Alibaba to stop selling online lotteries

Many vending platforms also halt sales in accordance with orders from regulators

Alibaba's online lottery platform caipiao.taobao.com started suspending sales of lotteries, the country's e-commerce giant said over the weekend, following the increased importance attached by the country's lottery administrators to control over online lottery distribution.

In accordance with the orders from different provincial sports and welfare lottery administration centers, which Alibaba partnered with, all kinds of lotteries will be unavailable on caipiao.taobao.com from Saturday afternoon, according to a press release sent to the Global Times Saturday by Alibaba.

Winning tickets that have already been sold will be redeemed, and customers who have already paid money for later rounds will get refunds after one to five working days, said the press release.

Other similar online platforms including Internet giant Tencent Holdings' 888.qq.com and Baidu Inc's caipiao.baidu.com also announced a halt to selling lotteries on Saturday, and will run mainly as online providers of lottery information.

The move came after the General Administration of Sport (GAS) issued a notice on Wednesday requiring provincial lottery watchdogs to crack down on illegal online sales of lotteries.

Another government document, jointly promulgated by the Ministry of Finance, Ministry of Civil Affairs and the GAS on January 15, called for self-inspection and self-correction in online lottery selling, the results of which were required to be submitted by provincial lottery administrators by Sunday.

This is the fifth time that the lottery regulators have ordered a halt to online lottery selling since 2007, in a move to crack down on potential illegal activities, according to media reports.

The authorities' notice on Wednesday made the share price of , a leading Chinese lottery service online provider, fall 22.37 percent to $9.96 on the New York stock market on the same day.

As it is one of the two entities authorized to act as a vendor for online lottery sales services by the Ministry of Finance, is among the few that can still sell lotteries online. Sporttery.cn, a site under the GAS, is the other approved one running as a lottery information portal.

But some types like high-frequency lottery products, which analysts said can more easily involve illegal practices, have been banned by under pressure from authorities on Wednesday. Since then, 's stock has continued dropping, closing down 8.61 percent at $9.23 on Friday.

The suspension orders are unlikely to be lifted soon, therefore online lottery selling platforms like caipiao.taobao.com will face a waste of resources and user outflows, Li Zichuan, an industry analyst with Beijing-based market consultancy Analysys International, told the Global Times Sunday.

For the long term, however, the temporary halt can give Chinese authorities a chance to map out a plausible and improved online lottery sales supervision system, which will further boost the sound development of the promising sector overall, Li said.

A report released in late January by Beijing-based lottery market research firm Caitong Consulting showed that China's online lottery sales in 2014 recorded 85 billion yuan ($13.59 billion), increasing 102.4 percent from the previous year.

Brick-and-mortar lottery selling stores are still major contribution to the whole lottery sales in China, but online platforms are becoming a fast-growing channel, accounting for 22.2 percent of the total sales in 2014, while accounting for 13.6 percent in 2013, according to Caitong.

Online lottery purchasing is trendy, therefore the current suspension will not last for long and may speed up the potential issuing of licenses for selling lotteries online, Li Chao, an industry analyst from another Beijing-based consultancy iResearch, told the Global Times Sunday.

Analysts believe that companies that have a large user base and big online sales will be the earliest ones to obtain the licenses if the government decides to issue them.

"Rising lottery industry players Alibaba, Baidu and Tencent as well as veteran online lottery service providers such as will be among the first batch," said Li from iResearch, noting the number of companies in the first batch is expected to be about 20, which is enough to support the country's online lottery selling.

Caipiao.taobao.com was the largest online lottery platform in China by sales in the third quarter of 2014, with a 19.2 percent share of the market, while 888.qq.com ranked second with 10.4 percent, according to Analysys International's report issued in November 2014.