails about how the lottery handled its biggest vendor. When the contract was finally put out to tender, the incumbent's rate fell from 8% to 5.05%.

• Montana's Legislative Audit Division says the Lottery, the Department of Administration and the governor's office did not let it "independently obtain and review emails" during its audit of the lottery's procurement, so it "cannot provide assurance" that its review is complete
• In August 2024 the incumbent vendor, reported to be Intralot, sent the lottery director an unsolicited proposal to keep running the lottery and Sports Bet Montana at 8% of traditional net sales
• After the Legislature reversed a procurement exemption and the lottery ran a competitive tender, the same vendor won a seven-year contract at 5.05%, a bid "almost 37 percent lower than its initial offer"
• Auditors told a legislative committee on 18 September that the difference saves the state about $17.6 million, according to KRTV; they found no evidence of conflicts of interest
• Lottery director Bob Brown said exploring the unsolicited offer was his choice and "the right thing to do for the people of Montana"

An Audit That Could Not See the Emails

The Legislative Audit Division's performance audit, "Administration of Procurement: Statewide and at the Montana Lottery", published in August, set out to examine how the state buys goods and services, with the lottery's largest contract as a case study. It says it could not finish the job. "Throughout the audit, the DOA, the Lottery, and the Governor's Office did not consistently facilitate the provision of and access to information that allowed us to draw independent conclusions," the report states. "These barriers included not providing us with requested information, especially not allowing us to independently obtain and review emails, limiting access to interviewees, and involving its legal counsel in most interviews. As a result, we cannot provide assurance to the legislature that our review of the lottery procurement process is complete."

The auditors note that state law allows the legislative auditor to examine "at any time the books, accounts, activities, and records, confidential or otherwise, of a state agency". The Montana State News Bureau reported on 23 September that the lottery has refused for nearly two years to disclose details of its negotiations with its largest vendor.

From a No-Bid Offer to a Tender

The report does not name the vendor, calling it the "incumbent vendor"; KRTV and the Independent Record identify it as Intralot, which has run the Montana Lottery's systems and its Sports Bet Montana sports betting product. Its previous contract ran from April 2016 to March 2026 and was valued at $73.5 million.

In mid-August 2024, according to the audit, the vendor sent the lottery director an unsolicited proposal to continue providing lottery and sports betting services, at 8% of traditional product net sales. "The Lottery could not recall the details of how the offer was received," the auditors wrote, and the proposal lacked disclosures required by state law. After meetings involving the governor's office and the Department of Administration, the agreed approach was to seek a no-bid extension. A 2023 law, SB 51, had created a procurement exemption that the department said was suggested by a source it "could not recall". The Legislature reversed it in 2025 and threatened the lottery's budget unless it ran a request for proposals.

Two vendors bid. The incumbent won a seven-year contract, from April 2026 to March 2033, at 5.05% of traditional net sales, "almost 37 percent lower than its initial offer". The sports betting rate, 40% of gross gaming revenue, was unchanged. The auditors found the tender complied with procurement law and found "no evidence of conflict of interest among state employees or Commissioners".

At the Legislative Audit Committee on 18 September, Brown defended the lottery's handling. "That was my choice to fully explore that, because I believe that was the right thing to do for the people of Montana, to be sure that we were getting the best deal," he said, according to KRTV. Auditor David Singer said that "for such large contracts, assuming the RFP is done diligently, the existence of competition makes vendors submit a lower rate, all else equal."

The Tender Proved the Auditors' Point in Numbers

The lottery's defence is that it explored every option and the commissioners made the right choice in the end. The end result does support that. But the audit's numbers show what the alternative would have cost: the state's first plan was a no-bid extension with the vendor that had offered 8%, until the Legislature forced a tender, and competition then cut the rate to 5.05%. A lottery that could not recall how a multimillion-dollar offer reached its director, and that shielded the emails that might explain it, has made it impossible for the Legislature to judge whether the path to that extension was simply a poor negotiating choice or something that needs a closer look. The auditors found no conflicts of interest; they also said they could not be sure their review was complete.

Sports Betting Was Left Out of the Savings

The competitive tender lowered the rate on draw and instant games, but the 40% share of sports betting revenue did not move between the old contract, the unsolicited offer and the new deal. In Montana, where sports betting runs through the lottery's Sports Bet Montana, that share is a structural choice about the state's model rather than a negotiated price, and it stayed outside the competition that saved $17.6 million elsewhere. The audit's recommendations, which the lottery accepted, are about process. The question it leaves is whether the state's sports betting arrangement would survive the same test.