Texas is moving toward regulation of lottery courier services after the Sunset Advisory Commission (SCA) has proposed actions the Texas Lottery Commission (TLC) can take against the third-party sellers.
The Sunset Advisory Commission has been pushing the TLC to take action against couriers for years, but a recent change in leadership at the TLC has finally allowed the ball to get rolling.
With the TLC claiming it needed guidance from legislators on what action it could take, the SCA has now provided it in a report that was released in January.
Texas has five lottery couriers operating inside its borders without any kind of regulation or limitation. Their operations led to an April 2023 Lotto Texas jackpot being taken over by a private partnership that purchased nearly every outcome of the drawing thanks to the help of courier services in order to win a $95 million jackpot.
What the Advisory Commission is proposing for regulation
When looking at how to best address the courier situation in Texas from a legal standpoint, the Sunset Advisory Commission put its focus on three other states. They are New Jersey, New York and Arkansas.
In these three states, couriers are regulated by the state lottery either through regulations or licensing.
The SCA proposes that Texas take a regulation approach. The report indicated that the Office of Attorney General found the TLC doesn’t have the authority to license couriers.
Among the highlights of the SCA proposal are:
- Regulation: Couriers will register to operate through the TLC for a fee that is still to be determined. Licensing would be renewed every two years.
- Ticket Sales: Couriers will only be authorized to sell draw game tickets. Currently, three different couriers are offering select Texas scratch games.
- Fees: All fees must be made clear before purchase. Accepted forms are US currency, check, debit card, coupons or vouchers. Mail-order subscriptions will be acceptable.
- Prize Redemption: Couriers would be authorized to redeem prizes on behalf of a customer if it is less than $600. No prizes can be withheld for a fee. Any ticket over $600 must be delivered to a customer in a secure and timely manner.
- Retail Relationships: A courier would be required to have a contractual relationship with one or more retailers. The retailer would need to have a dedicated terminal at their location that is configured solely for courier purchases to keep them from being eligible for any TLC promotions.
- Geolocation: Couriers would be required to employ geolocation functionality approved by the TLC to verify all purchases are made from within the state. Selling to a customer outside of Texas would be prohibited.
- Age Verification: The couriers would be required to utilize age verification functionality to assure nobody under 18 makes a purchase.
- Advertising/Promotion: Couriers would be required to link to the TLC on their sites and any advertising would have to be approved by the commission. The couriers also wouldn’t be able to announce winners without the permission of the TLC executive director.
- Responsible Gambling: Couriers would be responsible to adhere to a self-exclusion list and give customers the ability to set a spending limit.
Call for regulation stems from 2023 incident
The call for regulation by the Sunset Advisory Commission stems from an April 2023 Lotto Texas drawing.
After the lottery jackpot grew to $95 million, a private group from New Jersey calling itself “Rook TX” swooped in to purchase tickets covering nearly every possible draw outcome and guarantee themselves a win. It cost the group nearly $26 million to buy the tickets at $1 each.
Couriers played a key role in facilitating this mass purchase. These companies offer online sales of retail lottery tickets.
In this instance, some of the couriers also operated their own retail locations and had additional ticket printers brought into their stores to complete the purchase. At that time, the Texas Lottery Commission approved the additional printers for the retailers.
The partnership won the jackpot along with assorted smaller prizes. Regular lottery players in the state cried foul, ultimately drawing the attention of the Sunset Advisory Commission.
Previous TLC executive director ignored issues
The SCA last published a report in May 2024, criticizing the TLC for taking a passive approach toward couriers in the state. It cited the April 2023 incident as an example of the threat posed by couriers in the absence of adequate oversight.
In August, the Sunset Advisory Committee held an in-person meeting with the TLC. However, the committee left unsatisfied with the TLC’s responses to questions on courier operations.
Current executive director Ryan Mindell felt the TLC had no authorization to act without guidance from Texas legislators. Though frustrated by the response, the SCA found that Mindell’s predecessor, Gary Grief, left Mindell in a tough spot, according to the report.
“Sunset staff’s evaluation revealed that decisions made by TLC’s previous executive director likely contributed to the uncomfortable position the agency finds itself in today.”
Grief was executive director of the TLC for 14 years before retiring in February 2024. Mindell was named as his full-time replacement in April of 2024. According to the committee, Grief declined to interview with them during the process of assessing the courier situation.
The committee found that Grief was comfortable operating in the gray areas of the State Lottery Act. This was due to the couriers helping bring in record sales for the state.
Though Mindell wasn’t taking a hard stance against couriers, the SCA felt he was working to address the issue and help the commission find a solution. That includes adding ID scanners to state lottery ticket vending machines to prevent underage purchases. He also has limited the speed at which lottery machines can print tickets. This in order to avoid bulk purchases, preventing another “Rook TX” situation.
History of lottery couriers in Texas
According to the report, the state has been aware of couriers operating in Texas since 2015.
Grief communicated with a courier in 2016 that it wasn’t required to obtain a license in the state. That was because the transactions didn’t involve a regulated sale of lottery tickets.
Since that time, couriers have increased in number. Currently, Jackpocket, Jackpot.com, Lotto.com, theLotter and Mido Lotto all operate in the state. Each sells draw tickets for Texas and multistate games.
Jackpocket, Jackpot.com and Lotto.com each sell select scratch tickets in the state as well.
According to the SCA, couriers are responsible for 9% of Texas Lottery draw game sales. That equated to $173 million in fiscal year 2023.
Legislators, couriers seek solution to end issue
The SCA and TLC both acknowledge that couriers increase lottery sales. Because of that, they both seek regulation as opposed to an outright ban.
Altogether, 19 different states, as well as Washington D.C. and Puerto Rico, have at least one lottery courier operating inside of it.
Of the 19, 16 states have couriers operate without regulation or oversight.
In an interview with PlayiLottery, Jackpot.com CEO Akshay Khanna expressed that his company, as well as most couriers, want to work with states on earning trust, even if that means regulation. He believes it’s a win-win situation for the courier and the state lottery
“There are states that are more willing to do what they’re doing, states that are more willing to have new and innovative options, particularly when they have evaluated and considered the safety and security of couriers. They’re recognizing the legitimacy of an industry, so they’re more willing to dive in and either create regulation or legislation, or at least some form of light touch oversight.
The lack of regulation not only presents risk of sale that goes outside the state’s policies, but has ruffled the feathers of tribal leaders. The Kickapoo Traditional Tribe of Texas believes the couriers currently operate illegally and they infringe of their tribal gaming rights.
Without a solution, the tribe has threatened to take gaming expansion into its own hands.
This latest report provides guidance for what the TLC can now legally do to regulate couriers and put an end to concerns of all parties involved.
