Abstract: The development of internet lottery has not been smooth in China. Sometimes it was allowed, sometimes it was prohibited. The changing attitude of the Chinese government is due to that it has never come up with clear and consistent strategies toward internet lotteries, nor developed effective regulatory measures to them. From the very birth of the internet lotteries, China has embraced a competitive business model while the other countries such as the United States and the European countries have taken on an opposite one, the monopolistic business model. Although it has produces larger revenues, the competitive model has caused difficulties for the Chinese government to regulate online lotteries as so many internet companies have been involved into the business. The Chinese government should consider giving up the competitive model and taking the monopolistic one so that it can easily regulate the industry. It should also take on a phased engagement strategy to allow the industry matures step by step. It must be careful to protect the current base of lottery sale shops and take measures to protect the lottery buyers as they were significantly affected by the online lottery sales. Regulation is important to the healthy development of the industry. Regulatory measures such as licensing and minimum internal control should be taken and reviewed from time to time.